Intense Technologies Limited (532326) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Results Conference Call of Intense Technologies Limited hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sakhi Panjiyara from Kirin Advisors Private Limited. Thank you, and over to you, ma'am.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Intense Technologies Limited. From management team, we have Mr. C.K. Shastri, Chairman and Managing Director; Ms. Anisha Shastri, Executive Director; Mr. Jayant Dwarkanath, Whole-Time Director; and Mr. Nitin Sarda, Chief Financial Officer. Now I hand over the call to Mr. C.K. Shastri for the opening remarks. Over to you, sir.

Good afternoon, everyone, who's on the call. Thank you very much for taking time to spend time with us and know about Intense and its plans and goals and what we have performed in Q1. Though I would like to tell you all that it has been a muted result. We did INR 31.47 crores with an EBITDA of INR 314 crores. There have been a lot of activity and buzz in the industry and in our company, too. AI has been a big initiative which we have taken up, and we had to make some investments in that, and we have to also ramp up our growth plans. And hence, you will hear the details of everything from Nitin and Anisha. All I could say is that we added 4 long-term logos to our list of customers. As you know that nowadays, most of the revenues are moving towards long term. It is not immediate recognition. It goes on a SaaS model kind of a thing going forward. And I wish you all the best for -- good wishes for a happy Independence Day tomorrow. And I hand over the stream to Anisha. She will brief you in detail on everything.

Thank you so much, C.K., and thank you so much, everybody, for joining us in today's Q1 call.

Anisha, probably you have to also give background of the company for new joinees.

Sure, sure, sure. So for those joining us for the first time, Intense is an AI platforms and services company. We deliver mission-critical products in communications, data, process automation spaces, predominantly to BFSIs, telecoms and government. We like to introduce ourselves as whether you know us or not, we're already in your inbox in some way or the other. So we impact the daily -- on a daily basis, we impact over 1 billion lives. Our platforms are tried, tested, trusted by Fortune 500 across 4 continents. Now coming to the current quarter. This quarter's performance, both on top line and bottom line is below the same period last year. I would want to acknowledge that. Having said that, this was not unexpected as we had also mentioned on the previous calls. We had 3 contracts that were close to completion in the last year, 3 long-term contracts, 2 of which were -- had the scope of being renewed and they were renewed at better rates. One contract, which was a large build, operate, transfer managed services contract, that concluded in Q4 of last year. That contract used to contribute significantly both on our top line and our bottom line, especially in the first half of the year. It was a 5-year contract. So over the period of 5 years, we had also achieved significant automation efficiencies. So it was a healthy contributor to our bottom line as well. Having said that, we've made considerable efforts on building the pipe to compensate for this engagement. And I'm happy to inform you that those efforts have been paying off. In the first quarter itself, we've already added 4 new BFSI customers, 3 in India, 1 in Saudi Arabia. And this is also our first customer acquisition in the Saudi geography. And as we all know, that geography is booming and that's a place that we really want to be in. We also added 2 state government contracts for managed services. Those contracts are yet to fully commence. Last -- in Q1, we're also happy to inform you that we were awarded 2 copyrights for our centralized communication platform and our offerings. On the financial front, we concluded the first quarter like C.K. said, with a INR 30.5 crores to top line without other income and a INR 1.25 crore bottom line. The drop is a result of the successful transferring of our large value managed services engagement. However, we've been taking the right steps, the necessary steps to improve both on our top line and optimize on our bottom line. Our cash reserves remain healthy and we are a debt free organization. On the sales front, hunting -- from a hunting standpoint, it was an unprecedented quarter. We added 4 new BFSI customers, 2 in insurance, 1 in banking and 1 NBFC. This was an outcome of our investment in sales that we've been making over the last few quarters, if you've all been following that. We're also in last stages of a couple of government contracts. On the farming front, our farming efforts are also starting to pay off. We're seeing great attraction with our existing customers. They have helped bridge a certain gap of the managed services contract. Our international sales have also been contributing significantly higher. So last quarter -- last year, we were at maybe 82% India contribution and 18% international contribution. In our Q1, that split has now moved to a 70% India and 30% international. We have been focusing our efforts on seeing how we can make our green shoots grow and our international markets pay off, and both have now started contributing healthily overall to our numbers. Our pipeline for the year also is healthy, both on the private sector as well as government. On the people front, we've been adopting AI company-wide to improve efficiency, the efficiency with which we deliver to our customers, build our products, et cetera. Our overall headcount has come down from 482 last quarter to 452 this quarter, and optimization efforts are continuous. Now we use AI to ensure that we are delivering more optimally, more agilely and more efficiently. We did add additional people to overseas markets for billable engagements, which has increased our overall employee expense, but these are all against direct revenue billable opportunities. They're linked to those engagements. On the product front, over the past quarter, we've made significant strides in strengthening our platform capabilities. We successfully launched key upgrades to enhance our scalability, our integration flexibility, et cetera, making it easier for clients to adopt our platforms and expand usage. Generative AI as well is extremely well integrated into all our platforms right now. These capabilities are enabling our customers, banks, insurers, the government, et cetera, to automate complex customer interactions, generate hyper-personalized content at scale, proactively resolve service needs without human intervention, per se. We've also introduced an agentic AI upgrade, a module to our overall UniServe communications suite, which enables our customers to engage with their customers in very human -- with human-like empathy but without the same commensurate expense. With all of these AI enhancements, our platform is moving from being a communication enabler to truly an intelligent engagement engine, setting a stage for higher value, more stickier client relationships and better customer experiences for their customers as well. Our product road map remains on track. And with these -- with the upcoming releases that are planned for Q2, Q3 as well, we're focused on, again, AI-driven hyperpersonalization within all our communications irrespective of what channel. And this is positioning us strongly for a healthy adoption and a healthy engagement across -- increased engagement across our existing customers as well. Overall, I'd say while this quarter's numbers are muted and since we used to have a strong contributor to H1 and, thus, the H1 may be a little muted, our fundamentals remain strong. Our strategy has not changed. We continue to be focused on what we set forth for ourselves in Project Butterfly, I'd say, 5 quarters ago. And our market opportunity continues to expand. So these strategic actions that we have been taking over the last 3, 4 quarters will definitely create meaningful shareholder value and we are extremely confident of delivering long-term sustainable growth. With that, Nitin, if you want to say anything. Otherwise, we can open it up to Q&A.

I think we can open up the forum for questions.

Okay. Thank you so much for joining us and happy Independence Day in advance.

[Operator Instructions] The first question is from the line of Sumit Kothari, an individual investor.

Very disappointed by the current quarter's numbers and the margins being just 10%, operating margins, that is. We have been talking about investing and seeing significant growth in the future for the last probably 2, 3 years now but we have not seen any numbers till now. And you've alluded to the fact that Q2 also may be a little weak and we may see significant growth from H2 onwards. So it will be really helpful if you can quantify at least in that range what kind of growth are we looking at here in H2.

Can you hear me?

Yes, yes. I can hear you.

Yes, Sumit. Thanks for your question. I completely understand. The H1 being muted, so our managed services contract that we handed over to our client, that used to contribute significantly in our H1. And our efforts, all the new logo additions, all the additional business that we are doing in H1 is kind of going towards covering up for that engagement. Having said that, I mean, we have been making investments in sales, as you know, over the last 3 quarters. And that is paying off. You are seeing the logo additions. And while logo additions in today's day and age don't contribute sizable numbers upfront at once, but lifetime value of those customers, overall, it adds to our overall number. So all I can say is we are very positive about our H2. And all the logos that we're adding now as well will start adding numbers to our H2 as well.

But it will be really helpful if you can give me a band of growth. Because as an investor, who has been investing for the past decade now who's losing out patience here because there's not been any significant growth there, and although we had some top line growth last year, the margins were lower. So ultimately, the profit was much lower. So if you -- and the point of doing a call like this would be to give an investor a ballpark number in terms of growth. I know you said significant growth, and I agree with that. But if you can give me some kind of a percentage plan, like a top line, bottom line, and when can we get back to this 20% kind of EBITDA margins which we had earlier and the absolute top line growth in H2?

Sure, Sumit. This is Nitin here. Hope I'm audible to you.

Yes. Please go ahead, Nitin.

So Sumit, as Anisha had mentioned, we have added 4 logos. So just to quantify as to what it really brings on to the table in terms of numbers is these 4 logos along with the government deal that we have secured with the government -- state government in India, so together, this contributes about INR 12 crores to our pipeline, of which INR 1 crore has been invoiced and billed in Q1. So whatever you see is about INR 11 crores is what will get billed over the next 2 quarters. It also depends on the delivery -- the pace of delivery that which we are delivering. Now the whole idea is that now that we've added INR 12 crores, we hope to continue the same run rate even in the -- over the next 3 quarters as well. So if we were to continue to that rate, continue that new logo additions and the new hunting business, we will just not fill the deficit that we have created by transferring a large managed services deal, but we'll also be able to deliver a growth over year-on-year on the top line as well. But as you pointed out, the margins, of course, are stressed -- has been extremely stressed in Q1 to say that. And since that engagement is to contribute heavily, just to also give you a context, we had billed them INR 12 crores in Q1 of last financial year vis-a-vis this particular when we had done about INR 35 crores of -- INR 39 crores of billing in Q1. We've been able to still deliver INR 30 crores of top line minus the INR 12 crores of high -- that managed services contract. So this investment we have been making in case will help us to generate this INR 10 crores to INR 12 crores of new logo additions over the year, which will just not kill the deficit, but also post some growth, right? Having said that, the margins in the short run, as Anisha has mentioned in H2, it was a high-margin engagement because we have been delivering it over the past 5 years, and we have brought in significant efficiencies and automation there. So we would definitely not be -- the new business that we are adding on would not contribute the same margin profile. But definitely, we would see that coming back to the 20% -- or 15% to 20% in later half of the financial year. I hope I'm able to give some sense and color to your query.

Fine, it is reassuring that you are saying that we may go down -- go back to 15%, 20% operating margin in H2. And how about the top line growth here, Nitin? Like margin is one thing, but how about the top line growth here?

So like I mentioned, the top line, since we will continue to add more logos going forward quarter-on-quarter, so we would just not be able to fill in the deficit but also growth. So maybe another 10% to 15% growth looks realistic, possible at this time because we've got certain engagements which are in the advanced stages of our pipeline, which we would not want to commit at this point in time as an upside. But if those were to come through, yes, we will be able to also project some decent growth in our top line as well.

So you're saying that we will be having something like a 10%, 15% kind of a top line growth over FY '25, if I understood that correctly.

Yes, yes.

So you're saying, Nitin, that FY '25 -- FY '26 growth will be 10% to 15% and year-end margins will be closer to 20%, correct? Is that right assessment here?

Overall, see, if you also aggregate -- average out H1 and H2, it might not come to those percentages, but in the later half of the year...

Yes, yes, that's why the exit margin. That's why I said the exit margin, not the overall margins. Fine. Got my answer. And Nitin, what is the current debtors and cash on books as of date?

We have about INR 58 crores as cash balance, Sumit, and we have about INR 65 crores of receivables as of June, of which we've collected around INR 12 crores. So we have about INR 53 crores of receivables due coming from my previous quarter.

The next question is from the line of , an individual investor.

Congratulations on getting the copyrights and bagging new logos. You mentioned about the -- yes, you mentioned about the increase in the overseas contracts mix to about 30% currently. So we are just starting exploring avenues on the international side. If you look at our top line, and 30% of that is peanuts when you compare to the opportunity over there. My specific question was on the overseas engagements of customers, what is the margin profile compared to an Indian customer? Is it margin accretive? Or do we have better margins there? And the second question is what is the delivery model? Are we -- are these billable resources based out of India and will they deliver from India? And we can bill in, say, U.S. dollars on a U.S. client?

So thanks for your question. So it depends from engagement to engagement. Some engagements, like, for example, some engagements in Middle East, they want people to be onshore delivering from there. Those margin profiles are different when compared to people who deliver from India. But having said that, in general, margins across our international engagements are much better than Indian engagements.

Okay. And as a company, the strategy for our international business will be to have a higher portion of deliveries from India from a margin perspective?

Yes, yes. Again, it depends on the type of engagement. If it is platform deliveries like what -- of our core platforms, then most of it will be handled in India with just maybe 1 or 2 people over there for client stakeholder management. If it's managed services, then depending on the nature of that contract and that engagement, customers may want people to be overseas or work from India.

Okay. My next question was about the incremental business we are doing. Are we selling it on a SaaS model or on a license model? And are you seeing as a company, is the strategy to increase the revenue from the recurring SaaS model compared to a license model? And if yes, will that have a temporary impact on our kind of revenue run rate? Because when you sell a license, you get upfront revenue once in a -- one, one -- in one go, whereas it's a SaaS model, it's more sticky, but you have to recognize it ratably over the period of the contract.

That's right. That's a good question. In fact, in the 4 customers that we closed in Q1, 2 contracts we closed on annual recurring engagements and 2 contracts were closed on upfront license engagements. Our aim is to get to recurring engagements. And even if they are upfront license engagements, then term-based engagements, which means this is valid for a period of 5 years, which essentially again, eventually becomes a recurring engagement in some sense, right? So our goal is to get to a more recurring engagement kind of a model so that we have predictability. But the industry as such, and even competition and the customers, people in our space are used to the more license-based approach.

Okay, but...

Our ambition is to focus on SaaS. We could convince a few customers in Europe, 1 customer in Europe and a couple of -- 3, 4 customers in India, the large PSU which we have model. The point is that because of the volumes which we process and the growth at which the B2C market is growing, they would prefer a license one -- license model because it makes financial sense for them.

Yes. From a client perspective, it's a CapEx versus OpEx kind of thing, right? So I mean currently -- yes. All right. If I can ask one more question?

Sure, sure.

Yes. So broadly, we have such wonderful logos on our list. In the investor presentation, thank you for being so clear on the additional logos and what we have as customer base. My specific question is there was -- as part of Project Butterfly, there was this plan to increase the average revenue per customer, which means we cross-sell more to the existing customers and create more opportunities. From an execution point, how are we actually going about it? I mean, are we offering any new products or solutions to the customers? Or if a customer is currently using, say, a license for 1,000 users, are we -- when we are selling a SaaS model, are we planning to sell it for like an unlimited user agreement? Or I mean, from your perspective, how are you going to execute on increasing this average revenue share per customer?

That's a good question again. So earlier, we used to only sell -- we used to sell a single module of ours called UniServe 360, which is used by most large private banks, insurances in the country. We have expanded our overall communications offering right now to about 5 different modules covering everything from design to deciding who receives what, when, to the final delivery of the messages. And we have integrated all of that as modules of our overall platform. So number one, that opens up cross-sell opportunities of these additional modules to our existing customers. Second, we provide services to manage their overall customer engagement as well. So we manage their operations, we manage their billing cycles, et cetera. So that's the second way. Third is, over the period of time, over the period of the last 3 decades, we've built strong data management capabilities in-house, which erstwhile we used to just provide it as part of an integration or an implementation, today we sell that also as a separate service. And we have also partnered with organizations like, for instance, like AWS and other upstream, downstream kind of platforms as well to cross-sell them as well. So this gives us opportunities of, say, cloud migration, for instance. Or it gives us the opportunity if we do this piece and now the next step you will need is this, so take this partner product. So that's how we have increased on the number of offerings in both product and service that we can sell to our existing customers.

And we are seeing significant growth in our revenue from our existing customers compared to the hunting one.

Okay. I am very clear. Just one request. When you -- if you have not finalized the annual report in terms of your management commentary, I mean, any more color on how we are evolving in terms of metrics, in terms of numbers would be very good, charts explaining how we evolved as a company, the mix of SaaS versus the license, the mix of overseas versus domestic. So all these things -- it would be good to position it properly to our investors on an annual report. So wish you all the best.

Sure, sir.

[Operator Instructions] The next question is from the line of [ Dhanraj Tolani ], an individual investor.