Ladies and gentlemen, good day, and welcome to Q3 FY 2024 earnings conference call of Newgen Software Technologies Limited, hosted by ICICI Securities. As a reminder, all participants' lines will be in 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 and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Aditi Patil from ICICI Securities. Thank you, and over to you, ma'am.
Thank you, Muskan. Good evening, everyone, and welcome you all to the Q3 FY 2024 results of Newgen Software Technologies. We have with us today from the Newgen management team, Mr. Diwakar Nigam, Chairman and Managing Director, Mr. Varadarajan, Whole-time Director, Mr. Virender Jeet, Chief Executive Officer, Mr. Arun Gupta, Chief Financial Officer, and Ms. Deepti Mehra Chugh, Head Investor Relations. I now hand over the call to Ms. Deepti for further proceedings. Thank you, and over to you, Deepti.
Thank you so much, Aditi. Hi, everyone, and Happy New Year to all. Before we move on for 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 will now hand over the call to Mr. Nigam for presentation of the results, which will be followed by a Q&A. Thank you.
Good afternoon, everyone, and wishing you a very Happy New Year. Thank you for joining us for our Q3 FY 2024 financial results call. Newgen has always endeavored to deliver consistent business performance, and this quarter continues to be in that direction. We witnessed a record revenue quarter, with revenue reaching INR 324 crore, with a growth of 27% YoY. During the quarter, we also saw robust profitability and significant cash flow generation, highlighting the financial strength and resilience of our operations. Our revenue growth remained diversified across various geographies, specifically in our traditional market of EMEA and India regions. In the India market, we are witnessing significant opportunities in digitization in the lending space, especially for MSME segment, where many customer journeys need to be digitized, including integration with public digital infrastructure.
Additionally, corporate and commercial lending, previously automated in part, is now moving towards end-to-end automation. Other area of focus includes trade finance automation, digitalization of supply chain financing, and agri lending digitalization. The EMEA region witnessed a revenue growth of 29% YoY during the quarter. We are expanding our presence, growing the value share, and fostering stronger relationships through cross-selling opportunities in our installed base of public and private sector Indian banks. During the quarter, we further strengthened our collaboration with one more Indian public sector bank by providing the crucial trade finance supply chain finance solution with a total order value of INR 18 crore. We also won an order from the leading player in the financial services industry, offering asset and liability product solutions for providing our Loan Origination System platform. EMEA region, we witnessed robust revenue growth of 42% YoY during the quarter.
As we have highlighted earlier, in the Middle East region, there has been a notable surge in requirements for innovative banking solutions. Financial institutions in the region are actively deploying advanced technologies and digital platforms to offer more efficient, secure, and customer-centric banking services. Newgen is helping customers in this region by delivering solutions and services that cater to their unique requirements. In the APAC region, we witnessed a growth of 17%, and in Americas region, we had a growth of 13% YoY. We have expanded our relationship with existing customers in these regions, including a large order from a leading global multinational bank in the Singapore region and one of the leading banks in Philippines as well as a leading healthcare company in U.S.
We continue to witness upward trends in our order booking from existing bank customers as well as healthy new logo additions. We added 11 new logos across geographies in Q3. For the year till date, we have added 38 new logos. During the quarter, our annuity revenues were at INR 191 crores, comprising of subscription revenue of INR 96 crores. Our implementation and support revenue grew at a faster pace during the quarter. Newgen has been at the forefront of modernizing technology stakes, leveraging innovation, innovative tools and frameworks like generative AI, open APIs, microservices, and intuitive UIs. These investments have enabled us to make application development faster and smarter, meeting the evolving needs of businesses in a rapidly changing digital landscape. We are extremely delighted with the response our products are getting from customers across different geographies, as well as recognition from the industry analyst.
We have been recognized in October 2023 in Gartner's Magic Quadrant for Enterprise Low-Code Application Platform, fourth time in a row. We have also been recognized as a Strong Performer in Forrester Wave and digital process automation software. Newgen is also positioned as a leader in Everest Group's Low-Code Technology Providers in Insurance products PEAK Matrix Assessment. Underscoring our commitment to delivering effective and innovative solutions, we have recently introduced NewgenONE Marvin. Gen AI-powered enhancement to our end-to-end automation platform, NewgenONE. NewgenONE Marvin is set to support organization in rapidly transforming customers' digital journey through faster and smarter application development, automation of customer journey, as well as the help in building better customer engagement framework. Marvin combines the power of low-code with Gen AI, empowering business users to bring best practices into business by creating the necessary elements using Gen AI.
This will help us in rapidly delivering, developing different state-of-the-art use cases across sectors. Our multifaceted team plays a crucial role in delivering excellence across various aspects of our business operations. We are harnessing the combined powers of our global workforce that has expanded to 4,000 people now and is steadily growing and maturing in line with business growth. On the sales and marketing front, we continue to work on enhancing the customer engagement, strengthening our team and partnership network, expanding our digital presence. We have recently partnered with Duck Creek Technologies, a leading provider of comprehensive property and casualty insurance, software, and services for insurers to offer NewgenONE OmniDocs Contextual Content Services platform to insurers. Our recent customer meet in Mumbai, EkAM 2023, was a resounding success, providing an invaluable platform for meaningful interactions with our stakeholder.
The event served as a testament to our commitment to customer engagement, fostering a positive environment of networking, knowledge sharing, and showcasing the strength of our product, team, and relationship with our valued, valued clientele. On profits and margin, we delivered healthy growth in profits and expanded net margins during the quarter compared to same quarter last year. Profit after tax was INR 68 crore, witnessing a growth of 45% YoY. During the quarter, apart from investing 10% of our revenue on R&D initiative, the company invested 21% of revenue on various sales and marketing initiatives. On balance sheet, we witnessed a strong cash flow generation, with our net cash generated from operations activities for the nine months during ending quarter was INR 196.93 crore.
Our net trade receivables were INR 342 crore at the end of December, which resulted in net DSO of 106 days. Keeping in mind our shareholders' interest, we have recently declared a bonus in the ratio of 1:1. In the 9 months ending December 2023, our revenues were INR 869 crore, witnessing a growth of 30% YoY. Profit after tax was INR 146 crore, witnessing a growth of 51% YoY. We are looking forward to an exciting 2024, energized by the prospects of continuous growth, innovation, and success. We continue to be committed towards building cutting-edge solutions and focusing on customer centricity to achieve newer milestones. We are now open for Q&A.
Thank you very much. Now we begin with the question and answer session. Anyone who wish to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while question queue assembles. We have a first question with Aditi Patil. Please go ahead.
Yeah. Congratulations on good set of numbers. At the start of the year, you had mentioned that order book is growing faster than revenue at around 30%+ growth. Can you provide some color on the order book growth momentum currently? And, like, based on this order book, order book growth, do you expect the 25%+ growth in revenue to continue in the near term, like for next 2-3 quarters?
Good evening, and thank you, Aditi. Aditi, you're right. I think over the last few quarters, the order book has significantly grown, and that's also on accounts of larger deal sizes we are doing with the customers. And some of these order books are specifically, you know, one year or multi-year as well. So right now, I think, for the first nine months, our order book growth has been roughly around 20%, for the nine months period. However, you know, the order book which we have already accumulated over last four quarters, there's a significant part of that yet to be executed over next two, three quarters. We do see generally our growth will be more determined from our deal velocity and in terms of new deals which we win in the market.
And obviously, we are convinced that our, as the market is right now looking both India and Middle East, and also the markets where we are trying hard, like US and all are showing good traction. And we find that the growth momentum can continue. Exactly what the numbers will be, as I've explained last time also, that, our Q3, Q4 are significant quarters. We have seen a higher growth rate in the Q3 quarter, which has given us more confidence to have a strong Q4, but we'll have to wait for exactly what the numbers are there.
Okay, got it. And, so in this quarter, there was a YoY decline in the license revenue, but like Q3 is traditionally has been seasonally strong for license revenue. So already you had recognized a good amount of license revenue in first half of FY 2024?
Yeah, you are right. I think so, basically, what... There are two parts of license revenue. We are also, at the beginning of the year, we said that license growth rate is going to be lower than the company's growth rate, because we are also looking at subscription-based revenues coming in, which are part of coming in annually. Still, for the year, we have grown the license for nine months for a period by around 25%, which is, and then the subscription has grown by around 33%. So it continues to grow, and, so we don't see that as a concern. Q3 has been strong, but last year, Q3 was phenomenally large on license deals. So if you compare the quarter and quarter, it looks flat, but on the year basis, it's growing at more than 25%.
Okay, got it. And the growth in subscription revenue, is it largely driven by growth in U.S. geography or in other geographies also, you are able to get subscription based deals?
I think U.S. predominantly has a large base, but other geographies are where we are adding the new logos and new customers out there in subscription. So right now, the growth is determined as an outcome of total company revenue across all geos.
Okay, got it. And, so this quarter, we also saw good growth in the government and healthcare verticals, like, apart from BFSI. Can you give some color on what is driving growth in these two verticals?
I think right now, you know, for both these verticals, I would not say that, you know, they have been growth drivers. But what has happened are some of our existing contracts or existing accounts have been significant deals, especially in healthcare in U.S. We've got a substantial deal which is reflected in growth in that account. Government, I think right now the base numbers are very small, and any deal every quarter can change the means, number significantly. I would say that still the growth is being driven by financial services, for us, that be banking predominantly, and all the other segments are following that.
Okay, got it. And one last question on the GenAI-based new product which you have launched. So what is the interest among clients for this product? And are you able to price higher for NewgenONE Marvin?
So, basically what's happening, globally, all products are looking at leveraging AI to drive use cases and drive functionality. And, with the kind of innovation and the interest markets have seen in generative AI over last, it's a natural expectation from all product categories to leverage that. So our Marvin is an extension for the same in terms of we are looking at how we can enhance the low-code capabilities of our pre, products, how we can enhance the content management capabilities of the product. So these are horizontal capabilities added to our product, which will just make our product better and more competitive in the market. Some of these components are priced separately if the customers buy, but most of these capabilities get bundled as part of the enhancement of the product in that.
We are not looking at margin on its own to drive revenue stream, but we are looking at it as essential capabilities to augment our product, to make it more competitive for both mature markets as well as our existing customers.
... Okay. So, like all the new deals which you will be winning, they, they will include this Marvin by default as part of the deal?
Most of the time, it may be priced as a component, or it may be part of a default offer.
Okay, got it. Thank you.
Thank you.
Thank you. The next question from Baidik Sarkar from Unifi Capital.
[Gentlemen], hi, good evening. I'm coming up in a very short term. So, Virender, clearly we are in the midst of a new technology refresh cycle. How do you reckon we understand where exactly we are in the cycle, right? I mean, significantly early days, or do you reckon that we're closer to a more mature phase, you know, because this refresh cycle perhaps started right after COVID. How do you reckon we imagine that, firstly? And secondly, you know, how should we deconstruct the growth in your dynamic business between newer logo additions versus ramp up in existing logos that you've already won, say, over the last few quarters?
Thanks, Sarkar. And, so if you on the, tech cycles, I think, every few years, I think we have some major announcements happening in tech cycles globally, and they, they are different from various factors. Right now, I think you'll see more coming from, you know, what, what's happening in AI and how it's influencing. But also previously, whether it was around cloud service platforms or, you know, mobility. Generally, it's part of the product companies to be slightly ahead of the tech cycle. Because when your customers are buying products, they are buying it for typically a long, long time usage, and they don't want to buy something which is not more contemporary, and it's not gonna keep them, you know, slightly behind their tech or technology innovation curve.
So it's a structured process in any serious product company to stay slightly ahead of tech cycle and then invest right in time so that you are not left behind or your products won't become obsolete. So I think we are quite comfortable and what we think with AI, the way AI as well as generative AI, the way they are leading changes in some of the way the customers are gonna consume the system or how the new use cases are gonna be delivered. That's why a lot of investment in, you know, our the Number Theory acquisition was part of that plan. Our generative AI launch is part of that plan, and more and more use cases are coming. So we think we are quite comfortable and, in fact, we'll be leading in some of these areas with our customer base.
You know, if I could just position that question in a different way, right, Virender. So, you know, we know that, you know, EMEA and India is the bulk of our customer base, and we kind of know, you know, what the end user demand there is, right? So, you know, what are your conversations with these, you know, with the decision makers in this geography again? Is this a refresh budget that will continue for the foreseeable future, just given how much anecdotally we know digitization remains to be done in the system? I mean, if you just give me a more granular sense of how your conversations in especially these two geographies are progressing, EMEA and India.
So predominantly, if you look at India and Middle East, I think they are on the journey of typically doing what you call end-to-end digitalization. They have done a lot of digital initiatives over the last four or five years, and it has been in, you know, what you call pieces or parts. And they are looking at, you know, transforming the complete customer experience or what you call the digital journey out there. And this is a use case which is happening across all major financial industries in these markets. Now, where we are seeing right now, I think the largest business or the interest where we touch consumers is happening in the areas of typically lending, and that's where the first transformation is happening.
So lending still has got a lot of areas like, so like I mentioned, MSME, lending is very important. Commercial lending is very important. Retail has always shown interest. So there's a cycle of that going on right now, and I would say we are at, you know, kind of a half of that cycle being executed in India, but early stages in other markets. But then what is happening beyond that lending, then there are other areas opening up, which again, need to be digitalized for that. They're basically next segment. Now, the drivers of spend are determining how the business cycles of these financial, like banks, in India are right now spending on these cycles. So I think the business is moving forward. In some markets, they may lag by one or two years.
So I would say that on this wave of even the digital journeys which we are right now riding on, we are probably in the early 20%-30% of that cycle, and it may last next 3-4 years in different areas, unless there are more macro situations which affect spend patterns in the market. Does that answer your question?
Yeah, yeah. I mean, it does. If I could just squeeze, you know, one last question within relation to, you know, it's getting to be financial year, right? You know, we noticed H1 versus H2, you know, the seasonality kind of contracted this year, FY 2024. Which means H1, to that extent, has a bigger base to be defended later the next year. You reckon this is a base we can defend comfortably as we step into the next system? Or would you caution saying that, you know, given how low the registration periods are, it's something that you... I mean, it's something that is really not in the bag as things stand today.
See, one of the, one of the issues of anytime you grow faster, you've got a next quarter challenge of growing even faster than that. That, that becomes the dynamics of business. But, you know, having said that, in our business, there is some amount of annuity getting generated, which gets some compounding effect, whether it's through annuity revenues or through, compounding ATSs. And generally, the relationships, once you start, they are long-term, so they keep on continuing. So somehow we are always comfortable going into next year as the base of the business has increased substantially. Having said that, we strongly dependent on our ability to go and sell again, which is the reason, you know, in the post-COVID, we have really grown faster as the markets have opened up.
So we'll have to still go and execute our business plans next year, but we don't see the market as a constraint. We don't see right now the conditions in the market seem to be, you know, quite, quite favorable, and our products and services are being received well. So I don't see any reason, but yes, there's a lot of hard work to do, which we need to still do. Thanks, thanks, thank you very much. All the best.
Thank you. Before we go with the next question, a reminder to all the participants that you may press star and one to ask the question. The next question is from Mihir Manohar , Carnelian, from Carnelian Asset Management. Go ahead.
Yeah, hi, thanks for giving the opportunity, and congratulations on a good set of numbers. So lastly, wanted to understand the U.S. part of the business. I mean, we have had strong growth in the last three quarters. This quarter, the U.S. business was soft, both on a YoY as well as QoQ basis. So if you can give color, you know, why did that happen? And, you know, what is the movement which is happening in the U.S. strategy, specifically the GSI part, that will be helpful. My second question was on the fact that, you know, I mean, when we see the last year, last year specifically was a year of uncertainty, and even in that situation, I mean, we were able to have such a handsome growth.
So just wanted to get your sense now, situation getting more certain, with U.S. interest rates are expected to remain in a certain range. How are you seeing the client conversations, and do we expect, you know, acceleration in growth, given the fact that even in, even in a bad period, you had a good growth? So some color around that. My third question was on the large logos. If you can throw some light on, you know, have we added tier ones across any of the geographies, maybe APAC, maybe India or maybe India, that will be helpful. And just last, fourth question, was, I wanted to understand the deal size.
I don't know what is the average deal size which is there currently, and what it used to be there, let's say two years before, three years before, that will be helpful, yeah.
Mihir, thanks for this rapid fire of questions, you know? So, I need a couple of more drinks to remember all of them, but yes, I'll try. So see, on the U.S., you are absolutely right. I think our aspiration to grow in U.S. is even much higher than the company's growth rate, and we think because that's the larger market, and we've got an entitlement to do that. Having said that, we have grown by around 25% YoY in U.S. this year. What is happening is the other markets, we are receiving far better traction, and that's why we are still leading that growth.
So it's not that the U.S. is not growing, but U.S. is not growing at the level of our own expectation, our own business plan, and so some amount of our GSI initiatives are still work in progress. Some amount of tilt towards from mid-sized banks to larger banks is still work in progress. Opening of insurance vertical is still work in progress. So there's a lot of work happening. We have not received results from that. So I would say U.S. is still work in progress, but we have still grown. When you say work in progress, we have still grown at 25% in U.S. this year for nine months, period. You know...
So sorry to interrupt, sir. Just a, just a clarification. I mean, U.S. business is significant growth, right? For this quarter, sorry, both on a YoY as well as QoQ basis.
On YoY basis for nine months for U.S., we have grown at 25%, 24.96%.
13% for quarter.
13% on quarter-over-quarter compared to last year, this last year.
14% versus last year.
Sure, sure, sure.
Are we clear? Okay.
Yeah. Yes, yes, yes.
Now, the second thing is about, you know, the certainty of the market. So if you look at, you know, the uncertainty which people are talking about, talking of is, it's typically a mature market phenomenon. So one thing is, I think we hope that if the mature markets start behaving, our mature market business, our GSI business, as well as U.S. business, should see a better traction once we are out of that, as we are also pivoting to larger accounts. But since our business predominantly is still driven, the growth is driven from emerging markets like India, Middle East, APAC, that's why we have been able to still substantially grow when there is, worse pain in those markets.
Now, if the pain is less in those markets and we are having the same traction in our existing markets, we can also keep on growing faster or make better results happening in U.S. and Europe. On the large logos and large deals, I think we are the accounts which you have mentioned in the both press release and what we said, they're all typically Tier One accounts in India and Middle East. We are talking about Tier One banks, you know, one of the top ten banks or similarly in Middle East, we are talking. In U.S., the order which we have got for the healthcare is a Tier One account. So there are. But we have not added large Tier One accounts in U.S., they have been existing accounts.
So in APAC, Middle East, and India, we have added Tier One accounts, but not in U.S. U.S. predominant business, which has come as, come from existing accounts, which are Tier One accounts. So on the deal size, I think I will have Deepti, if you can share details, we can give you more details, but generally, you know, we keep on expanding as, you know, you see the number of logo wins are not changing substantially, but the growth rates are changing. So that's a function of our average deal size is going up substantially. I don't have the numbers exactly, but I think we can, we can share those numbers with you.
Sure, sure, sure. That's really helpful. And lastly, just on the GSI strategy, I mean, any uptick over there?
I think it's work in progress. So I think GSI, there are multiple things right now. As you, as you rightly said, GSI are predominantly focused on mature markets, and there is a lot of pain happening in those mature markets. And I think as a result of that, we have got some traction from them, but it's not as the expectation, as per the expectation the company had. So we're still working on, I think, our partnerships with Duck Creek, Guidewire, those are gonna help the whole GSI ecosystem. We are working on few more partnerships, so it will take a bit more time.
Sure, yeah. That's it from my side. Thank you very much, yeah.
Thank you.
Thanks much.
The next question from Ashish Chopra, from Goldman Sachs Asset Management Limited.
Yeah. Hi, thanks for the opportunity. Just a question as a follow-up on your previous comment. Could you just explain in little bit more detail the model that you would have in a partnership with someone like a Duck Creek, which it says could be an insurance product platform? So is it, is it like a, a product that is having features from you, and hence you make revenues as they sell, or what would be the business model and also the potential opportunity size, that, that you kind of foresee in such a partnership?
Hi, Ashish, and, you know, thanks for the question. So you know what happens, whether we're talking of Guidewire, Guidewire, Duck Creek, or any other, for that matter, these are typically product to product alliances. There, what we are, we're trying to say that the use cases of Duck Creek in terms of what are in the digital journeys which are implemented on our product, have better support of working on Duck Creek platform. So, what it gives comfort to the customer, that any customer who has a Duck Creek platform and wants to implement low-code digital journey, usually becomes a better choice because the integrations are already established. So these are product-to-product integrations.
The way they influence the market is that all of a sudden, the Duck Creek ecosystem becomes our prospect, and then we can run joint go-to markets with either Duck Creek or with any other partner, like the GSIs who have Duck Creek practices on that. One of our initiatives over the next 2-3 years is going to be to seek insurance in a big way in both U.S., India. So in that, the property and casualty insurance is where Duck Creek plays strongly, and this is one of the areas where we are gonna work both on claims and onboarding journeys. And that's where our product-to-product integration is on. So it's a early stage.
This is what I would call basic steps to go and enter these markets, and then subsequently, we'll have to do all other things to make sure we win those. Ashish, does that answer your question?
Yes, yes. So just to ensure that I understand it correctly, so your contextual services platform becomes as one of the options that can be integrated into a Duck Creek platform, is what is the messaging that you have given to the Duck Creek clients-
Exactly.
and that's an opportunity and
Yeah. Yeah, insurance customer who has Duck Creek as a platform, he's looking at content services, he's looking at workflow services, or he's looking at automation of digital processes. So we have an automatically formed alliance where the products work and talk to each other.
Understood. Understood. And, and would there, which could be the other that maybe large potential partnerships, even in the banking platform, if any, that would exist today?
So in banking, we don't go the same way, because in banking, over the period of time, we have already done integration with most of the core bankings in the world. So we are already, the credentials are quite established that we sit on any core banking and provide solutions and services. But in U.S., when we went to the U.S. market, we visited all the U.S. core banking, we did these integrations with that. In, on the Duck Creek side or Guidewire, which is another insurance player, this is, this is what... So insurance is a new area where we are going and implementing and solving larger use cases. So we are focusing on that segment to do that integration.
Understood. Understood. And, and my second question was around the license revenue segment in the overall revenues, which has grown now in excess of 70% over the last two quarters. So should that be construed as a flow-through from the high product license sales that we had in the prior quarters, and hence, they should normalize in line with the license sales that we witnessed? Or is there some other element to it that we should take note of?
You know, I think, so, you know, difficult to exactly answer that question, but I think we do still expect the license revenues in the coming quarters to be substantial for us to grow. And so, so there's no rationalization. You could say that, you know, last year Q3 license was very, very high, so this year you will see the growth. But on a year-on-year wide basis, you will see license revenue growing. So as part of our growth still since, number of deal acquisitions are still in the same traditional range, we still need lot of license deals to for higher growth rate. So as the, markets which are showing more traction are India and Middle East, and there will be larger, lot of deals that are going to be license-based deals.
So we do expect even in Q4 and even next year, to continue on license growth momentum. But having said that, some amount of still deals are going into subscription revenue, and which will get, you know, accumulated in revenue later, becomes, it builds the base of the revenue. So there is going to be some amount of... So, in the beginning of the year, I said that, you know, our target is to, that license revenue will grow by 10%-12%, and still we should be able to do a healthy growth, about 24%-25%. So I think even next year we should be in the same range. But our base, base of ATS will keep on growing and other subscription revenue will kick in.
Sure. I was specifically referring to the implementation revenue growth, because that is running far ahead of what probably the license sales growth is. So, I wanted to know what other elements could be drivers of that?
See, I think, one of the reasons for implementation revenue growth is the larger deals which we are accumulating. So what happens in larger deals is the, the ratio between license and implementation changes. So historically, in a, in a 500 or 700 case deal, it would have been a 60% license and 40% implementation. But on a INR 3 million deal, it becomes less, it becomes reverse, or even the license becomes smaller. So that means we accumulate more implementation revenue, more support, more services revenue, and that's what's building growth in last quarter. I think this may continue for some, because the order books have grown over the last, you know, 2 quarters substantially. So some amount of implementation revenue may continue growing, and support revenue may continue growing.
But, you know, we do intend to increase the deal velocity and to keep our gross margins intact. So in the short term, it may have a kind of a jerk for one or two quarters, but typically in a slightly medium to long term, generally the AMC revenues will grow faster than the, you know, what you call implementation and service revenues.
Understood. And just one last question from my side. So when we look at the very strong growth YoY this quarter on revenues, 27%, typically in that scenario, we would have expected, let's say, the margin expansion to be higher versus the 70 basis points that we see this quarter at the EBITDA level. Like you had mentioned in the past, that beyond 50%, 20%, 15%, 20% growth, margins should expand. And so just if you could maybe help us with the breakup there, in terms of whether this is really the gross margin where we might have seen some adjustment, or is it more on the operational expenses side as well?
See, we have grown for nine months around 30%, and that, you know, as we say, our budgets generally are always at that run in the beginning, around 22%-23%. So any higher growth for that should get adjusted in the, what we call margin expansion. But, you know, we have aspirations of growing even faster, so we keep on investing more. We did some, I think we had a disclosure of doing a large consulting exercise with one of the Tier One consulting companies. There was almost, near $1 million cost, which we have taken. There is also kind of some amount, one-time cost in SG&A, which is typically a supply of hardware, which has come in this time, which has taken, which has been, you know, added to the cost.
So there's some amount of, say, INR 1 million, INR 1.5 million extraordinary cost this quarter. Otherwise, the margin could have expanded slightly. But, you know, I think as we said, the guidance of roughly typically a net margin of roughly around 19% and a bit of 23% is what we... Because we do want to invest again next year for higher growth. So that's where we are. But you're right, you know, beyond 23%-24% of cost, anything higher revenues will always expand margins.
Understood. That, that's helpful. Thank you.
Thank you.
Thank you.
As a reminder, all the participants are requested to press star and one to ask a question. The next question is from Chirag Kachhadiya from Ashika Institutional Equity.
Hello. Congratulations on good set of numbers. So I have a couple of questions. So if you look at the net logo addition on year-on-year, it's showing a similar trend that what we have two years back also. So what's the strategy going forward to add the logo addition? Yeah, I understand your comment that in absolute terms, on per logo base, the business has expanded in value terms. But from a diversification perspective and reducing the concentration risks as we move forward, how are we going to add more and more logos so, you know, customer client risk can get mitigated? And second, on annual annuity revenue growth perspective, what strategy is there to, you know, maintain this growth trajectory going forward? Yeah.
Thanks, Chirag. I think you're right on net logo for over multiple years. Our typical logos additions have been similar. And what we have said is that's part of function of how we are operating the business. We are pivoting away from smaller deals. We are pivoting away from typically the small banks which we are trying to win in the U.S., and we are going for larger deals, and it's a conscious effort. Having said that, our ambition is to bring logo rates, win- win rates higher than this. So, but that's a function when all markets perform equally. Right now, for us, you know, you can say out of four markets, three markets are performing, one is very slow right now because the mature markets are not firing that well.
So as other markets and we start diversifying slightly more into other verticals, we should be able to get better logo rates. So you are absolutely right on that, but our targets would still remain, as I probably take this logo rate to 60 logos a year, or 65 or 70, not really, really high. We don't have concentration risks. I think we are particularly one of the most least concentration of revenue or concentration of segments in that. So particularly, we have got this kind of a revenue, INR 1,000 crore revenue last year by roughly around 520 customers. And no customer contributes more than 2%-3% of the revenue. So there is no concentration risk in our business. And when we say logos, these are net new logos added in that year.
So we have also the all the other logos. So I don't think the concentration is a risk. On the annuity front, as we clearly said, as part of our license business, some amount of compounding of annuity happens through ATS and AMC, but also some of the license deals are shifting to subscription-based deals, which are automatically adding to the annuity. We do hope that our annuity licenses will keep on growing faster than the company growth rate. I think this quarter is slightly an exception, but generally, if you look at historically, that has been the trend. And we may be back in next quarter or next, next quarter, we may again come back on the same trend.
Okay, just one follow-up question, sir. How do you see the economic scenario panning out in the Western world? And second, in last seven years, we almost made a 3x jump in our top line. So will this trajectory to continue going forward, any qualitative comment would be useful? Yeah.
So I think economic scenarios, you know, what we have, I think, we are still operating in markets at a much smaller level, and we've seen the European pain. Europe businesses have really been slow for us. And some amount of also here, uncertainty in larger accounts has been there. As everybody is hearing, we are seeing also things are coming out. Customers are asking for proposals, they're asking for RFPs are coming out. We hope that things change, but, you know, I don't have the exact answer to that, and I don't think anybody has on that. Yes, we have done economically well in our last seven years, and there is no reason we should not do the same thing.
But, you know, beyond that, I would not be able to state exactly how much it will, whether we can be next 3x in 3 years or 7years or 10 years. It's difficult to predict.
Okay, thanks. All the very best.
Thank you. And the next question is from Rahul Jain, from Dolat Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. I just have one question to Mr. Nigam's comment, where he said we are working on helping banks related to some public digital infrastructure side. So can you slightly elaborate more what exactly we are doing out here?
So, I think just to clarify what you said, for a lot of public sector banks, we are working on their digital journeys in terms of when they are trying to digitalize their journeys to improve their quality of service, improve their speed of service and scale. That's what we are helping. And I explained that, you know, like, examples are like, you know, transforming lending end to end. Lot of work has happened and the government has invested in digital stack, India digital stack. How to leverage that and transform the digital journey for a lending or a business loan, that's what we are helping Indian banks in that. And that's where we have got a lot of traction from these banks, and we'll continue to do that. Just a clarification, sir.
Understood. Understood. That's it for me. Thank you. Thank you.
Thank you. And the next question is from Sarang Sanil, from RW Investment Advisors. Please go ahead.
Hello. Thank you for the opportunity, sir. I hope I'm audible. So the implementation segment has performed very strongly this quarter, and you have mentioned that large deals would be a driver for this. But apart from that, was there any lumpy project undertaken on the implementation side during the quarter, like a one-off?
No. Sarang, thank you for the question. Sarang, no. So if you look at service revenues, can't have lumpiness because the nature of they're related on the execution, and you can't just ramp up execution for a quarter. So they are more sustained and slightly long term. There's no single client which is driving large numbers or values. So, so we added some large clients over the last 1.5 years, and those have the implementation and execution of those is driving this, but those continue—those clients continue to be added, and we continue to do business with them.
Sure, sir. Sure, sir. So also in general, how is the demand environment in the U.S. geography? Tier one IT companies aren't seeing, you know... It's, it's not very bright to them. And has there been a strong progress in this geography after opening up the branch in New York?
So, Sarang, I think this is a question typically which is, I think Indian industry, the discourse around services and how the service industry is completely dependent on the mature market. And, I think slightly we are, we are into a challenger ecosystem. We are a product-based company. We will keep on, you know, servicing our customers, and what's important for us to be in front of the customer. We have seen lately things improving in U.S., not account of opening office, but in terms of some amount of customers, especially our pivot to larger banks and larger banks looking at redefining and reinvesting in their digital journeys. That's where we are seeing some renewed interest in that. I think we'll have to wait a bit to see how it pans out.
Sure, sir. So, do you see any inorganic growth opportunities in the pipeline?
You know, our strategy around our core products and our core verticals, we are staying on that. Any opportunities which can augment that journey, we are looking at some of them, but, right now there's nothing exactly finalized or something.
Sure. So just to clarify, did you mention that the order book growth in nine months was 20%?
Yes.
Okay. Okay. So could you put a number to the growth and margin expected in FY 2025? Any upward revision from the 25% growth, or do you see... And on the margin side, do you see yourselves reinvesting back into the business and maintaining the 19% net profit margin?
Yes. So on the, on the margin, we have a kind of an understanding which we have built internally that, that in spite of investing for business, we should be able to keep on delivering those. But if we find opportunity to invest aggressively for growth, I think we can go on. There's no commitment or a defined value. That's what we have said, this is the number we can easily reach, and then over a longer period we can expand that. See, on the projection of what's, what's gonna happen next year, I think that's, it's too early. We will not be able to comment on that. And I think, you know, you see a lot of, lot of things will depend on, you know, in terms of our ability to execute our business plan.
Right now we are very, very hopeful that we should have, we should have good years. There's no reason we can't continue this growth momentum.
Sure, sir. Thank you, and hope this year also goes well for you. Thank you.
Thank you very much.
Thank you. As there are no further questions, I would like to hand over the conference to the management for closing comments.
Thank you so much everyone for joining. For any further questions, you can connect with me or you can go to our website for further details. Thank you. Thanks all.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.