Sent to all of you, and it's also available on our website. Our leadership team is present on the call to discuss the result. We have with us today Mr. Arun Jain, Chairman and Managing Director. Mr. Prabal Basu Roy, Advisor to the Chairman and Director on the Corporate Board. Mr. Manish Maakan, CEO of iGTB. Mr. Rajesh Saxena, CEO of iGCB. Mr. Banesh Prabhu, CEO of Intellect SEEC. We have Padmini Sharathkumar, Chief Talent Officer. Mr. Venkateswarlu Saranu, CFO, and Mr. Andrew England, Full-Time Director. Besides, some other senior members of the Intellect management team are also present on the call. Mr. Venkat he will present you the deck and then the comments will be made by Mr. Arun Jain. One safe harbor.
We would like to remind you that anything which we say, which refers to the outlook of the future, is a forward-looking statement. With this, I hand over the mic to Venkat. Venkat, over to you.
Thank you, Praveen. Greetings. I will very briefly walk you through the investor deck. I guess the investor deck and the CR are already with all of you. It's also on our website. It's on the stock exchanges as well. As we articulated in several of the earlier investor conferences and calls, as a product, IP-led product and platform organization, our results are best viewed in an annual, annualized basis. On that note, we will start with the reviewing the performance for the last 12 months, which ended on September 30th. For this period, our revenues grew 27%, moving from INR 1,640 crores last year to INR 2,087 crores this year.
On an annualized basis, it's a run rate we crossed the INR 2,000 crore mark in this quarter when we closed this quarter. Gross margins moved up by 25% against this revenue growth of 27%. They were largely kept up, moving from INR 931 crore to INR 1,166 crore. The EBITDA margin moved up by 9%, moving from INR 478 crore to INR 455 crore, while the profit after tax has remained flat, almost at around INR 311 crore to INR 314 crore to INR 311 crore. The growth margins as the slide shows is fairly constant. The EBITDA percentage is 22% against 25% last year. Collections during the quarter have been healthy. The last 12 months collection is around INR 1,905 crore.
Some of the, g oing into the granularity of the revenue, we've, in the past, in the technology days, two, one and two sessions which were hosted in 2021, we spoke about our progression from a products organization to a platform organization and perhaps eventually to a marketplace. The most gratifying metric that we would like to share is the stupendous growth in platform revenue. Platform revenues have grown 62%. They were from INR 276 crores-INR 448 crores in this. License revenues have remained flat. AMC revenues, which are driven by progressive go-lives and installations coming on board, have grown by 11%.
License link revenue is the other key metric that an IP-led organization like Intellect would like to benchmark itself on. That has again grown healthily, 20%, north of 20%. It's grown by 22% from INR 929 crores to INR 1,132 crores. The other one is the annual recurring revenue metric that we, which we've been presenting in most of the recent investor meets, which is an assurance of future revenue streams. That's again grown well by 35%, moving from INR 587 crores to INR 790 crores. Now, in the full year, the last 12 months, we had 41 wins, of which 14 wins were specifically in the last quarter.
They l ook at specifically in the last quarter, our revenues were at INR 528 crore, which represents a 17% year-on-year growth compared to the second quarter of last year. Gross margins against the 17% growth of revenue moved up by 5%, moving from INR 262 crore to INR 276 crore. EBITDA is a drop of 29%, dropping to INR 84 crore from INR 118 crore. PAT, we closed at INR 46 crore against INR 38 crore last year. The gross margin as a percentage of revenues is at 52% against 58% last year, and EBITDA is at 16% versus 26%. As I mentioned, the collections have remained healthy. They are at INR 472 crore in this quarter.
The recent day sales outstanding has been at 128 days, of which the DSOs for India-based customers is at 164, while for the rest of the world it's at 150. Again, looking at the granular view of the revenues, the platform revenue continues to be robust. It grew by 33% from INR 90 crore to INR 119 crore. License revenues are at INR 68 crore versus INR 86 crore in the corresponding period last year. AMCs, as I mentioned, for the last 12 months, it's grown at 10%, based on the go lives. We had 14 go lives, digital transformations, which went successfully live in the quarter. The AMC moved up from INR 81 crore to INR 90 crore.
License link revenues grew by 7%, while the annual recurring revenue has grown by 22%. As I mentioned a while back, we had 14 wins this quarter, of which nine are platform wins. Which means more than half of the deal wins of this quarter are coming from the six platforms that we launched in the group. As I mentioned, there have also been 14 new digital transformations where our MACH compliant architecture, our accelerators, our own technologies and such as iTurmeric and Canvas, have helped us deliver at least 25%-40% faster go live cycles. The revenue mix. The next slide gives the revenue mix in terms of the currencies. As you all know, the rupee has significantly weakened.
We've had a significant Indian rupee earnings, which impacts the conversion of that into dollars. Similarly, the weakening of the European-based currencies such as the euro and the pound, where we hold significant revenue streams, also has impacted our dollar-denominated revenues this quarter. Looking straight into the future, the pipeline growth continues to be strong. There's a 36% increase in pipeline against the corresponding quarter last year, moving from INR 4,800 crores to INR 6,500 crores.
In the recent quarters, we've more than the overall pipeline itself, which itself is growing, we continue to benchmark ourselves in terms of the Destiny deals, which are the key deals above, as in the next slide, it's above INR 20 crores of value, which we track. The entire leadership team focuses on them. That grows both in terms of the number of deals as well as the customers, the marquee logos that we get involved with, and as well as the average deal size. As you can see, compared to a year ago, the number of deals have grown up from 54 to 66, with more deals growing in the higher tier of deal size, which is over INR 50 crores and INR 30 crores-INR 50 crores.
Obviously we're not articulated in this slide, but in the subsequent commentaries we would hear that some of these deals are pursued with marquee logos as always. We are at advanced stage of evaluation or negotiation in several of these deals. As I mentioned, there are 14 wins this particular quarter, of which nine were with Intellect platforms. As we have mentioned in the two technology sessions, about our architecture, the four core technologies of Intellect, the accelerators, and the rich repertoire that we have of 300+ packaged business components on our user journeys.
The open architecture with 900+ APIs, which allows us to practically work with any ecosystem, integrate with any other technology partner that our customers, the banks, would be using. The speed with which we are able to complete this integration, which is traditionally a big pain point in all implementations. These demonstrated capabilities and the differentiators that they provide help us accelerate the deal wins. Like I mentioned, nine of the wins are in platforms. One is the Foresight, which is a major insurance client in the U.S., has chosen a suite of underwriting, which is a combination of Magic Submission, Risk Analyst and Xponent.
You would have heard our senior colleague Deepak presenting about the entire data cycle in the technology day sessions. Right from that stage of data uptake to data enrichment to triangulation to presenting decision-grade information to the underwriter for faster and sharper quotes. The entire cycle, the entire value chain of underwriting with an unparalleled accuracy is provided by this platform. We mentioned Saudi as a focus on upcoming promising geography in one of our earlier calls. That is bolstered by one more win for the Cash Cloud. Cash Cloud was also a recently announced platform where we also had signed a partnership with Microsoft Azure.
There and that we won the second deal in Saudi Arabia. We have a win in Egypt for our Lifestyle Banking, where we had an award-winning, a lighter stand of an implementation in the Middle East. That is drawing more traction as we move along. iESG, ESG has always been the most trendy catchword with a lot of investment bankers, a lot of financial institutions, investors, right focusing on the quality of the ESG assessment of their target investments.
To that end, one of the world's largest sovereign wealth funds has chosen our iESG platform, which is again driven by data and AML technologies, to implement this ESG assessment for all their investment evaluations. We had also one more insurance company win in North America for our Magic Submission, which uses our Doc2API technology in conversion of structured and unstructured data into which could be readily used by the personnel in the insurance organization. I mentioned briefly about Saudi earlier. We have one more win in Saudi for a microservices organization for a debt management platform.
This apart, our products in the transaction banking and the consumer banking business continue to fire. The core product-led deal wins, we had five such wins. One among the top three U.K. banks, where we already have a relationship, but signed up for payments. Similarly, payments had its second biggest win with another Canadian bank, where we have again a very strong relationship. That relationship has been further deepened by a win. U.A.E. has always been one of our more successful markets, and we had one of the top three banks we won for a mobility upgrade. The consumer banking business also won a Digital Core deal in Africa.
Last year, you would recollect that we had mentioned about three large central banking deal wins in and around Africa. That winning streak is continuing with a digital core win during this quarter. In India, we did mention two significant wealth platform deal wins last year and in the earlier quarters. That referenceability has helped us with one more win in this current quarter. These are some of the deal wins. I mentioned about the go lives. Totally, we've had about 14 digital transformations going live during this quarter. In the next couple of slides, we've given details of each of them. That sort of summarizes very briefly in terms of the numbers, our performance during this quarter.
More importantly, as we always measure ourselves as an IT-led organization, how we have performed over the last trailing 12 months. What is in store ahead? What has been the quality more importantly than the numbers that we have given to the top line? What has been the quality of some of those wins? Why are they promising enough? And what message they convey to us, and what confidence they give us? And what has been our success story with some of these transformations, and where do they put us in our growth path? That is a very brief summary.
I would now hand over to our Chairman and Managing Director, Arun , to share his perspectives and give a larger view of the overall market, the product technology scenario, and where we are in our journey at this point in time. Thanks.
Thank you, Venkat. Take the whole presentation back at a very fast pace. I'm sure the smart investor would have picked up all the numbers which you have thrown in the last 15 minutes. Looking at the numbers of the quarterly numbers when you look at it, I feel that a lot of investors on the street would be disappointed. I acknowledge that, the disappointment based on the numbers which is there from the perspective of the quarterly results. We consistently communicated that as a heavily focused license revenue company which is adding portfolio of platform, it may result into few quarters where we will not be sure of the final number.
That was a kind of a perspective we always added to the communication with each investor conversation, that we can only design our business on annualized basis, and on annualized basis, what Venkat put it, 27% LTM growth, that's the right metrics. Now, this can get colored from the perspective of saying this quarter is a trend which is coming from few quarters like this, or this can be construed as a trend whether we can trust a company for the future revenue or some analyst report on the street. That could be coloring the perspective from investor perspective. Let me just take you to the level, next level detail of the results. The next level detail of the result is. You switch off the presentation. No need of presentation.
Next level detail says that we are shortfall by $6 million in our revenue numbers. That's the underlying equation of revenue and cost. If you would have $6 million additional revenue, we would have been right number around INR 570 crore, and our cost, EBITDA, would have been INR 125 crore plus would have been the number from the $6 million. Now, this $6 million consists of two elements. One element is when we're moving from product to platform, there's a like-to-like license revenue. Like-to-like license revenue, we won three platform deals as announced by Venkat. These three platform deals resulted into a like-to-like license revenue of $2.9 million is the number which is coming like to like.
We measure internally two-year ARR of the platform as a like-for-like license deal to compare license deal versus platform deals. This two-year ARR is what tantamount to $2.9 million, and that's how we calculate our internal business plans and revenue streams based on that two-year ARR as a part of MIS. Unfortunately, on accounting principle, there is zero accounting or less than $100,000 accounting in the last quarter of, out of $2.9 million in this, for winning this deal. While winning the deal, contracting, everything has been done, which is a very, very great celebrating moment, which we are celebrating. Banesh and his team has done a wonderful job in getting this $2.9 million order deal, on this quarter.
Second thing is, out of $6 million, $3.1 million is the two deals which are closed but not contracted. This $3.1 million is already in the bag, but not contracted, so it cannot be accounted in the quarterly results. That's the story of the numbers from numbers perspective. Now, if I look at it from a qualitative perspective, the teams which is working in Intellect, I think we are surprised. We ourselves got surprised more than what market is expecting or market is trusting Intellect as. What is the surprises coming? We are calling this as a white window moment for internally for this quarter. In last six months, our journey which happened, it's a white window moment for us, which is making us move from 2.0 to 3.0.
What we spoke about in Technology Day 2 is all coming true within the nine months of our Technology Day 2. It very rarely happens when company is able to present something in December 9, 2021, and what market is looking for is what we presented that time. Let me take you through each story of white window moment, what we have. First area is we planned three units, one by one. We said GTB unit will go to the market first and take a product leadership where liquidity and GTB becomes the market leaders and take the market share. We said next two years, we'll look at GCB will take the major. I mean, major winning spree last year.
You have seen the result, whatever the investment we made in GCB, core banking, lending and winning the deal in central banking in Quantum, all are driving towards the second wave. Third wave was Intellect SEEC, which we renamed it to IntellectAI. The IntellectAI was the unit where we looked at it as a phase three of driving the revenue growth. This year, in last six months, the platform deals substantial growth is being visible in IntellectAI. We have merged wealth management unit also as a part of IntellectAI unit. So that's a combined unit is under leadership of Banesh is delivering the results. The first wave was Manish, second wave was Rajesh, third wave is Banesh.
Now when we look at it that our calibrated strategy is panning out in the same way as we projected in 2017, again, that is a validation of our strategy that the company is performing as per the strategy, not by chance or not by the market tailwinds or market headwinds. During this period we had a Brexit, we have a Trump, we have everything happened during the period, but nothing has impacted the overall strategy and consistency of the strategy. Now, looking at what we are seeing in the marketplace today. When we are winning the large deal from a largest fund and from Europe on AI for ESG, what it means for a company like us as a technology company?
They are highly invested company, where each company has invested more than $150 million-$250 million in AI and data space. Against them, we are winning a deal on a complex topic like ESG, which is just an emerging topic. Winning the deal against all American, against all European competition, that signifies a white window moment for us. It has not resulted into single revenue for this quarter, zero revenue for this quarter. It's a lead indicator which is like we crack the Fabric Data Services AI algorithm of multi-question search, the moment of truth in the life when Google was there. We look at it when Google was doing a good search engine, they didn't have revenues, but they had an algorithm which was a great algorithm, and that's a great algorithm. We call it the white window moment.
That is not about ESG or Magic Invoice or Magic Submission. They are three products we launched, but they are built on the same technology platform investments we made in last five years of our journey. For each platform, the incremental investment is less than $3 million per platform. In last six months, this platform could able to compose. As soon as we see the possibility of ESG, within six months we could able to pitch in for the largest fund house of Europe and win the deal against all the competition. The second white window moment is when we are getting a large core banking space. Now, core banking space, we all know is the largest, biggest, market space. You must have read the market space size of $16 billion of a core banking space.
This is published by Temenos in their results that how big is the market size. Till last year, as we were contender in that space, now we are getting to a leadership quadrant of that space. Now we are rubbing shoulders with Thought Machine. Temenos and Intellect are the three players which are rubbing shoulders on architecture, on APIs, on microservices, on cloud, and on depth of the product functionality. We are competing with the largest player. Now, this space of $16 billion where the deal value multiplies. The size of deal value in our pipeline are running into double-digit license numbers, double-digit million dollars. We are participating in those deals, which we never participate in our 10-year journey. Those are our dream deals, or dream deals for any company when you're rubbing shoulders with this player.
We are in the backyard of the competition. We are in Thought Machine, which is led by Google, ex-Google player in 2014. You must do a research on Thought Machine. The $550 million funding has happened on that particular company for building the core banking product, and still we are with head to head in four deals in Europe with Thought Machine and similarly on Temenos, beating Infosys, Flex, Oracle, TCS or Fiserv. They are 10-player market. That's the second white window moment for Rajesh. Rajesh and his team is extremely busy in bringing in POCs and POVs and lot of presale investments are going in.
Almost more than eight deals in Europe we are participating over a period of time, and that's giving us the confidence of saying we can, on annualized basis, we can still do 20% of the growth numbers in rupee terms. The third moment is our recreating a new opportunity window where we are seeing consumerization of corporate banking. We created a space called GTB in 2014 when we started the business. We created a space called Global Transaction Banking space. Then we were able to displace multiple player from 2014 onwards. There was a player called Misys at that time. There was a player called Fundtech at that point of time.
This new space which we are creating called consumerization of corporate banking, just to understand from the perspective, there are at least 15 startups in this space, which is called embedded finance. Maximum amount of money which is coming in corporate banking space is in the space of embedded finance, where corporate banking is embedded with the financial accounts where when the payment recon can happen. Like, say, if Coca-Cola is a corporate account of HDFC Bank, then all the vendor suppliers of Coca-Cola will also be part of the virtual network of the bank and how do they participate over there. That is the consumerization. Uber, when Uber is account and drivers of Uber drivers are a part of the virtual accounts, that's embedded finance, and that is about consumerization.
Because the drivers of Uber is a consumers, while Uber is a corporate, and that's a consumerization of corporate banking. This is a new space which we launched in Sibos. Last two years, we were working in this space. We signed up three customers in this space before we are announcing consumerization of corporate banking, which is a third white window moment which we are experiencing. More than 25 leads got generated in Sibos within a small event of three days. We are changing the narrative. In this, we are changing the narrative, and this is based behind one of the largest European deal from a U.K. bank. We are payment space, which is crowded by a lot of European player. Again, the payments, corporate banking's payment space is one of the largest invested fund in all the startups and fintechs.
We are able to win the deal for the largest, one of the largest U.K. bank on building the payment system for them. All these three lead indicators, one on consumerization of corporate banking. Second is Intellect Digital Core, which is built on completely microservices, API, cloud native, headless architecture, where more than 300 APIs are working on it with more than 280 microservices, which we are combining, core banking, lending and credit card. Third is entire data space. These are like three different large funded entities within one single ecosystem called Intellect Arena, equivalent to almost three companies. Each one has a potential to lead their own journey and fight the battles.
They're fighting, all the three are fighting with all of the kind of a culture we created in the Intellect Design Arena, where all the three companies can go together in this space. All the deals, new deals signed up during this period are the indication 14 deals. We are accelerating number of deals in coming quarters. We are well-positioned to ensure that this license numbers can give us a good consistency going forward. This is nothing new for us, that one quarter will go bad.
Even we were. I will not say we are sure of it, but any part of journey we were expecting such moment where one quarter can go $6 million in one quarter where $2.9 million goes from a perspective of moving to platform and $3.1 million goes where the deal is closed, put boxed in, customer is convinced about it and everything is there and we land up into not able to contract before 30th September because date of auditors is 30th September to get a contract in there. That's the story which I'm saying why we feel so excited as a management team over here. Now we are in window of opportunities which has opened up with this white window moment is phenomenally large.
A lot of time we are spending nowadays, more than 10 to 12 hours a day of our R&D teams or our sales teams, pre-sales team building POCs. It's a humongous amount of excitement behind the scenes. If you look behind the scenes, if you get an opportunity to see the BTS of Intellect, you will feel the pulse of what is happening at Intellect. Thank you for participating and attending in numbers for this call. For us, it's a journey which we are very excited about in spite of a slowdown or high inflation rates in the industry. However, there is this year slowing down.
Some impact is there, so we acknowledge that the slowdown impact because of high inflation in Europe and low growth indexes over there is creating our cost structures because of talent are going up more than what we anticipated or planned for. Tax structure which is resulting into the our lower PAT margins since tax rate is moving from 16% to 26%. These are three factors we acknowledge which are the market realities. In spite of those three realities, we have three windows of opportunities which are led by our white window moment. Thank you. We can open it for-
Thank you, sir. Now, I think we can start the Q&A. No?
Yeah, please.
Now we are starting Q&A. In case you want to ask a question, please click on Raise Hand. I request you to click on please Raise Hand. First we have Mr. Mukul Verma. Please ask your question. Please unmute him.
Hello.
Hello, yeah.
Yeah. Good evening, sir.
Yeah, Mukul.
This presentation, when we give that pipeline, we give a pipeline comparing it to year-on-year.
Yes.
Can we add, can we put quarter-on-quarter as well as so one more column so it gives us a clear perspective where we are moving quarter-on-quarter as well? Although we are looking at the company from a yearly perspective only.
Yeah.
Just to drive the point that.
Yeah.
Quarter-over-quarter, how we are moving.
We can give it.
That is one suggestion, if we can do that. We can know, okay, quarter-over-quarter, how many-
Yeah, Mukul.
Additional deals you have added just to give that perspective. When you say that $6 million is something which could have come into the quarter two but could not come due to non-contracting and the platform thing. We assume that this is a one-off quarter where profits have come on a lower end and on a yearly metrics, we will grow at a 20% pace as we have been looking at.
Yes.
That's what I wanted to know.
That's right, Mukul. Exactly.
Thank you.
It's a one-off quarter.
Okay. Great, sir. Wish you all the best. Thank you.
Thank you.
Thank you, Mukul. Next, we have Mr. Krishna Thakker. Mr. Krishna Thakker? I think it's from Anand Rathi.
Yes. Sir, I have two questions. One of course is that $6 million follow-up. As I understand, $3 million you guys will possibly report in third quarter.
Yeah.
Because it has already been signed. We'll get that extra revenue. The balance $3 million is converted into or is spread over two years or three years.
That's right.
You will book only few thousand.
Yeah.
Month or quarter.
That's right.
Now, point is, if that were to continue, do you think given our high license contributions, and I'm expecting as you migrate more towards platform, there will be more shifts coming ahead. Structurally, your revenue growth for one or two years could be a little slower in this transition phase?
Yeah, that's true. I think that's exactly which will happen, that whenever. What we need to look at it, we need to publish a number for this kind of a deal. That's what we need to publish separate number, that how many platform deals are getting signed and what is the kind of ARR we are signing. Actual number, book number will be lower. That's what we are now thinking about it. As of now, we've not made a decision how do we communicate this platform deals to the investors so that they make a right decision.
Okay. Possibly 20% may not be the right number to look at from a growth perspective while you may do it this year, but from a longer time horizon, maybe two or three years, we should be more conservative than that.
Yeah. In dollar terms then, yeah, definitely.
The second thing, sir, in terms of cost structures. Now, I am assuming when we plugged the numbers, most of the costs are probably in line. It is only the revenue miss which is flowing through to EBITDA and to PAT.
Yes. That's it. That's it.
Sir, for cost, have you built in all the costs or do you think this 3, 4Q because generally you plan ahead for the next year. Are there any incremental costs which we should build in for the rest of the year or do you think costs will remain steady and therefore that additional $3 million will not come with additional cost in third quarter?
Most of the costs are always built in on actual basis. The costs we can't take through and forward the cost. Cost is all built into this. The incremental cost of the salary increment, as you know, we do a quarterly salary increment, not annual salary increment. Those costs of the talent still will be there, but those numbers will not be significantly impacted.
Sir, what I mean to ask is generally, like I've been following the company for a few years, so typically you build in the second half for potentially FY 2024. Sometimes you hire more sales people-
Yes, yes.
-sometimes.
Yes, yes. Exactly.
I was referring to that one time step-up cost.
Yeah.
Is that something we should expect in 3Q, 4Q or do you think cost structure is currently perfectly sized?
Yeah. What I'm trying to say is the cost structures from this perspective as of now, INR 443 crore is total cost structure. Pre-EBITDA cost is INR 443 crore. It may go up by some INR 2 million, INR 3 million per quarter based on the new talent requirement and new platform in GTM. Those costs will be there, EA or POC cost. These are the few cost numbers which will go up, but they're not in that significant number as what we had experienced Q1 numbers, where travel costs and other costs, all of them went together. Now travel costs are stabilized, infrastructure costs are stabilized, so it's only the talent increase cost will be the hit on us. Q3 we have a marketing cost also like Sibos and other things will be there. Few marketing costs, up to INR 3 crore will be there.
Those are natural costs, which is there in the business, so no extraordinary cost.
Okay. Lastly, therefore, I mean, consecutively, if my revenue growth is going to be 20%, earlier we used to have this outlook on margins of 23%-24% wherever we end up. So should we assume that it is only a quarterly slippage and therefore 16%-17% is not the recurring margin?
Yeah.
Next quarter we should be back to. From a full year perspective.
Yeah.
When we project, we should look at 23%-24% margin?
It's difficult to give you an exact number, but it will be 20%+ for the full year.
20%+ ,
For the full year basis.
I think, sir, your last 12-month average, including the bad quarter, is 22%.
Yeah. Don't commit to something here. We'll try our best to have it.
This 16%-17% or 20% should be the new base, is what you're saying, rather than going back to 24%.
Yeah. It can happen, yeah, but we can't commit right now. 20 is number, 20% is the PAT growth and 20% margin growth.
Okay. Done, sir. Thank you and all the best.
Thanks, Thakker. Next we have Sugandhi Sud from InCred. Sugandhi, please ask your question.
Yes. Hello. Thank you for taking my question. I just had a similar question on the growth, you know, on the growth trajectory. If you look at just the license AMC, SaaS revenue mix, you know that there is a significant deceleration. Now, I do understand, you know, the color, extra color that you have given. Is there something structural that you're seeing in the market? Maybe it is on account of the, you know, pressures you're seeing with your end customers or maybe just a natural, you know, trajectory that the business was to follow because, you know, there was this sudden surge in, you know, implementation revenue, and you know, that's bound to decelerate.
Could you give us some color there?
I think there are two things which I mentioned. One is the license revenue of $3.1 million if you look at it. Some deceleration will be less or so around. Typically, $11 million-$13 million is the license revenue with SaaS. License revenue growth. You asked a structural question. Structural question obviously is because of the high inflation, the market environment. There are some structural delays happening on closing the deal. Last minute, closure cycle times are getting elongated. That is a structural issue we are facing. That is an issue, we are not a different island than any other player in the marketplace. We are sitting in the same island of technology companies where some slowdown is happening on the technology investments as we move forward. Second thing is license, AMC and implementation.
Those numbers on quarter-on-quarter basis doesn't mean much of it. Look at it from the annual LTM basis. That will give us a good indication. Where our AMC is growing 11%, which we expected around 11% number. So that is a license number growth will be 10%, 11%. That's the number we expect. Our core value as a company, which we have changed our trajectory from Intellect 2.0 to 3.0, is around platform. Platform is what is making a difference. The three white window moments which I mentioned are those three units in any business performing at the same time is very rarely I've seen in my life that three out of three units are performing where we put a bet on.
That's what I can respond to your question.
In terms of implementation with iTurmeric, I understand that your implementation cycles have shrunk.
Yeah.
Does that have a role to play? Because we've seen a very strong growth in implementation over the last 12 months or let's say, you know, five quarters. Is that something that one should factor in and, you know, that implementation again would have a linkage with the pace of new wins. Is that a correct interpretation? I mean, in terms of your, you know, organic growth of revenues versus, you know, just the accrual of revenues over a shorter period because of the faster implementation.
Yeah. I mean, I think very good point you picked up. First of all, I must congratulate you that you are tracking the company so well, that you are even looking at that implementation life cycle. That become my competitive edge because my implementation cost for winning the deal will be lower because of iTurmeric I'm using for reducing the cycle time, and this may result into the lowering of the implementation revenue. What we are trying to do now is that we want to participate in a more cross-selling propositions. We identified 20 accounts where we are looking at to help them bid accounts for digital transformation using our composable and contextual technology. Those revenue as of now get booked under implementation revenue. We will be looking at it whether we create a line item called digital transformation line item.
Yes, implementation revenue will come down because its cycle time is coming down. If I have a deal of $1 million, which I'm bidding $600,000 for license. Customer has a finite budget of $1 million. Now I'm able to do 65%-70% on license and 30% to implementation, while earlier it used to be 50/50, or it used to be 45 for license and 55 for the implementation. Very well picked up by you, Sugandhi.
Sure. Thank you for that color. In terms of your deal, you know, if I look at the data that you give around Destiny deals, I can see that, you know, across all ticket sizes, your funnel has seen very healthy accretion. If I look at the pace of wins, that has been, you know, more or less.
Yes.
Within the 4-5 range, you know, one quarter excluding 4-5 range and while the number pipeline continues to grow. You know, what is going on behind? Are these deals taking more time to close? Is the size of deals or the nature of deals such? Could you just, you know, join the dots between the increasing number of deals in the funnel and the actual win rate? Considering that, you know, the commentary around competing with the top tier is very encouraging.
Yes. I think what happened now, the decision cycle has got two angles to it. One is an environment issue which is delaying some of the decisions. Second angle is, with the cloud technology available, the way the client evaluates a vendor has changed substantially. Earlier, most of the deals we used to win based on a lot of presentations, a lot of dance and drama in the boardrooms on the capability of the product. What is working in our favor is now with the cloud technology available, the customer is asking for proof of concept where they are taking a real-time scenario and they want to run on a system. So they have a longer cycle time frame when we first qualify under dance and drama session.
First of all is the proposal session, then there's a dance and drama session on the boardrooms on the technology and the domain. Now there is an actual real play which happens, which takes another three to six months. That is where these deals are getting delayed. Rajesh can speak about it, how many, how much work he has to do for a single large deal. Rajesh, you want to share something?
I think from a deal perspective, if I can put a little bit of the GCB context to it, I think Arun very rightly said that a couple of quarters and couple of years back, the deals that we were competing were relatively smaller, and we were fighting with smaller players. Now, as you rightly pointed out, we have moved into the big boy category, where now we are looking at some very large Destiny deals. In these large Destiny deals, which cuts across, you know, maybe multiple countries, multiple product lines, et cetera.
The process of winning this deal timeline that is required is much longer, and that is what is being reflected as you have seen in the data. A number of opportunities are rising because we are now competing with, let's say, from a core banking perspective, a Temenos or a Thought Machine. The deal values are very high that we are chasing, but it is also taking us longer as compared to four or five quarters back when we were still competing with Finastra and, you know, the Finacle and et cetera. The game has changed a little bit for us, especially in markets like Europe.
Sure. That's helpful. If I may just add one more question on the cost structure side. So you did mention, you know, call out the ESOP number in your notes. You know, within the software development cost, is that kind of the new base and will continue to grow? You know, are there any other one-offs? Are you including any, you know, the employee costs for R&D? How do you allocate that between the R&D costs and this line, the software line item?
For the last few years, our R&D budgets are $20 million. $20 million translates to INR 120 crore. It's INR 60 . Now it's around INR 75 . It comes to INR 150 crores. We are in the similar budget. We capitalized. This quarter, I think we capitalized around INR 35 crore.
Okay.
Most of them. Which is same number as close to $5 million, less than $5 million, $4.5 million, $4 million we capitalize on the R&D cost. Rest of the cost, which is for technology upgrades, we put into part of research and engineering group, and which is we take in the charge as and when it occurs. This charge is around INR 40+ crore for this quarter. That's the total R&D expense, one of the lowest in the industry from that perspective.
Sure.
Yeah.
Sure. Thank you so much for the answers.
Thank-
Yeah.
Thanks, Sugandhi. Next, we have Mr. Vivek Charoria. Vivek, please ask your question.
Hi, sir. Thank you for the opportunity. Sir, on the cost structure, you mentioned that we should expect another $2 million-$3 million for the next two quarters. Will that be the new norm, or should we expect, say, after Q4 for it to slow down a bit? In terms of the headcount, are we now at a $90 million run rate? I mean, now that we are moving some revenue from product to platform, I'm guessing that will take more time. But in terms of the headcount, do you think we are at the $90 million capacity?
Yeah. Headcount is almost there. I mean, like, we still needing more headcount on sales and marketing side. With platform, we need to build up a capacity in the sales and marketing side. That it's not in headcount terms, but it will be in the qualitative higher cost inputs will be there from the perspective of looking at it. $2 million-$3 million cost increase with talent. Let's see how the market stabilizes, then we can comment on it. But as of now, for next two quarters, this number is visible to us because of whatever raises they get in first quarter and second quarter, third quarter, fourth quarter has to be in line with what raises are related to the first quarter and second quarter.
Sir, in terms of, we were expecting previously to hit $100 million run rate in the next eight, 10, 12 quarters. Do you want to now stretch that? Do we still hold on to the 30% margin target at $100 million, or we need to scale that back by a few points?
Let me not comment on it as of now because the market is too volatile right now. These current fluctuations are too much right now. This quarter will not be right time. Maybe another three to six months, we can come back onto that number of two to three years. $100 million, reaching $100 million in eight, 12 quarters, I think that is, we are quite confident about. On the margin side, we just need to look at it, the market volatility.
Sir, you mentioned that you're still confident about hitting a 20% growth for this year. Is that dependent on you, on us signing a few big deals which are in the pipeline, as Rajesh had mentioned? Because if those don't come through, the numbers might drop down significantly. Are we reasonably confident that those will come through?
We have not taken those into account in this 20%. On rupee
Okay. 20%-
We have not taken it into account.
Okay. You've not taken those big deals when you talk about a 20. Sir, previously you were talking about a 20% dollar growth run rate. I mean.
Yeah.
There is some change in the market or, I mean, because.
There's some change in the market. I think we need to recognize that some slowdown is happening. This slowdown has resulted in dollar numbers. We say, we always mention to you is that we have designed our business for 20%. Last year we did 26% in dollar terms. I constantly kept on saying, a lot of times investors were saying, "Why shouldn't you grow more than that?" We say 20% ± 5% is a kind of a, it can happen because of market scenario, and that is what exactly which will happen this year.
Just one more-
If we win.
Sorry. Yeah, go on.
If we win more deals, it can be much more closer to 20%. It may be closer to lower end of the 15%. Yeah.
Sir, just one more qualitative question. On the one hand, we keep talking about the fact there's a slowdown in the market, and then we are pressing ahead with so much of investment. Don't you think we might run into a wall where we've bloated up the cost structure but the revenues aren't coming in? Or are you reasonably confident that with the headcount increase, I mean, there's enough business to be had? Because, I mean, I can't square the two together where on one hand you're talking about a macro slowdown, on the other hand, we are increasing the pace of investment.
I think you should. I'll give you the indication. There's a company called Modern Treasury. I mean, they signed up a deal with Goldman Sachs. Okay. There's a company called Modern Treasury. They are getting a... Manish can share the color on it. There's a company called Thought Machine. If you just study these two companies, that what are they seeing? The new investors which are coming at a valuation of Thought Machine at $2.7 billion for $50 million-$60 million revenue company. What are they seeing the market size in core banking space? That what is the kind of inefficiencies are sitting on core banking side in Europe and America, which is leading to that. Similarly, what is the opportunities in Modern Treasury in a same space as consumerization? Manish , would you like to put a color on it?
Yeah.
They're also about INR 25-INR 27 million revenue and between INR 2-INR 2.5 billion market cap. This is primarily because the TAM being very high, and this is based on volume of transactions. The whole platform Banking as a Service which we have launched, this is based on a transaction value, volume, multiple similar parameters. We're also competing in North America, the same market. Number of these individual fintechs are running. I think the difference between them and us would be they are borrowing someone else's money and burning it out. We are organically funding and competing and winning against them. Our base assets was strong, that tuning it for the right market segment, we could do it at a much lower cost.
Like Arun said, where we might look at is on a sales and marketing some of the costs, but from a product readiness, the composable nature of our products, straight away we are able to get in a segment where there are more happening. The TAM on, if you look and study the TAM on embedded finance in general, both on consumer and corporate, the numbers are in trillion dollars. This is a new segment which is happening, and this is where growth is happening very significantly.
Okay, sir. Thank you, sir.
Thank you, Vivek. Next, we have Mr. Harshil Shethia for AUM Advisors. Harshil, you there?
Hi, sir. I want to ask, our operating cash flow for the first six months is at INR 45 crore. It was INR 94 crore for the same time last year. What has happened in the firstsix 6 months that our operating cash flows have reduced? I see that our DSO days has increased by 13 days in the first six months.
I think this operating cash flow coming down is basically on a bonus payout. Bonus payout is higher this year. Dividend is not a part of operating cash flow, maybe.
Okay.
Operating cash flow is a bonus. Bonus payout for the last year we grew very well, close to 27% we grew last year. The bonus payout was higher than the previous year on that basis. Collection is same as INR 460 crore last quarter and INR 460 crore this quarter, is in same line of business. Salary costs are higher in this year compared to the salary costs were there in the last year. Yes, there is a marginal drop, but this is the two places, salary cost increase and travel cost increase compared to the last year, where travel was not there last year same time. The third is your.
My question for the DSO days that it has increased, so for which was ex-India 95 days or two quarters back, has gone to 115 days currently.
This fluctuates from quarter to quarter. I think this is, it will come back once we get an advance payment, we get some large deal payment, some closure of the project. This ten days here and there is fluctuating in a product business compared to the services business.
What would be a standard sustainable range of DSOs?
If you try to look at it between 115 to 125, it fluctuate on an overall basis. It goes to 120+ , it come down to 116. If you look at it last 16 quarters, you'll have this fluctuation.
Yes, sir.
In the same range.
Okay. Thank you.
Thanks, Harshil. Next we have Mr. Ravi Mehta from Deep Financial.
I just want to clarify. Praveen, I want to clarify some of the investor reports which is floating around unbilled revenue, that unbilled revenue is a fake revenue. I think some analyst has looked at it as if unbilled revenues are the fake revenue, and that is projected in an investor report. We got very hurt with that kind of a non-knowledgeable people sitting in, doing the analyst community to say that unbilled revenues are not appropriate. Unbilled revenue is the nature of the business. So if somebody has to write a report, he should talk to us that what is the nature of the business is there. Nature of the business is that when we sign the contract, we have some commitment of business outcome based deals we sign. Based on that, we have a, w hen we completed the outcome, we bill the bill to the customer.
But whatever the efforts we've put in during the building the solution for the customer, when customer is not achieving the milestone, it lies into unbilled revenue. Unbilled revenue is not a new phenomenon. It's always happened in many civil contracts. When a building has to be constructed, there's a huge amount of unbilled revenue will be sitting in books of any work in progress business. That is the one point since you mentioned about the DSO days. I just want to cover up that point. Because this was a I received some of the calls after the report got published that somebody's looking unbilled, why won't you give a clarification?
I said, I don't need a clarification for anybody, when we are doing the right business in this area. Okay. Next question.
Yeah. Thanks, Arun. Next, we have Mr. Ravi Mehta from Deep Financial. Ravi?
Yeah, hi. Am I audible?
Yeah. Yeah, Ravi, please go ahead.
Yeah. Just two questions. One was on the pre-sale investment, because looking at the larger deals and also the POC involved in platform deals, what kind of pre-sale investment, if you can share some number vis-à-vis what we used to do? Because I think the margins what we see captures the pre-sale which wasn't that high earlier. Maybe some color around the pre-sales investments.
If you look at S&M investment, which is close to now INR 150 crore for this quarter, it's around INR 600 crores. Pre-sale is embedded into this particular cost of S&M and which is grown by INR 7 crore from last quarter to this quarter. That's the kind of a pre-sale investment which is booked. They are not capitalized on anything, they are just expensed out.
Sure. One more question was that, in this quarter we signed nine platform deals, out of the total 14.
Yeah.
The platform revenues, the subscription revenues are flat Q on Q. Just wanted to understand the cycle as to when you book a deal, by when we see the revenue flowing into the subscription line item.
Typically, it takes between three to six months to get a flow in. Because when somebody start consuming the platform, the payment start from the day when he's consuming the platform. The initial product business, which used to call implementation, we used to have two revenue streams earlier. We used to have a license booked on the day of looking at it. If you have to make somebody live in six months time, then six months was the implementation cycle time. In platform deal, we have reduced the cycle time of going live. In some situation, two months, some situation, three months, some situation, four months, depending upon various platform when it become live, the platform revenue get booked.
There won't be any implementation component when the platform deal is going live within two or three months?
In few cases it's there, few cases it's not there. Normally, if it is standard platform, no changes are there and it's just onboarding of the customer, then there's no implementation charge. There could be setup charge for certain large customer. We may have a setup charge for him when we are onboarding a customer and he has some specific requirement for using the platforms. Like if largest financial services company of Switzerland, if they start using our platform, then obviously it takes, we need to integrate their platform with their security structures, their cybersecurity issues, and we need to spend a lot of time with it. At that time customer pays us setup fees.
Oh, sure. That helps. Just one small follow-up to the clarification you just gave prior to my question regarding those deals, unbilled revenues under DSO days. Just wanted to check that the unbilled portion was increasing pretty sharply in last few years. Is that a function of the cloud business, the platform business? Is it a function of that?
Yeah. I think there are two kind of functions of that. One function of this unbilled related to the contextual payments in it. The other, we sign a five-year deal where we have to book the revenue based on the accounting principle on the date of booking the deal. Then the contracted payments are annual basis. Some of the deals in a cloud nature, where we sold a license, we are accounting the deal on the date of booking the contract. That increases the unbilled component. Second is more and more customers are now looking for outcome-based deals, outcome-based deliveries. Some major milestones, payments are not equally proportion every three months. They are linked at the time of UAT sign-off or when business is going live, because of which the market situation is changing from that perspective.
There are two factors which are resulting into higher unbilled revenue.
Sure. That answers. Thanks. All the best.
Thank you.
Thanks, Ravi. We have next, Mr. Rahul Jain from Dolat Capital. Rahul, you are there? Please ask your question.
Hello.
Yeah, Rahul. Please go on.
Is my line fine?
Yeah, yeah. Please go on.
Just two questions. Firstly, on the business side, I mean, is there a way that we should now look next 12 to 18 months little different than how what we were perceiving on the demand scenario? What aspect of the business in terms of the segments, multiple segment we operate should see a behavioral change in terms of the customer spend? Any color on those front and a base case demand thought process, if you could share, assuming that macro is uncertain, I can understand it's very difficult to compute a number for next year sitting today.
Any base case number one can go for from a next twelve-month perspective, that would be an additional color if you could give in any form, that would be of help. Thank you.
Rahul, the three indicators when we say white window moment for us, I'll ask Banesh to look at it, the opportunity that what he's seeing in the data positive. Data is such a big space emerging. Fortunately, our technology day was a pathbreaking day. December ninth, when we presented the technology day to all of you, I think you should go back to those presentation decks. We were expecting that to come through in next two years when what we presented in technology day two in December. Within nine months, we are seeing that those are becoming reality. Those are from product to platform to marketplace. Companies which are struggling are those who stayed in a product business.
Since we took a journey almost 18 months back, we are able to see some windows of opportunities, but for many product company will be in a struggling phase right now. Banesh can share the data opportunity what we see, because underlying platform of Fabric Data Services and Doc2API, our ability to create new platforms, which can compete in a new emerging scenarios in next two to three years, the capabilities are there. Rajesh, composability is there. The product we are selling in a market is not the standard products. With composable and contextual technology, two frames which we use, composable frame to create a new products and contextual frame for a data perspective. Both the frames are panning out so beautifully for us. Over to Banesh.
Yeah. You know, just to add to what I think Rahul was saying earlier, the data platform that I talked about at Technology Day, along with another colleague of mine, Deepak. I think the data platform is being a big differentiator for us in the U.S., where we've launched it from an insurance perspective. Now, we've touched on the end-to-end life cycle of, you know, just to take stock again, the insurance platform that we run for commercial lines insurance is fully on AWS on the cloud. It's 100% subscription business. Now, within the subscription, customers are clearly paying a license component that is paid over a period of time, and some of the subscription revenues are actually sticking for a lot longer period.
What we're actually seeing is a significant number of customers, and we've had some very good traction in the last two quarters, both for the data platform that we use, which is using a product which we call Risk Analyst, along with our Magic Submission platform. This is where people submit a lot of documents for commercial lines, different commercial lines insurance businesses. Doc2API, which is the platform that actually is the core platform that extracts information from insurance companies' documents, and these are pretty large set of documents, quite complex. This is not just extraction of data, but we have a lot of AI technologies that pull information. It's actually achieving an operational efficiency for the client in such a way that it is almost a low touch operations model.
It's quite efficient for a customer to take a submission from an email, extract it, and convert it to APIs, have data platform that we have, which is FDS. Which enhances the data quality on the submissions, does some validation of the submissions, and passes it to the underwriter on the underwriter workbench, which is Xponent, to fulfill underwriting.
Banesh.
Yeah.
I think we are addressing more on the technology aspect of it. My question was more from the sense of that. I think our use cases are pretty much, you know, proven in terms of the kind of customer we have got onto those kind of product.
Yeah.
Where my question is more, I mean, your insight would be more of help in terms of how we see some of these things become scalable. Because some of this product, like Risk Analyst, we've been hearing for more than five, six years now.
Yeah.
I know the market has evolved, your use cases has evolved from insurance offering to a much different set of offering.
Mm-hmm.
We do understand those things, and I think you have, as an organization, have delivered much faster growth than you know most of your peers in the space. I think those parts are well addressed in your bigger events and all. My simple question right now is that some of this right positioning of the product be it on the cloud, be it on the otherwise on-premise model also.
Mm-hmm.
With these offerings, where we stand today in this current environment, because this is probably, as per various analyst thought process and all, probably the first down cycle in the potential down cycle of a banking sector that we may see ever since we came into public, right? From that perspective, should we see anything to look into from next 12 to 18 months perspective versus whatever we have delivered on the last five years CAGR basis? Is that the number we can still stay as from our thought process perspective, or should we see in a different light given the macros that we are facing right now?
Rahul, hold on for six months. I think that this volatility is there today. In 30th September, our pound went down to 1.03. It came back to 1.16. This volatility of 10% in the market, we've never seen in the past.
I think it will be better to comment. We are able to see at least up to March right now on exact number what you are judging. We see, as we are on the cutting edge, and these technologies are required, and we are seeing the momentum of the investments coming from the in spite of the downturn of the start-up investment, but in these spaces what consumerization of corporate banking, the core banking investments are coming there. It means the market deposit is there. How exactly, how much percentage? Wait for six months, maybe we can be able to communicate to you during the annual cycle of the communication.
Got it, sir. Thank you and best of luck for the time.
Thanks, Rahul. Arun, six.
Yeah.
Over 6:15. Can we take some more questions?
Just one more question, yes.
Okay. Next, we have TVK Kumar from [BestPal]. Mr. Kumar? Hello? Mr. TVK Kumar, you are there?
Okay, he's not there.
I think he is not there. Next,
Sir, are you there, sir? Sir, are you able to hear me, sir?
Yeah. Mr. Kumar, yes. Please go on.
No, you told about this digital core banking that we are competing with Temenos and Thought Machine. Have you won any deals or you're very sure? What is the essence of what you are seeing in that? Are you sure that you will have a reasonable market share? 'Cause you are saying this is a new thing that has opened up for us. Can you just throw more light on that? That was it. Thank you.
I think let me answer that for you. I think when we look at a large player looking at a core banking transformation, and this could be a large player with multiple country business, they start with a long list, right? That long list could be 10 to 12 of our peers, so competitors who are in that long list. As we go through the process, we go through various stages. What we are seeing, that is what we summarized for you, we're saying in four deals in Europe, we are right now in the last three stages. What are we seeing there, right?
What is very interesting for us is that we see Temenos there, and we see Thought Machine, and we see Intellect there. I think that's where we are saying that we feel confident that large tier bank, and when you say large tier bank, if you understand their buying mechanism, it goes through functional, it goes through technical, it goes through their architects, it goes through their cloud architects. I think it's a very thorough process. For us to make consistently from the long list to the short list and be in the last three for a couple of these very large deals, gives us the confidence that our technology is the market leading technology. I think what we have said earlier, which is MACH, right?
Microservices, API, and event-driven, cloud and headless, is what is resonating very well for us in markets like Europe. That's why we feel cautiously optimistic that in these deals, we may not have won any deal because if we win any deal, this will have a significant impact on our revenues. We feel reasonably confident that our product is well-matched to our competitors or peers, these two competitors that I talked about in this market.
We will be announcing if we win any deals in the next. When will we know whether we are
We are all waiting for it. Yeah.
I wish we had a crystal ball.
Okay. Yeah, that was my question. Yeah. Do you have the crystal? Okay.
Yeah.
Got it. Thank you. Thank you. All the best.
Thank you, Mr. Kumar.
Thank you.
Yeah. Thank you, Mr. TVK Kumar. Thank you everybody for participating in today's call. There might be a few questions, which, because of the paucity of time, we were not able to take it. Please do write to us with your questions, and we'll answer you and mail you back. Thank you so much.
Thank you very much.
Now we can disconnect.