Okay, good afternoon, everybody. Welcome to the hSenid Business Solutions PLC Half-Year Investor Forum. And from this year onwards, we have kind of decided that we'll actually do it from a quarterly. After the quarter results have been released, we will actually do investor forum in a similar format. And the main objective of the investor forum is to able to answer questions from the participants, from the analyst community, as well as our shareholders. Mainly focused on the results that we had the previous quarter or the previous half year. And the detail of this, I think, Nilendra will actually take you through as the CFO on that. And with that, what I would like to do is to actually pass the presentation discussion to Nilendra and Sampath.
Again, thank you very much for participating on the hSenid Business Solutions investor forum. Over to you, Nilendra.
Thank you, Dinesh. Once again, good afternoon, everyone. We extend a warm welcome to the first half FY 2024 investor forum hosted by hSenid Business Solutions. We sincerely appreciate your participation and look forward to your continuous engagement in our investor relations program. Before we commence, like Dinesh mentioned, there are a few housekeeping updates regarding our IR program, which I'll highlight to you. Starting third quarter of this financial year, we will transition into hosting quarterly IR calls, as opposed to our previous practice of semi-annual investor calls. However, this particular call will cover the entire first half, since we are meeting you after our full year FY 2023 call that we hosted last.
Please take note that during these quarterly calls, as mentioned in our email, to all registrations to this call, we will not be delivering a formal presentation. Instead, we will upload the quarterly IR presentation to the IR webpage ahead of the scheduled investor call, like we have done, this time around and notified you via email. We believe this approach provides you with ample time to review the presentation and formulate your own questions to the management, so that we can have a productive IR call. The Investor Day call will be scheduled within four to seven business days following the release of the quarterly results, and the entire IR call will be dedicated to answering and clarifying your questions.
With that, I will now move to a quick summary, bird's-eye view of the first half results, after which we'll open for Q&A. hSenid Business Solutions recorded a revenue of LKR 758 million for the half year ended September 30, 2023. This represents 7.5% year-on-year growth in LKR terms, and a 13% year-on-year growth when measured on USD constant currency basis. As expected, this growth was primarily driven by our PeoplesHR cloud offering, which grew 24.7% year-on-year in LKR terms, and a much higher 35.7% in USD constant currency terms. In first half 2024, core recurring revenue amounted to 55% of total revenues, up from 48%, during the corresponding period of the previous financial year.
It is noteworthy that our margins improved from Q1 to Q2, reflecting stabilizing OpEx, and growth in high-margin cloud revenue. The core exit ARR, annual recurring revenue, as of September 30th, has now reached LKR 888 million, or in other words, approximately $2.8 million, which represents a 28% year-on-year growth, again, in LKR terms, and a notable 47% year-on-year growth in USD constant currency terms. Our strategic investments in market development initiatives, including targeted lead generation campaigns, active participation in international events, digital marketing, partner marketing, have yielded successful results for hSenid Business. And these results are reflected in the successful new deal closures, demonstrating a notable increase in Q2 of FY 2024, where deal closures were up 141% in USD terms compared to Q1 of FY 2024.
And it's worth highlighting that there is a significant 48% of these new deals were secured from the APAC region. And the growth on the first half total number of new deals stood at 18.5%, year-on-year, compared to the corresponding period in USD terms. As we look ahead to the remainder of FY 2024, we are committed to strengthening our market development activities, with the aim of securing more high-value deals, particularly in the cloud business. With that, we will now move to Q&A.
I encourage all participants to either raise their hand so that we could unmute you and allow you to pose your questions, or alternatively, use the chat function on the platform so that you can post your messages, which we will then address one by one. The forum is now open, and we are happy to take your questions. We have a few questions on the chat, which I will direct now to the relevant panelists. I'll take the first question. Out of the on-premise non-recurring revenue recognized during the year, how much is attributable to the Uganda project phase two. How much of the Uganda phase two revenue has been left to be recognized in the next two quarters? Sampath, do you want to?
Yeah, yes, actually, we raised one invoice in Q2 with regards to Uganda government project, and we are planning to raise another invoice worth, like, you know, $72 million in Q3. And again, like, you know, another invoice in Q4 as well, size like, you know, $32,000 in Q4. So that concludes the phase two activities. So we are in line with the project plan and delivery plan with regards to Uganda government invoicing as well as revenue recognition. So upon completion of phase two, there's another phase to come, that is phase three. The purely deployment or new unit addition to phase one and phase two. So that will start soon after completion of the phase two activities.
Hopefully, like, you know, that means that we have another set of revenue plan for next financial year as well. Also we start the support activities after warranty period for phase one, that support activity starts September 2023, and it's an annual contract starting from September 2023. Upon completion of phase two, there'll be a warranty period again, and then, like, again, we are signing a support contract for phase two as well, and subsequently phase three.
Thank you, Sampath. I'll move on to question number two. Out of the LKR 32 million QOQ increase in cloud subscription revenue, what portion is attributable to the repricing effort? Was on-premise product also subject to repricing program? I'll probably take that question. Essentially, we commenced the repricing program in July and ended it in October. Out of the QOQ increase, I would say there would be negligible revenue affecting the quarter, because most of the new invoices happened in October, hence it'll fall into Q3. And also, from a point of view of forming realistic expectations, you need to understand the full effect of the repricing program will take exactly 12 months from the point of new prices being effective to fully reflect in the revenue and the financial statements of the company.
So essentially we'll be starting recognizing in the month of October, but it'll essentially take 12 full months under the new price regime for that to be reflected in our numbers. As to the on-premise clientele, for an on-premise client that's using our software, essentially what we have is a annual maintenance contract. So we have not subject AMC contracts to repricing, but has been focused... the focus is the cloud business. Essentially, the AMC contract is contractually agreed upon, roughly being 20% of the license value of the initial sale. So to answer the question, no, on-premise product has not gone through repricing. I'll move on to question number three.
Can you explain what has driven FY 2023 infrastructure cost approximately 90% year-on-year in USD terms? How does it convert into the improvement in service standards or expansions? What is meant by infrastructure cost optimization? Sampath, do you want to touch on really what led to the infrastructure cost increase, particularly in terms of the higher server and infrastructure quality-
Yeah.
... we have provided to our customers?
Of course, we enhanced the infrastructure standard because we are now an ISO 27001 certified company with the cloud security certification. So we are very much concerned about the security aspect as well, like, you know, so we enhance the cloud infrastructure. So we had to incur additional cost there to lift the standards. And same time, like, you know, we are working on a cloud optimization exercise at the moment, standardize, like, you know, overall cloud infrastructure. So that project is going on, like, you know, hopefully, that will lead to next quarter as well. So with that, actually, we are planning to bring down the costs little bit like, you know, or rather, same level, by increasing number of employees onto the same cloud environment. Incremental costs, like, you know, we can manage very well with that.
Moving on to the next question: What has driven the encouraging new deal closures? Is it specifically attributable to market development activities that took place during the quarter? Sampath, do you want to?
Yeah. I think, like, you know... Yeah, mostly, yes, as Nilendra very correctly mentioned, like, you know, Q2 sales, if you really look at majority from the APAC region. So we are doing major campaign, like, you know, in the region, APAC region, like, you know, to improve our sales and marketing and our visibility in the region. And also, like, you know, resource utilization point of view. Now our top team utilize in the region, like, you know, so they are into lead generation, and we heavily use, like, you know, digital marketing activities as well for lead generation and event participation. So with that, actually, our pipeline has grown drastically compared to last year, Q4 and Q1 this year. And so, like, you know, we have a steady a funnel and then, close your pipeline, at the moment. Yes, like, you know, so that it's, directly attributable to market development activities we are carrying out.
Next question is the reason for cost of sales to increase year-on-year. Maybe I can take that. If you really look at Q2 versus Q1, definitely we have not just stabilized but improved margins. However, if you look at first half as a total compared to corresponding period of last year, there are multiple reasons, you know, behind the cost of sales increase. One of which I think Sampath explained, which is the infrastructure cost increase. Second, of course, is the higher cost of people that we had to incur.
First, from a retention point of view, you know, the volatilities that the IT industry as a whole has been facing, particularly with the migration with remote work opportunities from overseas software companies. So, this has led to a significant increase in the cost of talent, and in certain cases, we had to proactively increase our cost base in order to retain the talent. Also, secondly, wherever there was staff turnover, replacements have come at a much higher cost than previously expected by and enjoyed by the company. So this has definitely given rise to first half of FY 2024 versus corresponding period of previous financial year cost increases.
Nevertheless, we need to mention that Q2, we've seen an improvement from Q1, where the margins have not just stabilized but also improved. Moving on to the next question: Why only focus on HR systems? Any idea to look at different areas to reduce the dependency on one or few products? Dinesh or Sampath, do you want to take this?
Yeah, if you really look at HR domain, like, you know, the market sizing is around $10 billion only in APAC region, like, you know, so there's a big opportunity in that area. So when you focus on one product line, even though we call it HR, like, and if you look at the product, there are core nine areas and overall 27 modules and more than 50% component. So it is like a ERP, mini -ERP solution for organization. So we are working on that scope because when you focus on one domain, and you can be the leader in certain areas. So that's the focus at the moment. Like, we'll not move into non-HR activities, but of course, like HR line, we are expanding our services.
Now, simple example, HR or human resource outsourcing services, human tracking solutions. So those, similar lines will expand our business, like, you know, going forward as well. And even the, the PeoplesHR marketplace will bring, like, you know, certain solutions to our customers, and we will, work on those areas. But, we don't have an immediate plan to move out of HR domain and focus any other are because scope in this area itself is huge, and there's a very big potential, globally.
Thanks, Sampath. And if I just add something to it and just stress one important word that Sampath mentioned, I think it's all about focus. So focus in terms of domain, which is the HR -related systems that we do. And then also on top of that, I would say focus in terms of markets. We want to be really focused in terms of the markets we go into, so that we really go deep and establish a meaningful market share and presence in those markets. So I think that I would say that summarizes our approach. Next question-
Sure.
... also probably-
Yeah.
... to use Sampath-
I'll take the next question.
Yeah.
Like, you know, so, so yes, we start the AI journey-
Sampath, for the benefit of everyone, I'll read out the question because I think our-
Okay.
... participants may not be seeing the questions. So the question is: Do you have any AI-related HR products at the moment? Over to you, Sampath.
Yeah. So, yes, we start the AI journey, maybe 18 months back. So we set up a, like, you know, innovation team within the organization to work on some of the latest technology, not only AI, AI, IoT, intelligent automation, and most of these areas. So at the moment, like, you know, there are certain AI -related products are already released, especially when it comes to a recruitment module. We are heavily, like, you know, using AI on that, like, you know, especially sentiment analysis, behavioral assessment, then, shortlisting, longlisting these areas. Like, you know, we are using AI at the moment. At the, at the same time, like, you know, certain other areas like analytics.
So you can do predictive analytics today, like, you know, so we use certain data and also to understand employee happiness and then engagement levels within the organization, so we use AI. Same time, like, you know, especially when it comes to payroll and stuff like that, we use anomaly detection and various different areas just to, like, you know, minimize the cost and understand, like, you know, problems well in advance, so user can correct themselves without, like, you know, even reaching us. Like, you know, so there are multiple activities happening even at the moment. So product will be enhanced based on those capabilities.
Thank you, Sampath. When are you planning to start phase three of Uganda project? I think we addressed that. It'll be beginning of next financial year-
Yeah.
... with phase two coming to an end in this financial year. Given that hSenid has utilized 100% of the IPO proceeds that are allocated to market development, what is the outlook for that front? Sampath, you want to take it?
Yeah. So, we have not utilized fully if we look at because the IPO funds, we have planned for three different areas. One is, market development, one is product development, and, and third component is, potential acquisition. So, like, you know, we have not touched the acquisition value. So, like, you know, we will, keep you all posted, like, in our plans on, that, like, you know, soon. And on the other two fronts, actually, market development activities are happening. So, so we have utilized the major portion of that fund and the product development activities as well. Now product development activities will continue, of course, research area and stuff like that. So we, we have internally generated funds to continue our product development journey.
Market development activities still, like, you know, it is not fully utilized IPO funds, but, we are, like, you know, well-placed to, continue our development work, next, I would say, like, you know, 24 months and beyond.
There's a question on what would be EBITDA and NP margins after the repricing exercise. I'll take that. So I'm not going to comment on NP margins because there's a lot of volatility that happens at NP level, and comparisons become difficult with taxation, with the FX gains and all that. But I would say from an investor point of view, it is more accurate to look at EBITDA margins, which is more relatable and also controllable from our side, from a management point of view. So Q1, our normalized EBITDA margin, and when I say normalized, referring to normalizing for FX gains, interest income, all non-core revenue items. So if you look at normalized EBITDA margins, Q1 was at -19%, obviously, given all the cost increases that they've been taking.
Q2 was - 13%. Of course, our immediate target is to ensure that normalized EBITDA margins break even, and then of course, become profitable as well. As a rule of thumb, something that we benchmark ourselves is that there is this Rule of 40 that applies or that is usually used in the SaaS industry. Rule of 40 essentially means that the best performing SaaS companies, EBITDA margin plus revenue growth rate on a year-on-year basis should be equal to or exceed 40.
So our aspirations as a company essentially is to make sure our normalized EBITDA margins get to about 15%, with revenue at about 25%, and the addition of those two will give us the 40%, Rule of 40, basically to be equal to that 40 number, which is the benchmark for a good, well-performing, SaaS company. So, our plans are to get there as soon as possible. Next question: What has driven... Maybe before the next question, I see one person has raised their hand, so we'll probably take that question, and then move on to the written Q&A. Ranjan, over to you. You're on mute.
Ranjan, you're on mute. Do we have to unmute? I have clicked on ask to unmute.
Thank you, Nilendra.
Okay.
Just a small question, following up, Mr. Sampath, regarding acquisitions. So there's a certain amount of money that is left over for acquisitions from the IPO proceeds. Are there any potential targets that you all have looked at for maybe acquisition in the next 12 months? Are there any anything in the pipeline that is being discussed so far?
So, Ranjan, I mean, we have been continuously scouting the market for acquisition opportunities. It's just that we don't want to jump or rush at every opportunity that comes our way, because we are always weighing organic growth, which is fueled by sales and marketing spend, versus inorganic growth, which is going to be fueled by an acquisition.
So right now, given the valuation expectations of some of these companies we've been looking at, given their growth profiles, up to now, based on the opportunities we've seen, we have seen the kind of pendulum swing in the favor of organic growth, where we've been pouring in a lot of market development expenses, as we highlighted in some of the answers before, and also sales recruitments in these key markets that we are focusing on, because we have felt that the risk reward or the payoff for organic growth has been good enough. Nevertheless, if some opportunity comes by, which is interesting, which really has a reasonable payoff compared to the results we are seeing on the organic growth, which is fueled by selling and marketing expense, which is our investment, our customer acquisition cost, we will definitely, you know, explore that.
As of now, we continue to explore opportunities and haven't found one that basically hits the sweet spot.
Thank you, Nilendra. Just, just a small follow-up on that. So earlier, Mr. Sampath mentioned about plans regarding to focus on the core activities of the HR, in the field of HR. In an event where something sort of an interesting proposal comes your way, like maybe on some other field to divest from the core competence, is that something you all are looking at, or can we expect acquisitions coming in the same lines of business lines of HR?
We will consider the same line of business, primarily. We will not change the domain, because we have a lot of expertise in this domain, now developed over a period of time, more than 25 years, like, you know. So we look at a similar line of business.
All right. Thank you, got it. Thanks. Thanks again.
Thank you, Ranjan. Let me move on with the Q&A on the chat. What has driven the Q and Q- quarter-over-quarter increase in admin expenses and selling expenses by approximately LKR 20 million and LKR 30 million, respectively? So essentially, what you're seeing in Q2, I think we mentioned this when in our previous investor call as well, most of the senior hires that we made, the first full quarter where you see all of these costs essentially is Q2. So that's why you're seeing the full burden costs of all the talent acquisitions that we did getting reflected in this P&L.
As we mentioned, in our previous call, we don't see any more significant increases in headcount, particularly senior talent, with the exception of sales staff that we may recruit, you know, in particular markets so that we have better focus. But, from a senior talent point of view, I think what you see is pretty much a full burden cost during the last quarter. Moving on to the next question: Your other income for the quarter has increased by 1,125%. What is the reason behind this? This is predominantly FX gains. So if you look at quarter one, we had FX losses because of the rupee essentially strengthening against the dollar.
Quarter two, we had that reversed, where the rupee depreciated, leading to FX gains. Do you have any other future plans to partner up with SL government to restructure SOEs? I, I don't think the question is-
Mm-hmm.
... relevant to us.
Yeah.
Uh, no.
No.
No, not at all. There's another question: Can we expect plans to expand through acquisitions in the coming months? I think it's from Ranjan. I think we answered your question. Do you prefer larger clients or much smaller clients in terms of margins? Please explain, Sampath.
Yeah. So larger clients comes under two categories. We prefer larger, SaaS customers, cloud, customers, like, you know, so margins are much better, like, you know, when you work on a large accounts and especially on the SaaS side. But still, like, you know, we are getting some accounts from, especially MEA region, African region, large accounts, but on on-premise. So, so the advantage is then you get a larger, license component during first one, but then, like, you know, ongoing basis, only a maintenance, revenue, like, you know, we are earning year on year. Yes, we, we much prefer to get large accounts. Obviously, like, you know, margins are, are better, especially in the APAC region.
So as of now, I think we've answered all the questions that came on the chat. So I'd like to invite, again, those of you who are joining us on this call, if you have any questions and prefer to post those questions, please raise your hand, and we will allow you to unmute yourself and speak. I think there's one more, two more questions on the chat. Are market development efforts considered as capital nature spending? So from an accounting point of view, I think we have been mentioning this consistently, and thank you for raising that question. As a software company, all our CapEx are, in fact, OpEx.
So the CapEx-like items we do, these market development efforts, this can be, PR, this can be digital marketing, it can be events that we hold to, invite customers, potential leads, make our brand and presence felt in a particular market. So all this, what we call customer acquisition costs, are expense right through the P&L. Nothing of that, those costs are capitalized. So yes, all investments we, we make, which are capital in nature, when you compare the software business, are hitting the P&L and getting, expensed in the P&L. So essentially, we are making losses in day one for all the market development activities we do. The recruitments we do to, accelerate our sales, all of the costs are hitting the P&L on day one, but the revenues will come-... with a lag.
The lag is because of two reasons: one, a sales, a sale itself, a deal closure itself will have typically a three- to four-month sales cycle, from initial proposal right up to final agreement sign-off. Then from that point, again, probably another four to six months of implementation time, before which, a client essentially goes live. We call it the go-live event, and we start billing. If it's a cloud, client, we start billing subscription revenue. But when we keep doing this over and over again, you really see that hockey stick effect of subscription revenues accumulating.
In fact, what you're seeing, basically with the higher sales numbers that we've generated in Q2 is, it'll take a couple of quarters for these to start getting reflected in the earnings, and that's when you'll really see a big takeoff, exponential growth in our numbers. Thank you for raising that question. PeoplesHR business accounts for about 50% of the revenue. Is this going to increase? Sampath, do you want to take that?
Yeah. I think, like, you know, as Nilendra mentioned at the very beginning, our core area is PeoplesHR. PeoplesHR business is the growing business, especially the cloud business. So the advantage is actually when you get sales, cloud sales, there's an annual recurring component adding to the P&L, like, you know, so that's a value we are creating. So this will continue to grow in our overall business.
The next question: Given the development of AI and other free tools in HR, how is the future? And if it is a risk, how is it planned to be mitigated? Sampath, do you want to take it?
Yeah, so I'll start, and then you can add anything. So, yes, of course, like, you know, in technology area, always like we are working with risk and return, like, you know, so we are also well-placed. There are many projects happening, like, you know, within the organization, as I told you earlier, AI area, intelligent automation area, low-code/no-code area to bring down the development cost structures and stuff like that. So like, you know, we also use latest technology for our development work. So, that's what we have to always look at, like, you know, how to get the maximum out of available technology. So we also continue in that journey. So we'll keep on improving by utilizing latest technology.
So, like, you know, because of that, we won't see a threat or like, you know, risk in immediate future. Like, you know, of course, the technology area, very difficult to predict what is going to happen in the future, like, you know, so. But of course, like, you know, developing enterprise-level application is not that easy. Like, you know, so it is a lot of effort, and you have to mature the solution as well for enterprise to use application, like, you know, so, so that journey is not that easy. Like, you know, developing a small, mobile app or whatever, like, you know, that is easy, but enterprise application journey is different.
So I'd like to just pick on one word that Sampath said: enterprise. So, there is a big difference between B2B and B2C software. B2C software is particularly an area where, you know, as long as you give the sleekest, smoothest new UI, you know, you'll have consumers switching and, and, and churning from whoever the incumbent vendor en masse. You know, you will see that churn happen and, and a new player winning. B2B is an area where... and particularly enterprise is an area where it's a segment where there is a lot of complexity that we are getting involved with.
If you really look at the product, one of our key competencies, apart from the multiple countries that we have localized the software and are statutorily compliant for, one of the key competencies lies in the fact that there is more than 25 years of domain experience built into this product. Now, what that means is, say, a new startup or a new company that comes up with a, say, let's say, hypothetically, a free HR tool, will never be able to, within a short span of time, build capabilities to handle that entire complexity that is inherent in an enterprise that typically that we cater to.
And it takes time, and that time that we've spent in the domain and the complexities that we've gone through, operating in 20+ industries, from banking to retail, to manufacturing, to hospitality, healthcare, services, so on and so forth, puts us at an advantage where the barriers to entry is much higher compared to B2C, and then secondly, compared to even B2B on the SME businesses, where our needs can be much more simple. So given that we operate in the higher end of the middle market and enterprise, that gives us puts us as an at an advantage. Moving on to the next, next question: With many large organizations developing their own solutions, how would that affect HBS? Sampath?
So, like, again, like, you know, it's same line of business, like, because enterprise application, it is not that easy to develop and deploy within an organization. We have seen this happening in multiple countries. Time to time, large organizations decide to develop HR solutions or finance solution in-house. But after a year or two, like, you know, that project fail and coming back to a vendor, external vendor, like, you know. Because vendor point of view, your focus is developing HR solutions. So you look at, like, benchmark your products with global leaders in that particular domain. You develop, like, you know, domain knowledge within the organization. Yeah, that's very much focused.
It's a huge effort, like, you know, company to develop an internal HR application and run within the organization. It's not practical, and it's not advisable as well, like, you know. So companies won't do that actually, even large corporates that they will not go that path, like, you know, because at the end of the day, it is not just the code, the security, the infrastructure, like, you know, the things you have to manage is not worth like, you know, because you have to focus on your business, and allowing, like, you know, other third-party companies to focus on their domains and their expertise. So because of that, I don't see any threat in this area.
Of course, like, from time to time, people are trying, and but, but, we have come across many scenarios where, like, you know, after a year or two, they're coming back to the solution, like, you know, and that's, that's a common trend.
And if I may also add to what Sampath said, I think, success in this domain, probably like many other domains, requires not just a good product, but also good implementation services. I mean, you can have the best of product, but if you're unable to implement it properly in a way that the client and their users embrace this product, embrace the new digitalized journeys that they have to, follow for all their day-to-day activities... We've seen so many projects end up in failure. So yes, you need a good product, and secondly, you need a lot of experience and expertise in order to ensure that your client successfully goes through that digital transformation journey and starts using that software.
Because if you don't have customers using your software, I mean, all your customer acquisition efforts probably can go into a waste if the client churns in one year. So I think that high stickiness is really coming through successful digital transformations, and us, as a vendor, not just selling software, but providing the services that are required to make the customer benefit from that software. So I think that is an integral part of our offering. That's it for the questions again. Up to now, we've taken all questions that have been raised. If there are any questions-
There's another one, Nilendra.
Yeah. Yes. Do you have any subscription-based products, and thoughts on the potential for subscription-based solutions? Sampath.
Of course, like, you know, our PeoplesHR platform, like, it is a subscription-based product. Like, you know, so customers are paying, per employee per month rate or per employee per, per annum rate. So it's a complete subscription-based, business, and as Nilendra mentioned at the very beginning, a majority of new business are on, on subscription-based, like, you know, so, so that's the good news. So subscription revenue will, grow, like, you know, in next few quarters as well.
Yeah. So I think, I think, just for everyone's benefit, when we highlight this key metric, ARR, essentially, we are looking at recurring revenue, and, and essentially that's subscription-based revenue. Because the beauty of ARR is the non-linearity. So every quarter, the customers we acquire, the customers we then take through successful implementation, go live, and come into the subscription bucket, essentially keeps adding. So the more you keep doing this, essentially you'll see an exponential growth in the ARR number. I mean, even, even those numbers are visible right now with, I think we mentioned the growth rates, ARR growing almost 18% for quarter two on USD constant currency terms, slightly over 30% year-on-year.
So, these growth numbers are possible because of that non-linearity in subscription revenue, where every subscription you keep adding accumulates, provided you manage your churn well. I think on the presentation we have presented our GRR and NRR numbers, that is gross retention ratio and net retention ratio, and both numbers are up from what we presented to you last, during the last call. Our gross retention ratio has gone up to 99%, and net retention ratio has gone up to 102%. What this means is gross retention ratio is essentially one minus churn. So we've lost only 1% of our customer base, 99% has retained. Net retention ratio basically is adjusting for churn and headcount expansion and module upsells.
So essentially, the revenue base we started with at the beginning of the period, without new customer additions, ignoring new customer additions, have grown to 102%. What this means is that our existing customer base is also starting to spend more with us, in terms of software, consumption, and, you layer the new customer acquisitions on top of that, that's when you get exponential growth. And we are happy to note that our NRR, which was 97% last, call, that was, full year FY 2023, has gone up to 102%, as we have reported in our, earnings presentation. Yeah. Given the talent costs are high in Sri Lanka, any plans to move to other areas with cheap talent?
Actually, if you compare last year, 2022 to 2023, yes, there's a drastic improvement of talent cost. But now I think things are stabilizing. Even the attrition rates have gone down, like, you know, in the industry level. So, so we are not... I don't think like it will drastically improve, like, you know, cost structure during next couple of years as well. On the other hand, as a risk minimization strategy, now we have a second development center based out of Dhaka, Bangladesh. So, so, that is the first outside Colombo, like, you know, development center for hSenid Business Solutions PLC, like, you know, so we are looking at multiple options, like, you know, but, but overall now, costs have stabilized.
Yeah.
Question.
Okay. So once again, thank you everyone, and in conclusion, let me remind you that we will be uploading this call on our investor relations website for the benefit of those of you who couldn't join us today. We look forward to engaging with you on a quarterly basis on the same format, and we encourage continuous engagement so that we keep you abreast of the progress we are making as we move towards targets of being the most preferred HR tech vendor in the emerging markets. Thank you very much, ladies and gentlemen. Wish you a pleasant evening and a good weekend. Thank you.
Thank you.
Yeah. Thank you. Thank you, everybody.