Ladies and gentlemen, good day, and welcome to the Q4 FY 2024 conference call of Newgen Software Technologies Limited. As a reminder, all participants' line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Deepti Mehra Chugh. Thank you, and over to you, ma'am.
Thank you. Good afternoon, everyone. I am Deepti Mehra Chugh, Investor Relations, Newgen Software Technologies Limited, and I would welcome you all to Q4 FY 2024 results of the company. Joining with me today on the call is our management, Mr. Diwakar Nigam, Chairman and Managing Director, Mr. T. S. Varadarajan, Founder and Whole-Time Director, Mr. Virender Jeet, Chief Executive Officer, and Mr. Arun Kumar Gupta, Chief Financial Officer. Due to bad throat of Mr. Nigam, Mr. T. S. Varadarajan will take up presentation of the results. Before we move on to the discussion, let me highlight that this call may contain certain forward-looking statements concerning Newgen's future business prospects and profitability, which are subject to a number of risks and uncertainties, and the actual results could materially vary from the forward-looking statements. Past performance may not be indicative of future performance.
The company does not undertake to make any announcement in case any of these forward-looking statements become materially incorrect in future or update any forward-looking statements made from time to time by or on behalf of the company. For further details, you may please refer to the Investor Relations section of our website. I would now hand over to Mr. Varadarajan for presentation of results, which will be followed by Q&A. Thank you.
Good afternoon, everyone, and thank you for joining us for our Q4 FY 2024 financial results call. As we reflect on the past year, it has been another remarkable year, with financial performance reflecting considerable strength and resilience. We witnessed revenues of INR 1,244 crores, leading to a growth of 28% YoY. The year saw many milestones and opportunities to get deeper engagement with our clients. We have also witnessed robust profitability and healthy cash flow generation. Customer relationship has been always key for us and have been instrumental in our growth across all geographies, particularly EMEA and India, where we have witnessed growth of 39% and 33% respectively for the year. In India and EMEA market, we are automating end-to-end for our customers by tying up the front, middle, and back-office processes for them.
We have seen strong interest and increased acceptability of our solution, including trade, finance, and digital lending, customer onboarding, card origination, and supply chain finance solution. In the APAC region, we have booked our largest-ever project of INR 97 crore with a leading technology organization in Singapore. In the Americas region, we have been resetting our strategy for the market. As part of our client portfolio, we are happy to share that with deeper engagement with our client, we have seen a notable increase in the business size per customer. We saw an increase in the number of customers with billing of over 5 crore from 51 last year to 65 in the current year. The average revenue per customer has gone up by 29%. This underscores our conscious emphasis on catering to larger-scale clients and those who significantly contribute to our business.
We are pleased to see ongoing growth in commitments from our existing banking customers, as well as healthy new logo addition to our portfolio. We have added 51 new logos in the year, 11 of which have come in Q4. For the year, our annual revenues were at INR 750 crores, comprising 60% of our revenues. Coming to our products, over the past year, we have continued with our commitment towards innovation, constantly refining and expanding the capability of our platform. This year was filled with excitement, with new version launches of several of our platforms and deeper work on our solution. We have launched the AI-enabled version of NewgenONE platform called Marvin during the year. We have also launched newer versions of our ECM and CCM platform.
We have released our next-generation low-code trade finance solution, IDP Studio, IDP standing for Intelligent Document Processing, with advanced machine learning algorithms and NewgenAI Data Science Studio. In the new version, we have incorporated new inputs from our customers, industry leaders, analysts, and et cetera, thereby enhancing our platforms, features, and functionalities. We have worked on different aspects, including use of artificial intelligence, cloud and microservices, security, empowering system integrator partners and migration. This enables our platform to build next-generation use cases, new ways to design the application, enhance the user experience, and optimize resource usage. Our vertical solution in digital lending and trade have done well, and we continue to build on that base. Further, we are penetrating into the insurance vertical and strengthening the team for the same.
During the year, we continued to recognize, to be recognized by industry analysts—Gartner in the Magic Quadrant and Forrester in the Wave report. We are also recognized for the first time by Everest Group. Despite the challenges, including the recent cyber securities, we have demonstrated resilience and came out very stronger. We are leveraging the collective strength of our global workforce, which has grown to 4,500 individuals, and continues to expand and mature in alignment with our business growth trajectory. Central to our commitment to organizational success is our steadfast focus on talent management and learning initiatives. We believe that by empowering our employees with the skills, knowledge, and tools they need to succeed, we can foster a culture of excellence and drive innovations and growth. We are constantly working on increasing our global footprint and brand presence.
We've opened our offices in New York and Saudi Arabia during the financial year. We also continue to work on enhancing customer engagement, strengthening our sales team and partnership network, and expanding our digital presence. On profits and margins, we delivered a healthy growth in profits and expanded margins during the year. Profit after tax was at INR 252 crore, witnessing a growth of 42% YoY. We continue to prudently invest in R&D and sales and marketing initiatives. During the year, we have invested 9% of our revenues on R&D initiatives, and around 22% of revenues on the various sales and marketing activities. On the balance sheet front, we witnessed a robust cash flow generation, with our net cash generated from operating activities for the year at INR 281 crore.
Our net trade receivables were at INR 444 crores as of thirty-first March 2024, which resulted in net DSO of 130 days. Our collections for the year have improved by 34% YoY. We have declared a dividend of INR 4 per share, post bonus issue of 1:1, which is INR 8 on pre-bonus shares. Looking at Q4 results, we are happy to close Q4, its strongest revenue ever for a quarter, at INR 375 crores, increasing 23% YoY. Our PAT has also crossed INR 100 crores for the first time in a quarter. As we start the new financial year, we remain steadfast in our commitment to delivering value, innovation, growth, and providing superior customer experience. Thank you very much. We are now open for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Baidik Sarkar from Unifi Capital. Please go ahead.
Virender, hi, good evening, and congrats to you and the team on a strong quarter and what's been a phenomenal year, overall. Obviously, multiple things are firing for us today at the same time, but I think the best way to synthesize all of this is to ask you is in your words, like you've said this in the past few quarters, if your order book and your deal pipeline is perhaps growing at a pace that is faster than your revenue booking pace, and we, you know, given where our order pipeline today, you know, where do you think we are in this cycle, right?
Are we—I mean, do you reckon we're in the middle of the cycle, or perhaps, you know, moving towards the end of the cycle in terms of how banks and financial institutions are thinking about their digital journeys and how that's relevant to us?
Thanks, Vaidik, and thank you for your question. So you are right. So basically, order book gives us in terms of, kind of an insight in terms of, how the business is shaping up. And we have expanded our order book to roughly around some INR 1,560 crores, from a previous around INR 1,300 crores. So there's a growth, healthy growth out there. The order book is, as you rightly said, is just one of the dimensions. The other dimension about is about the growth in our new deals, which is about mining and new sales. Out there we have also a substantial healthy growth in that order book.
On the order pipeline, clearly, you know, as of now, we still see that, the good traction in the coming year, both in India and financial services and what we are doing in Middle East. And in fact, we find the next year to be as a very strong impact recovery year. U.S., I think we are working. There are a lot of moving parts out there. There is a part of moving, which is about our strategy, where we are trying to reset, trying to move away from the smaller entities to getting larger entities and reshaping the market. And there's also about the whole market in terms of being slow, whether it's a European market and U.S. market. So I think that's a moving part. We are still working very strong.
At beginning of every year, we are very, very hopeful to really make substantial inroads in everything, but at the end, the outcome depends on various factors. But going into next year, I think the pipeline is quite healthy, on the traditional space.
... It is, it is very similar, what it has been last year on the US side. There is not a too much of a great jump by which I can predict a much higher US revenue growth. But on the other three markets, which are traditional markets, we are, we are finding the pipeline to be very healthy. We are building the US pipeline. I think we are, we are making forays into both larger banks and insurance, but it's still early to call it out. And also there is an outline in terms of our other, markets which are just we are seeding, like Australia and U.K. They have started showing some seeds. We, we do, we closed some deals last year. This year we expect to close two more deals.
Overall, I know, just we still look at next year, there's no reason why we can't maintain our growth momentum and do better.
Sure, sure. So, so, you know, obviously, multiple moving parts, and I will not get into details here, but, I think you had highlighted, an endeavor about $500 million by the end of FY 2027, right? So, you know, if we have to slice that into the products and the initiatives that will help us get there, you know, how should we imagine each of these parts better?
Yes, see, I think every company has a long, long, you know, what you call aspiration of doing large numbers. And, as a product company, we always believe there is a, there is going to be a time thing. We can even accelerate the growth rates even beyond what we have. Our growth momentums for all, whether it's a $500 million plan or a, specifically next year's plan, is still based on the core verticals we are driving. So one of the core The only thing what we are doing is we are opening up insurance in a major way. That's where a lot of investments are happening.
So you should see that in next three quarters, four quarters, you'll see a kind of a funnel, healthy funnel and deal growth happening in insurance beyond the banking, which has been, our traditional strong space. Government is going to be, there's an organic growth in government, but on the market dynamics, we clearly still, for a $500 million picture to realize in the time span we are talking about, our mature markets have to fire, which is still a kind of a work in progress for us. And though a lot of investment is happening in those areas, I think there is a, there's a healthy push coming from the markets where we are strong. And especially, you know, in this era, where hardly any, IT companies have really struggled from the growth front.
We have been substantially well because our customer bases have been in the markets which have been less affected, and our solutions have resonated in this time period as well in all these markets. So I think we are sitting well on that. But the business composition does not change much, but it changes slightly more on more focus on insurance to open it as another substantial vertical, and it focuses on mature market expansion more quickly. I hope that answers your question.
Yeah. And, you know, just the last one before I get back with the kids. Looking at the pace of growth has been so, you know, momentous, that reinvestment means that our operating leverage expectations have probably been faster than what we expected, right? So just keeping that growth in mind, how do you read your margin profile in the year ahead?
See, I think, you know, as you know, most of the cost planning happens at the beginning of the year, and there's little variabilization which happens beyond some tactical manpower or energy and expenses.
Right. Right.
I think, you know, we, we have been given that, you know, we don't aspire to generate very large margins beyond this healthy 20% net margin or 21%, but it's going to be a function of that year. In terms of if at the beginning of year, we are targeting, say, X% growth, but we end up doing slightly more than X, then the margin expansion would happen. Today we are targeting growth ranges which are similar to our past years.
Yeah.
I think we should be able to maintain the margin. The other thing on the net margin side, I think maybe, Arun will also comment or you can get more data. I think the tax rates for us next year-
Yeah.
They are going to be different, I think, because on the SEZ side, I think this is the lowest tax slab will be this year. Next year, we'll be on at least 2%-3% higher tax or more than the current year. So there's on the net margin, while on the gross margin or, or the EBITDA side, you will still see expansion happening. On the net margin, we'll be able to maintain that kind of a margin.
And just in terms of seasonal variability, you know, Q1 has always been a step down. I mean, obviously, that correlation was broken last year, Q1 of FY 2024. You know, given how things have shaped up for us last two quarters and, you know, we're already a month into Q1 2025, I mean, will you revert to the previous, the relationship of a step down, or, you know, how should we, you know, read that?
We hope to keep on reducing seasonality. It doesn't go away. I think I don't expect Q1 to be bigger than Q4, even this year. But I do expect the Q1 growth rate to be slightly higher than our average growth rates. The way you have seen this year, I think we have had a higher growth rate on Q1, Q2, and then slightly lesser, you know, I will say, I should not call the lower numbers. They're still very large numbers, but not at the same level. On an average, we expect next year also to have the same behavior.
All right. Thanks very much. I'll build that. Thank you very much.
Thank you. Thank you, Arun.
Thank you. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.
Yeah, hi, thanks for giving the opportunity, and congratulations on good set of numbers. Sir, I wanted to understand the growth in the order booking. I mean, at this time, the presentation you mentioned that the growth in the order booking is 20%, versus this number was 30% last year, same time when we started the year. So should one see normalizing of growth rate, growth happening because of this year has been quite a stellar growth? So should one see coming back, us coming back to 22% kind of a growth? Because given the fact that now we are starting the order book with 20% growth, and last time it was 30% growth. So some, you know, some understanding around that will be helpful.
Yeah. So Mihir, thank you for your question about order book is right. I think the order book growth on the previous base of last year. It was a much more muted year for us. It was a very small year for us, and on that, we had a substantially large order book rate. So basically, it jumped from, I think 17% - 24%, 25%- 27%. So the order book of last year also has got some residual revenue, which is gonna come in this year as well. And with the growth of order book of last year, what we have built up from, you know, we've taken the order book again from a very high base of INR 1,300 crores -I NR 1,560 crores.
We don't see order book as a constraint to reach, not meet our next year's goals. We don't intend to fall back to 20% growth targets. We want to maintain them at higher level, but what higher, I think that is how, how the future will unfold. But I don't think, I, while I see order book as one of the dimensions, but it can't be taken in isolation. So we still feel that this year can be a much larger number than the 20% number.
Sure, sir. And how should one understand the new dimension? When you mentioned, order book is not the only thing to look at for the growth rate. So, I mean, which are the other dimensions that you are mentioning? If you can provide some clarity around that, that would be helpful.
I think, we just, it's the same thing. See, order book is one. I think new logo acquisition and average deal size per logo. So we have 29% growth on the deal size. That's where we are able to convert maximum. Our new logo additions are at a substantial pace, and all the new logos are at a much bigger size than the previous new logos. So these are the, these are some of the factors.
Sure. Understood. So second question was on the insurance. I know you, you mentioned that insurance you expect this year to be really quite strong. Can you provide some more color around this and what kind of conversations are you having with the clients? Is it life insurance or is it P&C? And what kind of outcome can we see on the deal size or on the revenue side for insurance? That would be helpful.
Okay, we are working on the strategy. So we have a, like, I think while we have expanded to a large, kind of, wallet share in banking for our major accounts, we have not been able to do the same sizes. Though we have insurance as our customers, but their deal sizes are pretty small. So we're working both in life, general and health. There are offerings which we are generating, where we can have a larger deal size. This is work in progress, and, we expect this to be a substantial part of our revenue in next coming two to three years. So it's early. So I think once we have a better visibility into the funnel generation part of it and deal sizes, I think we should be able to highlight more.
But we are quite excited about it, and we are aggressively investing right now, building teams, building capabilities, competencies, products around that, and then taking them to market in next six months' time.
Sure. So what is the growth in order booking for insurance? I mean, at the company level, it is 20%. For insurance, what could be the ballpark numbers?
I don't have that, but I think insurance we are just building right now. So I don't think insurance growth rate right now. I think even for this year, the last year, banking has been the primary driver of the growth with more than 30% of the banking growth happening. So all other segments have been either at 30 or less than that.
Sure, yeah. That's it from my side. I will join the next. Thank you.
Thanks, sir.
Thank you. A reminder to all the participants, you can press star and one to ask a question. I repeat, you can press star and one to ask a question. Next question is from the line of Ashish from JM Mutual Fund. Please go ahead.
Yeah, thanks for the opportunity. So any comments on the M&A strategy? And where are we in the GSI-led strategy? If you could throw some color.
Thanks, Ashish. So, so as I said, for merger, I think we are looking at tactical acquisitions for speed to market and access to market, predominantly in mature markets. We have not identified any targets yet. I think, but the work is going on, and we do expect that in next one or two years, we should be able to make some amount of, you know, you know, acquisitions for typically for making sure the mature markets, we are able to get, get some speed. But right now, we don't have any update on that, but also it's work in progress on that side. Sorry, what was your second question?
So the GSI-led strategy, so how is that shaping up?
Yeah, the GSI-led. I think while we are working on enablement side, and I think our tie-ups in terms of both product to product types, types are happening, and that is growing. On the funnel side, we are still... Because the funnel we are targeting still in mature markets. I think both for mature markets, the business for the GSIs, as you've seen, has not been that strong. And I think that also has resulted that we also have not any large growth in the funnels. We have some interesting cases, but I think, I would still say it's not, it's not picked up to the speed or expectations which we wanted it to have prior.
So, in the past, you were also thinking of exploring the system integrators to get into the U.S. markets. Any development? Are we in discussion with some of the SIs?
No, no, I think that is... I think we have a lot of alliances, partnerships. I think we have, in fact, we have expanded beyond the system integrators to the consulting companies, the top-tier consulting companies, to form alliances on that. So that work is going on. I think we, I will not be in the position right now to comment on the size of business or the size of funnel because of that. I think it is early, and it is, the GSI tractions have not shown the speed. I think their deal gestation sizes are very, very, very long, and I think we are, still working on deal sizes, which start from $500,000 to few million dollars....
They are very different appetite, and I think if you become a part of that larger deal, we don't have the closure cycles are not under our control. We are looking at various different ways to reset that whole strategy, as well as working with consulting companies in early stages of funnel building. So let's wait for, you know, a few more quarters to see how it shapes up.
And just lastly on, so you're confident of organic revenue growth to be 20% and more. So where is U.S. in this entire context? Would you say that U.S. will continue to grow at a much lower rate than the core business?
No, not really. I think even in the weakest of the U.S. years, still are around growth of 17% or 20% or 22%. Last year was much higher than that. So I'm saying is that in so while on the organic side, if U.S. does not give us great acceleration, we still can maintain high growth rates out in U.S. But what we expect to grow to a size of, which is typically a $500 million or a billion-dollar company, the mature market has to fire. So at one moment, our business plans have to see that the U.S. executes at a much faster rate. That is the moment we are waiting for. So in the meantime, all our markets have great potential to grow organically.
What organically is, we expect a minimum to grow at 20% or more organically, so and all markets can follow that.
And anything on pricing environment? So last question, sorry. Anything on pricing environment?
Yeah, so pricing is a continuous. I think one is, you see, globally, the prices have changed for everything, and I think both in IT products and as well as, you know, even the large players or small players. The cost itself, for, manpower and other services has also gone up. So we are gradually looking at and evaluating various components of our, products, services, and looking to working with customers to keep on revising the rates right now. We will be working on some more serious initiatives over the next few quarters on pricing and resetting some of the pricing, but it's a continuous job. I think I may be able to give you more clarity there, of than on next two quarters.
Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Ashish Chopra from Goldman Sachs Asset Management. Please go ahead.
Yeah, thanks, thanks for the opportunity. I hope I'm audible.
Hey, Ashish, how are you? I can hear you.
Hi. Yeah, great. Thanks. So Deepti, I think last year we saw the YOY growth start from 34% and then end at 23% in the fourth quarter. You highlighted that the trajectory this year also probably should be the same in terms of the way we should expect it. I was just wondering as to why should that be the case, and, and why, what was it last year as well that drove this phenomenon?
Yeah. So, Ashish, I think simple function that, you know, you know the, our business is quite seasonal. Q1, Q2, and on the total revenue side, are much smaller per quarter than Q3 and Q4. So as the growth is driven from new deals and the new what we have seen, the new deal acquisition is quite linear these days now. So we are able to still get higher maintenance as well as sales in all quarters laterally. Since the base numbers of those quarters are slower, the growth percentages are much higher. So you understand? So business in control, this is very linear in terms of renewals. It is, they're very linear, so they get divided over 24, you know, equal 12 months. But your deal velocity is not as lopsided as it was previously.
So we are able to do closures in Q1, we are able to do closures in Q2. So the quarterly growth rates, because they are at a lower base, they end up having higher revenues. Does that, does that, explain?
So just to reconfirm, if I understand correctly, so while the linear business obviously is sort of steady state, you're saying that the closures of deals now happen in a more spread out fashion versus probably the previous years?
That's exactly. which helps. Okay. Okay.
Understood. Understood. Got that. Got it. Yep. And secondly, I mean, you mentioned about a couple of vertical solutions that are doing well for you, like digital lending, trade finance. I just want to understand as to, you know, what would be the nature of solution in the insurance vertical as well, which you are looking at, in terms of the problem or point that you see, the problem statement that you would be looking to solve. And also, I mean, the vertical solutions today, what percentage of your revenues could be coming from such very specific industry solutions?
So, Ashish, I think you're right. On the vertical side, our recent platforms, which are actually also built on the same horizon, these are built on low code. So we're trying to reinvent products on traditional banking, whether it's a digital lending platform or a trade finance or a supply chain, on the low code approach to do, do them as a next generation product. So on the insurance side, we are exactly targeting very similar. We are talking of journey-led solutions, where we are right now automating the whole process, whether it's a claim or onboarding, both in life and general health. And what has happened, why these solutions are being reinvented, we thought that there is a lot of digital ecosystems and stacks which have got evolved in all countries.
And people want to have a very differentiated journey of, in terms of how they are able to onboard their customers or issue policies or do the claims for that. So very similar to what we have done in banking, but on the insurance side. On the point of how much of business is driven predominantly, so what has happened, a large part of our business today is also driven from solution stacks beyond horizontal. I don't have the exact number, but we can, I can, Deepti can provide those numbers in terms of for each accelerator, what is the kind of business mix? But at the end, for every sale, whether it's a horizontal or a vertical sale, the large part of that sale is a horizontal product sale for us.
Because customers end up buying our these accelerators with the hope that they can build more products over that. So at the end, we are always a horizontal play in an account with an entry strategy or a solution-led sales focus around a vertical accelerator.
Understood.
Does that, Rashid, answer your question?
Yes, yes, yes, it does. You mentioned that you expect APAC next year for APAC to be a very strong recovery year. Is that on the back of the largest deal that you signed in that region, or are there some more elements also that are contributing to the same?
No, I see, if you look at last few years, APAC has been always a strong growing market for us. I think last year has been anomaly in terms of lot of misses on deals, in terms of closure, contract cycles, and also market being not responding to us or, you know, in terms of closure rates as we expected. I think even just recovering back to a normal state should give us a healthy growth, and just relying right now on that. The deal which is there of around INR 90 crore, it is a five-year deal of subscription and an implementation. There will be some revenue, but it will not gonna make a material difference to the growth rate.
So we still feel, in terms of our velocity of deal closures and growth in that market, to be on the recovery rather than the last year approach.
Understood. And just lastly, from my side, on the DSO, as we exited the year at around 130 days. So on a fourth quarter basis, is that the kind of number consistent kind of growth we tend to witness in the last quarter? Would that be on the expected lines, or do you think that it may have come in higher than what you would have been targeting?
No, I think DSO is on the expected lines because I think we had a kind of a DSO miss on Q1 because it was slightly higher last year, and then we substantially brought it down. I think comparing to a YoY days quarters, it has come down. On an average, because Q4 is always a large quarter, so the DSO number is much larger, but on the average other quarters. So I think we should be on an average DSO of 120 days, 125. I don't know exactly the number. Our target is to reach 100 days. That's our immediate target as an average DSO. That would mean a Q4 DSO of 115 days or something like that.
This year, I think it's in line with our expectations, but we are taking a lot of measures to even bring it further down.
Understood. Understood. Great. Thanks, thanks a lot for taking my questions, and all the best.
Thanks.
Thank you. A reminder to all the participants, you can press star and one to ask a question. The next question is from the line of Jyoti Singh from Arihant Capital Market Limited. Please go ahead.
I'm I audible?
Yeah. Yeah, could you be a bit louder, so?
Yeah, so, thank you for the opportunity. Sir, if you can just, give a idea on the BPO segment that, you know, very small, for Newgen, 2%. But, what are the impact that we are seeing because of the, GenAI, and, what are expectation, from here onward?
Jyoti, thank you for your question. So, you know, BPO segment is a segment because it has been a traditional segment where typically people are doing... We were a great partner for most of the BPOs got set up in India in terms of when they are looking at a fresh start because they didn't have platforms. Suppose that the segment has been typically the AP/AR segment, accounts payable and accounts receivable, either it's in the captive or non-captive, which are, you know, the BPO-based segments. So it's a, it's a potential market for us for horizontal play. Has not shown substantial traction in India for us or outside India. So we are looking at ways to look at more horizontal play.
Coming to GenAI and BPO, I think it's a typically, wherever you can bring efficiency in operations using technology, I think the processing centers become the first, typically the places to try out, like if you had RPA or the BPM. Similarly, I think both on generative AI, a lot of use cases on in terms of automating some of the routine tasks would happen out there. We are excited about the platform play in our product. We have created our product offering in all three products, which are our horizontal lines. There's a GenAI offering, both for, you know, whether it's content, going deeper into content, content summarization and content management, BPM, automatic rule building or, accelerating the speed at which the processes can be deployed.
CCM also, which is customer communication, how fast you can do a multilingual co-communication depending on different personas. We are excited about that portfolio. We are right now looking at those cases to be taken across all verticals, not limiting to BPO. Yes, but BPOs do have some use cases which can be exploited on that, but right now I won't have more than that insight about that subject.
Okay, thank you. Sir, next question is on the GenAI side. So like, since when we are starting, it will be revenue generation for us?
So GenAI, so basically, GenAI is a technology, and as any horizontal great technology, product companies end up leveraging that and creating more offerings. Finally, those offerings are deployed with the customers to either optimize their businesses or drive growth. So what we are excited that with the, with Marvin, which is our GenAI launch, and the Number Theory, which is the AI platform, we should be able to accelerate our use cases and growth of those use cases in general. But specifically on revenue generation or not on revenue generation, those will depend on how end customers end up deploying the use cases.
... Okay, thank you, sir.
Thank you. Next question is from the line of Tushar Sarda from Athena Investment. Please go ahead.
Yeah, thank you. I have two questions. One is, you said, mature markets have to fire much higher. So what kind of growth rate, you know, would you look at to reach your aspirational targets? That's one. And second, because markets are not doing well, M&A should be much easier in this kind of market, so your thoughts on that.
So, Tushar, thank you for your question. So when I say mature markets have to fire well, it's typically for our long-term aspiration of a company to be reach $500 million or $1 billion. So, because that is where the addressable market is. Today, I think at a growth rate of, you know, above 20%, mature markets keep up that pace, then eventually we will not be able to do justice to the addressable market size in mature markets. We expect to be much higher. For some years it can be a 30%, 40%, 50% growth in mature markets. That's quite doable for a company like us. So, you know, it's more about how, where the addressable market is and where our share of... How do we increase our share of that addressable market?
On M&A strategy, I think as I told you, you know, our M&A strategy is typically localized around to get access to market so that we can do speed up our full sales process establishing in a country. We have not found too many prospective options right now. Depending different markets, conditions should generate sometimes opportunities and sometimes challenges. I am not really in a position to really comment on that, because I've not really felt about that there is too much of availability right now. We have not sensed that.
Okay. Okay, thank you very much.
Thank you.
Thank you. A reminder to all the participants, you can press star and one to ask a question. Next question is from the line of Shubham, an individual investor. Please go ahead.
Congratulations on the great set of numbers, sir.
Thanks, Shubham.
Would you be providing any kind of guidance for the next financial year, sir?
No, Shubham, sorry. We don't provide any guidance. But, we, as we always say, you know, we intend to meet our... keep on meeting our growth momentum and do the historical rates, which we end up doing. We don't see challenge. In case there's a, you know, kind of a delta, which is very different than what we did last year or both upside and downside, then we will inform you as soon as we have more insight into that.
All right, sir. Thank you so much.
Thank you. The next question is from the line of Devang Bhatt from IDBI Capital. Please go ahead.
Hi, sir. Thank you for taking my question. Just one question that you had highlighted that you are resetting your sales strategy in the U.S. So from the past, what different are you doing? Like, you have already tapped GSIs and all to tap the mature market. So what kind of resetting in sales strategy you are doing in U.S.?
Devang, when we are talking of resetting our sales strategy, which is about what was working for last three, four years, we were pursuing banks which were typically in the lower size or typically asset bases of $2 billion-$20 billion banks. This is a large number of roughly around 850 accounts. We saw that, you know, though, I think the account acquisition cost was much more higher than the lifetime cost of the customer. And because the U.S. banking also is kind of in terms of either consolidation phase or they're having a lot of issues raising deposits, these accounts, even after acquisition, did not have a lot of upside for us. And for our aspiration and the numbers we are talking with those companies, we thought that it is important to pivot towards larger banks.
So when we are talking of change in strategy, we are talking of pivoting from the smaller bank sizes to a larger addressable bank, which are banks above $20 billion or $50 billion, up to $200 billion, which is typically around 100 accounts. So we are focusing on those accounts now. And of course, there's an entry barrier to those accounts. It needs GSI support, it also needs various other things. But I think the lifetime value of those accounts will be much more meaningful for our company. That is the change we are talking about.
Yeah. So, sir, we have been trying this, I mean, previously, also, we were doing this, of targeting the larger banks. So, in terms of, I mean, now, for targeting larger banks, have you, I mean, do you, have you come out with some other sales strategy that, you know, that was not working in the past and now it will work?
Yeah, yeah, absolutely. I think, you know, first of all, you know, even in the larger segment, we have at least been able to get three or four accounts. It's not that we have not got inroads in that. The second strategy is about to keep on accelerating that. And I think we are. We have built up a different sales team. We are looking at product definitions which are more suited for that. We are looking at working with consulting and SI companies to target those. Yeah, but as having said that, you're absolutely right, that has not reflected in the numbers of growth right now. So it is. That's why I call it work in progress. But I'm very hopeful that we should be able to crack it. It may take a few more quarters, but we should be able to make that.
Great, sir. Last one thing, will you be targeting any M&A in this mature market, which will help you in, you know, garnering these larger banks?
Yes, I think we have a plan to look at some inorganic expansion for the segments which we want to address and tackle, so that we get more inroads that are more feet on the ground out there, other than building it organically, and that is one of our pursuits. Right now, you know, we don't have any final contenders or anything localized, but we are in the process of it.
Great! Thank you, sir. Thank you for taking my question.
Thanks, Sir.
Thank you. A reminder to all the participants, you can press star and one to ask a question. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.
Yeah, hi. Thanks for giving the follow-up. Sir, you mentioned that banks above $50 billion have somewhere larger accounts are, how many banks are there which are more than $50 billion as of now, and how many clients are we having?
So we are targeting the banking base of roughly around 90 banks which fit in that. They are not mega banks, and they are not the smaller banks. They're about 50 banks. So these 90 banks should be able to good enough market, and our target is to make sure that in next three years, we have at least, you know, more than 25-30 such accounts.
Okay, sure. And as of now, are there any accounts over there in that range?
We have, I think we have three accounts in that range.
Okay. And, these three have been added last year, or how was it?
No. I think last year in that range, we have been only able to acquire one.
Okay. Understood.
Yeah.
Sure. Sure. Sir, I just wanted to understand this fundamentally. I mean, as we move the value chain up to larger banks, do we need to fill more product gaps or anything around it? Or are we, are we, is the same product offering even applicable for larger banks? I mean, you know, how do you see that?
In fact, one of the reasons why we are seeing our product offering was more applicable to larger banks rather than... Because, you know, the platform-led play where people want to buy platform for future users beyond the current solution. You know, the smaller banks want to fill a need with the most cost-effective solution, while larger banks are looking at technology and platform for long-term use. So we are inclined that the current offering set we have. Of course, we'll be looking at complementing that, working on integration ecosystems, building more complementary, you know, features for that market. That's a job well. The issue is, we think the relevance of what we do is more to larger accounts than smaller accounts. That's why we made this correct.
Okay. Sure. So basically, what I understand that the gap which is there in GTM strategy and not, product per se.
No, yeah, yeah, absolutely. We don't... So there will be incremental things to be done in the product, but right now the gap is predominantly on the GTM side.
Sure. Sure. My second question was on the trade finance revenue. What's the trade finance revenue in FY 2024?
I think we would have crossed INR 100 crore or something. I'm not sure, but I think Deepti can send you the data. But we did get around six deals in trade finance, and I think all deals are above INR 10 crore, or some of them are much larger than that. So...
Okay. So basically 6-7 deals with roughly INR 100 crore of revenue.
I think we can ask Deepti for a more-
Just a rough cut number, and what was this number in FY 2023?
I think we started-
We started maybe two deals or something, two or three deals in that.
Okay.
Yeah.
That's okay.
INR 4 crore, maybe INR 40 crore-INR 100 crore, that kind of a jam.
Sure, sure. What kind of traction, I mean, what kind of inquiries are you seeing incrementally for FY 2025 in on the trade finance side?
Yes, so I think the product segment is quite hot, so there is an inquiry, but I think we are going to split it because I think it's unlike our traditional products which don't have large implementation cycles. Trade seems to have a much larger implementation cycles. We are really choosing narrowing, again, narrowing down early our set of targets accounts, slightly going only after larger deals and trying to make sure that we have the right fit for all the markets. So we are right now focusing on Middle East and India. We are not expanding drastically. So we are evaluating whether we should do it in APAC or in Europe or in US. Those things we are on hold yet. So but India and Middle East itself has a large potential.
For next year, I think that is where our focus will be, and then we can look at also beyond that.
Sure. Yeah. That's it from my side. Thank you very much.
Thank you, Mihir.
Thank you. The next question is from the line of Vinay Nadkarni from Hathway Investments. Please go ahead.
Yeah, hi. Just wanted one question. How has the Marvin been accepted by the AI, and what is the channel response to it, and what is the revenue that you earn out of it this year?
Yeah. Vinay, thank you for the question. So, see, Marvin is an extension of generative AI capability for our own products. And, it does not have a different alternate monetization stream, but it eventually creates more use cases where the product can be serviced right now. So we launched sometime back, not maybe few months back. I think right now, as the whole industry is damn interested in anything which is AI-led or generative AI-led. So there's a lot of interest in those use cases. We are seeing a lot of interest in horizontal and mature market use cases around AI, and sometimes also use cases with generative AI. But I will not be able to... We don't think of monetizing it separately.
We think of opening more opportunities, but at the end, we are still selling our BPM, ECM, and CCM platforms or solutions built around that, with Marvin capabilities to enhance the value to the customer.
Okay. One small bookkeeping question. There was 9% expenditure on R&D has been expensed out in the books, correct? That way you have been doing all-
Yeah, yeah. All will be that, yes.
Yeah. And lastly, just more forward looking thing, since between banking and insurance, you have almost 77% of your revenue comes from these two industries. I understand you are focusing on that as a primary driver, but going forward, is there any other areas that you are looking at? Because your healthcare and BPO has not really taken off much. So are you going to be hitching your star only on banking and finance for insurance?
So, you're right. Banking and finance will continue to be the global leaders for us across all verticals. Healthcare is typically healthcare, healthcare insurance, which is very similar to healthcare, but it's a completely a different segment, and this market only exists in the U.S. So we think we can build up anywhere between $15 million-$30 million business in that over the next two to three years. But beyond that, I think government is one important area where we think we can build more inroads. After that, our horizontal products have quite wide application across, but that is what we are looking at, either through partner sales or a channel sales or through GSI to take us to other verticals.
So we do believe that our horizontal sales, which is across beyond the financial banking and financial services vertical, should also pick up, but we are looking at that as a different channel sales rather than a direct sales model with that.
Okay. Thanks a lot. Thank you very much.
Thank you.
Thank you.
Thank you. As there are no further questions, I would now like to hand the conference over to Ms. Deepti Mehra Chugh for closing comments. Over to you, ma'am.
Thank you so much everyone for joining in for the call. For any further questions, you can connect with me or you can go to our website. Thank you.
On behalf of Newgen Software Technologies Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.