Ladies and gentlemen, good day, and welcome to Neogen Software Technologies Limited Q2 FY 'twenty two Financial Results Conference Call. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr.
Kriti Mehrachug from Neogen Software Technologies Limited. Thank you and over to you, ma'am.
Thank you. Good evening, everyone. I am the Senior Investor Relations in Media Software Technologies Center. And I welcome you all to the Q2 FY 'twenty two results of the company. I hope all are keeping safe.
Joining with me today from our management is Mr. Gulakan Niven, Chairman and Managing Director Mr. Varad Rajan, and Mr. Arun Kumar Gupta, Chief Financial Officer. Before we move on to the discussion, let me highlight that this call may contain certain forward looking statements concerning Nuance's future business prospects and profitability, which are subject to a number of risks and uncertainties, and the actual results may vary materially from the forward looking statements.
Our performance may not be indicative of the future performance. The company does not undertake to make any announcements in case any of these forward looking statements become a
deal in the future
necessary statements or update any of these
forward looking statements made from time to time on or by on behalf of the company. For further details, you may refer to the Investor Relations section of our website.
I now hand over
to Mr. Niman for presentation of the results, which will be followed by the Q and A. Thank you.
Good afternoon, everyone, and thank you for joining us on our Q2 FY 'twenty two earnings call. I'm pleased to present another quarter of profitable growth with margins and cash improvements. To begin with, I would like to announce changes in the management structure. Virenderjit has been promoted to take up the role of CEO and Karan Manwani has taken up the role of COO in the organization. Both have played key roles in shaping the company over the last 25 years and have been pillars of NewGen.
With this transition towards a professional structure, I firmly believe this will bring in new energy in the company and position us strongly to pass significant global opportunities. This internal promotion also reflects the company's core philosophy to invest in developing leaders in the organization and bring up vision as a family. We all continue to be infused by the same vision, focus and strategy with renewed user. On the operational front, we continue to work on a hybrid model. The senior management is now coming to office to 3 times a week.
Projects teams are now coming to work together as and when needed. Face to face meetings are happening. Training in person are taking place for new joinings. Our sales and business people have started to move to customer location as things are opening. We hope that by the end of this quarter, this will get further streamlined.
In terms of performance for the quarter, revenue witnessed a growth of 20% to reach CHF186 crores during the quarter. All the geographies have performed well and continue to grow steadily. During the quarter, especially EMEA region has witnessed a growth of 59% and India
has witnessed a growth of 40%.
We continue to help our existing and new us. We continue to help our existing and new customers in creating vehicle capabilities across their modern day business needs. The quarter marked significant additional business from our existing customers again. We also added 9 new logos during the quarter. Some of these logos are in the process of being built currently.
Some key orders during the quarter included providing a solution for a subvention system to government organization in Singapore, providing IVPS platform upgrade for leading private sector bank in India, rolling out our commercial loan origination system solution for the leading bank in Kenya offering full range of financial services providing an enterprise wide banking solution support and recognition of banking entities in the nationalized banking industry. Our NEP revenues continue to grow stronger. Nifty revenues were at INR 1.15 crore witnessing a growth of 17% YOY. This represents 62% of our business now. We continue with our transition towards subscription revenues with witnessed a growth of 23% YOY reaching to the previous INR61 crores on SaaS.
We witnessed a growth of 35% Y o Y. Banking and Financial Services and Insurance continue to be our key growth Our offerings and opportunities. On the product front, our NewGenOne platform is receiving good acceptance from the customers and system integrators. NewGen's market differentiation is based on our breadth of capability for automating complex processes at scale. Our platform manages rapid application development with business complexity, enterprise wide data access, customer experience and integration with back end applications.
The future belongs to simplifying the way we work, simplifying complex content and process requirements of our customers. This includes offering enhanced self-service experience, handling business complexity with full context and simplicity, automating processes, eliminating paper and manual interventions as much as possible and using data insights to offer personalized services and products. And our platforms does just that. Reinforcing our strong position in the industry, we have featured in the 2021 Bachmann Magic Quadrant, a low code as a niche player this quarter. This is our 2nd time in a row that we have appeared in the low code volume.
The key focus areas of our platform direction from here on are to improve customer and employee experience, enable rapid application development, facilitate intelligent automation and announce the platform scalability, security, manageability and deployment. Companies are fast adopting digital first business practices and ways of working to register the changes caused by pandemic and ensure their long term success. Midland is the right long term partner in this journey for the company. As an organization, we are taking all the necessary steps for creating a solid foundation for continued and sustainable business momentum. Low code development is becoming a large wave in the world.
With our IBPS platform, we are one of the front owners in low code process development. We are enhancing it for rapid app development as well. We see unlimited opportunities worldwide in this space. Profits and margin. We have maintained our growth momentum on the profit margins.
Our EBITDA was up by 13% YOY at INR47 crores and profit after tax, up 28% YOY at INR37 crores. We continue to invest heavily in our global expansion, our products and our people. During the quarter, R and D expenses comprised about 10% of sales and marketing expenses comprised 21%. Our balance sheet is strengthening with every quarter. We have a cash and bank balance of INR298 crores and the net cash generated from the operation updating activity was at least INR104 crores for the 1st 6 months of the year.
Our debt raised continues to show improvements. Our net trade receivables were INR674 crores at the end of the quarter, which resulted in net DSO of 87 days on the back of robust sales and collection. For the half year ended September 30, our revenues were INR33.45, witnessing a growth of 20% YOY and a profit after tax was reached NOK59 growing at 54% BOY. We are happy to be back on track on our historical growth path and hope that uncertain environment is behind us and markets open it quickly. On the DSI relationship, our partners are stepping up and taking greater interest in working with us.
Our pipeline is strong and growing over the last year across market in APAC, India and US. We are seeing action in newer geographies like Australia as well. With this, I end my commentary on the results and wish you a safe and happy festive season. We are now open to Q and A.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. The first question is from the line of Kunal Shah from Carnivian Capital.
Thank you for the opportunity and congratulations on good set of numbers. I had one accounting very basically, while Okay. Just a moment. Yes. So I had basically one accounting query.
So if I observe over the years, the accounts, right, I had lot of optimism where our bed case over the years has ranged specifically in the last 3 years, almost in the range of 12% to 15% of our GBP. So just wanted to understand how do we go about revenue recognition and about the collection policies and all. If you could basically help understand the revenue and collection cycles a little bit, it would be of great help.
Well, can I take a repeat the question once again? Yes,
Shraddhikesh. So basically, while going through the accounts for the last 3 years, I had an observation where bad dates, bad debts what we book in the accounts forms almost like 17% to 20% of our PBT, that is profit before tax. So just wanted to understand how do we go about revenue recognition and collection? If you could help understand the revenue and the collection cycle, right,
that would be a great help. Kunal, thanks for the question. I'll try to answer and probably more data from Gifty. So you are right in terms of any kind of a product business. We do expect some amount of provisioning and write offs.
Generally, they should remain in the range of between 1% to 2.5% depending on the markets you are operating in. Generally, we will have more cases of hourly default in markets like India and India, prominently government and other territories. And so right now the provisioning is happening, sir, is the ECL method, just typically looking at the past trend. And what has happened somewhere during the years where the currency issues were very prominent in Africa, we had higher provisioning in those years. And as the times have changed in last few years, they have substantially started getting reduced.
In fact, this quarter, we had almost medical provisioning in terms of having collected also what has been provisioned. So it is this is improving and what is but also in
the forward, we are looking there
is going to be a kind of default. It could be between 1%, 1.5% of the overall revenue. That's the reason. We don't look at the PPP level. On the revenue realization trend, I think the realization factors are the ones which are very quite standard in the industry.
On the license business, we have realizations as soon as the economic value is transferred as soon as the license gets transferred and deployed at the customer side. On the services side, the revenues are realized as the services are rendered to the customer milestones as well as realization of the effort we have put in. Does that answer your question?
I understood how does the collection part goes, right, because outstanding greater than 6 months or caters, right, also finds a very good portion of the overall caters. So while revenue recognition, I could understand, right, but how does this collection go? That means is it linked to milestones on the basis when we receive from that 90 days or on completion of certain, I mean how does that part works out in both the segments of the business will be helpful as well?
Yes. So on the license, generally the collections are not into any milestones. They are realized as soon as as part of the advances or on deployment of the software. On the services, they are on the milestone basis, predominantly on milestone. And those are the cases where sometimes the milestone delays do occur more significantly because there could be an acceptance of milestone which will take more time or a exclusion payment being after the milestone you have an issue with the customer.
And most of these deals generally would have been now, if you look at the 180 and above base collection, that amount is reduced substantially. I think I'm sure most more than 80% or 85% will be less than 90 days now. And certainly, and a small part of will be between roughly around I think between 1 crore around INR 30 crores is something which is above 180 days. Which is some very it's become very small amount. And out of that also more than 50% will be only provisioned in some ways.
Okay. So just to understand
And the ECM has come down back to almost 80, 80 days.
So, Krish, if I have understood correctly, we booked the revenue on reaching that milestone. That would be very much in line with the time when the amount becomes due, right. In that case, there should not be any impact on receivable delays, right, because you are eventually looking the revenue also when the amount is kind of becoming new, that is not assuming that particular milestone, right?
Yes, you're absolutely right. So I think you have to compare historically if you look at we are in product license business. And if you look at product license based companies, whether they are Indian and U. S. Companies, where generally DSOs are very high because irrespective of the revenue realization practices, customers do end up holding payments because you are delivering products as well as services.
But sometimes because of smaller issues, you are going to end up closing payments for a longer period of time. That's when an average DSO of a product company is generally pretty high. Now it has become started becoming better as the licenses have shifted to subscription or more NUC based licenses, then you have lesser of such problems. So you will see companies have shifted to NEC where the majority of revenues and their DSOs will be more closer to the service companies. But on traditional sense, significant part of our revenue is still in the license.
So we still operate in a DSO range of around 100, 110 days. And over the last few years, it has come roughly around 200 days to 100 days, months almost at 18 days. As the contribution from micro markets and subscription part of revenue grows, this keeps on improving.
Okay. And just two more questions as a follow-up to this question. So historically, what is the amount that we have written off? I mean, where we might have not provided that we will have to return off. You said that it is in the range of 1% to 1.5% of the overall revenues.
Is that understanding correct? And that is what something which eventually one has to write off?
We can send you the data, historical data. And in future, we look at that with around 1%, 1.5% of the future revenue may be affected by provisioning or DSOs. Actually, last 2, 3 years, basically, there is a change in accounting standard also, which has also impacted this number. So basically, a major part of provisioning is different because of change in accounting standard also in the last few years, especially earlier 2 years. So that is also a bucket of we can come back with the data more.
Sure, sure, sure. And just one question again pertaining to this only. We work with a lot of system integrators, right? And we are seeing good traction out there as well. So how does the revenue recognition and the receivables work with the system integrators?
I mean we directly get from the end clients or basically we are due to receive it from system integrators, how does that work, if you could shed some light that would be helpful as well. That's it from my side, sir.
Yes. So on the system integrated business predominantly our focus is on transfer of licenses on our field of subscription. So since the service components are lower, so the realization of license and subscriptions are more cleaner. And also our contracts can be both. They can be through a system integrator or through a direct end client.
So both models do exist. So we will have revenues coming directly from end clients or delays coming through system integrators.
Okay. But the DSOs more or less would be the same, about 90 to 120 days or with system integrators again, it would be a little on the higher side?
No, I think we expect it to be much lower because as I told there is no service component to it. But I think this business is still forming up. We have established to go last 1 year, 1 year, 1.5 years. So I think as the time goes right, our expectation is the DSO figures in system integration will be lower than our service revenue business.
Okay. Sure, sir. Thank you very much. I'll get back in the queue if I have any questions, sir. Thank you so
much. Thank you. The next question is from the line of Ashok, an investor. Please go ahead.
Hello?
Sorry, Tinturab Ashok, we're not able to hear you.
Hello. Am I audible?
Yes, sir. Please go ahead.
Yes. Thanks, sir. First of all, congratulations on a very good set of lenders. And also I would like to congratulate Mr. Virandavjit and Tarun for taking up the new roles and we expect a good amount of new roles going to be new roles.
And I have a follow-up on that. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So thanks for your question. And the expenses right now is very small. It's almost negligible. I think our traditional travel expenses will be in the range of around INR 8,000,000 crores a quarter.
Right now, they may be less than INR 2 crores. So we expect them to improve over next this quarter and next quarter to grow, but not to come to that level in next 1, 1.5 year at all, Because some of the part of the changes in that model are more permanent. But while as the markets open and the business takes up momentum, the travel will grow inside, but may not be at the same level as it was at historical level. Okay. So if I understand it correctly, we will take best case scenario, the max expenditure of the travel side would be another 8% to 9% delta, right?
I don't know exactly what I'm saying is that the main question for us is that the travel cost will improve and increase over next quarter and quarter after that. And also next year, they can be substantially grow from the current number. But I think that will also result in growth in the business momentum, because the travel predominant is for the business. Okay. Thank you very much, sir.
My follow-up question would be, sir, we have posted a very good set up number even in the Q1 and Q2. On the start And are we really having to beat our estimates of 18% to 20% growth, which we have guided in the previous call? So Ashok, right now what we've seen in Q1 and Q2, we have almost come back to the growth rates which we had traditionally. And I don't see any significant change happening in Q3. But Q3, Q4 as you're rightly saying are much larger than the quarters for them.
So the growth maintaining growth momentum is more challenging than what is in Q1 and Q2. But right now looking at the funnel and the way the margins are going, we hope to continue the growth momentum. Whether it's going to be 15%, 20% or 25%, I think we will not be in the position right now to comment on that.
Thank you. The next question is from the line of Venkat G, an individual investor. Please go ahead.
Hi, sir. Good afternoon, everybody. Sir, I first of all, thanks a lot for giving me this opportunity and congratulations on these good numbers this quarter. I'll keep short and sweet. Sir, I have gone through the data region wise revenue numbers.
We have done exceptionally well in India, APAC and India. But on the U. S. Side, the numbers have been lower compared to year on year or quarter on quarter. Can you help can you throw some light on the U.
S. Business?
Yes. Thanks, Vintak.
Thank you so much for your insights.
Growth are not at our expectation level. We're predominantly 2 reasons. Last year, I think for Q1 and Q2, we had significant jump up in quarter revenues on account of one time business, which was more on PC production program of years. So we added a substantial number in revenue in Q1 and also a follow-up substantial number in Q2. So maintaining a growth momentum over that number was a bit of a challenge.
However, on the other things, we also compensated a lot of things in terms of our work BSI initiatives are happening in U. S. And other things. And we hope to fix the issue in the coming next few quarters.
Okay. Thank you, sir. Thank you so much.
Thank you. The next question is from the line of Rahul Jain from Dollas Capital. Please go ahead.
Yes. Hi. Congratulations on strong number and congratulation for the management chair and congratulation, Jeet, on the evolution. My question is pertaining to this U. S.
As an end market. So if you could give me a broad thought process because of course, we just I guess answering to the previous question you alluded that there was a one time kind of an opportunity that we benefited from last year and now we are kind of not following on the same run rate. But if you have to draw 1 year, 2, 3 year to 5 year kind of a picture, how you see this geography shaping up? And what is the area of focus that would drive that kind of number for us?
Paul, thanks for your question. Around the way we look at U. S. Geography, we have 2 initiatives on the go to market going on there. One is we have our traditional market, which is the mid tier banks in U.
S, where we are capturing between 6 to 15 banks depending on which year we are. And that is a space of roughly around 1,000 accounts where we are going and penetrating that market. We already have around 36 banks as our customers, and that's what we are growing. Of course, last year, we as you slightly said, PPV was a one time initiative. But beyond that also last year, getting new logo acquisition was a challenge last year.
And this to an extent even this year, it's not completely opened up. It's a bit of challenge. But over 2 to 3 years horizon, we think this is our area where we can we have potential to get 20, 25, 30, even 40 accounts a year and grow that as a business. Beyond this, the segment to an investment we are doing is in the our horizontal sale of products to Global System Integrated. That's what we are investing deeply right now.
There is enough product recognition from Gartner's, Forrester's and system integrators have started recognizing. And we are forming deep relationship with few of them. And that is the reverse market we are focusing on 14,000 clients. And this will be not our traditional customer base. We have been going on peer to accounts in most of the mature markets.
This we should think of further acceleration of sales. For us to realize our long term ambition, the U. S. Has to become the primary market and has to become a significant growth driver. So in short term, we could always have higher growth rates in APAC or Middle East.
But in the 3 to 5 years for us, we expect U. S. To do much higher growth rate than 20%, 25% for us to reach the goals we have set for the company. So I expect that in next 1 year, 2 years, the U. S.
Becoming the largest growth driver for the company.
Right. If I would like to talk a little bit more on the 2 key drivers that you have identified. So first of all, when you said before I heard you as I said, you have a 1,000, odd bank in the mid tier space, which is your key target market. And we already have 30 customers and 25, 30 customers is what we can pass upon. So what could drive this client acquisition for those of us in that market?
Is it simply more foot in the ground or improved referenceability is what is going to drive it. And secondly, on the SIR side also, we have this relationship for now for a couple of years and we are seeing this all this popular effect companies are going to do well on their own BFSI revenue growth in this market. But somehow, this has not scaled up for us. So what is stopping us in this SI channel per se?
Yes. So, Adi, I'll just see on the bank side, you're absolutely right. I think the acceleration comes from 2 facts. One is if you have more responsibility and you have more penetration in banks, more you are able to sell because the it's not a single market, it's quite wide market. So you need local, especially in the mid tier banks, you need a lot of local referenceability, solutions referenceability.
So some of our acceleration will come as we become larger and larger in that market. And of course, beyond that, it's our own ability to execute on the sales and marketing side. On the SI side, there is more than the differentiability, it's about the brand, it's about the penetration into the GSI customer's client base as well as mapping up their accounts. So this is what has started yet. I think we have been very lucky to get very good wins earlier in the early stage.
We got 6, 7, 8 wins. I think we are having roughly around another 60 to 70 cases which we are pursuing with the GSI globally. And there is some amount of delays in terms of order cycles because some of their order cycles are more larger time frame than our regular cycles of 6 to 7 months. The contracting is taking much more time. But we hope that that establishes itself and once we get the initial run rate going and we should be able to address the universe much better with as there are 3 or 4 system integrators who can cover this 2,000 accounts very well for us.
So we are hoping on the banking side, the our organic model should suffice with more acceleration in sales and marketing. And on the GSI side, some amount of the brand building, some amount of getting better recognition from more GSIs and penetrating these larger accounts will help.
Right. And sorry to I have a more follow-up on that. So let me say this 2,000,000, 3,000 identified bank, I think this is the subset of some $5,000 community bank U. S. Have.
And my understanding suggests that the India centric GSI do not have a little bit penetration when it comes to these commutative banks are more in the top 100 universe. Correct me if I'm wrong on this part. So does that also mean somewhere we need to partner more domestic local service provider which can add to the momentum?
Now let me clarify. The strategy which is for the 1,000 entities on Banking and Credit Union is a direct sales strategy. We are not using the global system integrators for that. As you're right, we have no interest in that business. The Pidgit sizing will not service them.
So that is a direct sales strategy. We have already successfully executed Pidgit since we got our first 30 brands out there, and we also
Okay. Sorry. So basically you were referring to Fortune 2000 customer. I was more thinking from a 2,000 bank. Okay.
So basically, because you said this is more like an horizontal approach for you, not limited to one particular vertical. So got it. Thanks for the clarification and best of luck for the time ahead.
Thank you. Thank you, Rahul.
Thank you. The next question is from the line of Ronak Voda from OHM Advisors. Please go ahead.
Hi, sir. So how do
you see the order pipeline for the low code applications?
PFS? Yes, Ronak, thank you for your question. So Ronak's low code is a huge interest area right now globally, and it's not I think it's not a kind of a business opportunity on its own, but the kind of approach or a strategy or a product capability which most of the digital initiatives are expecting from their vendors. So products and platforms which have low code, strong low code capabilities have better chance of getting those digital initiatives. So the way we see this is a very, very globally large market, but also there is a lot of competition in this market.
With medium being very strong on the profit centric application and content centric applications and our low core capabilities end up providing a very big differentiated value to the customers. On the funnel side, all our cases are local cases for us because this has been the strategy we've been selling. Of course, it's been sold through process centric, process automation sometimes, sometimes intelligent business process management, sometimes digital process automation. The low code is a new terminology by which you are driving. So we are all our pipeline will be based on products which are low code products.
Okay. So in terms of capabilities, how do we differentiate ourselves from the other synergies? I'll throw some highlights in case if you
could give some case study for better understanding?
So I think the best one is if you visit our new website, you will understand that we have a very compelling offering for digital solutions, which are process centric and content centric. Anybody who wants to develop a digital process which is process centric and content centric, we are one of the best companies in the world today because of the inherent capabilities of our platform. And that's where we are very strong and we are able to differentiate. And then with certain verticals in banking, insurance, government, we have our history of servicing customers and the use cases makes us very compelling for customers in these segments. But lot of information is available on our website.
I would recommend that you can visit and see that.
Okay. And can you give a number of how much would currently GSI be
See See,
right now, our partners, which are including GSI, even small partners, are roughly around between 16% to 18% of the revenue with the influence. We expect that in next 5 years, this should become 50% of our revenue, while we can grow aggressively on our own. But with DSI, it can almost reach 50% of the revenue. But that would also mean that we can drive higher growth rates to that.
Okay. Thank you.
Thank you. The next question is from the line of Hina Garda from ICICI Securities. Please go ahead. Tina, your line is in the talk mode. Please go ahead.
Hi, Anna. Yes. Thank you.
Yes. Hi. Thanks for giving the opportunity. Just one question in terms of the India business. We saw strong growth during the quarter.
Are we expecting the same momentum to be covered as well or was there a one off this quarter?
Hiren, thanks for your question. Hiren, what we see in India is right now the growth which is on account of lot of penetration into Sysiq, outselling the new solutions and new products. And reaching that part of growth momentum will continue as existing accounts are giving us good business. But I think we're also expecting it supplemented by some more new local businesses which we're going to get as the markets open in India. So far the India, the government business which was for us was one of the big drivers of the sales has very, very it's completely slowed down.
We think over next 2 quarters some part of that can restore back and push. So long term, we are hopeful that India business can maintain a 20% momentum. But on short term and near term, we are not very bullish about India business, but a single digit growth or a slightly lower double digit growth is what we expect.
Okay. And just secondly on margins as well, how much do you think can we execute in this year given that the situation is normalizing and some of the costs are expected to come back? What can be not as a perfect guidance, but just if you could give us a range kind of how much do you expect?
Yes. So broadly even what we have done is we have already said that we should the business should be able to deliver at a growth trajectory. We should be able to deliver roughly around 19% to 20% net margin and between 23% to 25% EBITDA margins. I think this year, we expect to be close to those numbers. And because on the because Q1, Q2 are smaller for us.
But on Q2, we are already at close to that number and Q3, Q4 should significantly expand that. So we should be close to that. But we are right. On the cost front, some of the costs of which are more employee centric costs are going up for whole of industry. We have also taken those costs so far.
There could be a half a point or a one point difference because of that, depending on how the market
the line of Nilesh Jaydani from Envathan Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. Congratulations on the great set of numbers. So first question was on the margin profile. Just wanted to understand what is the difference in the margin profile when we do sales via GSI and then we do our direct sales?
Thanks, Mitesh. So see, margin profile is dependent on the line of product which we sell, like for our licenses, whether we sell them subscription or licenses, these are generally triggers high gross margin because there is no direct process suited with that. And on the service components, which are like our software implementation and software support, margin provides our like service company margin provides. So two parts of our business, which is the license and subscription and APS A and C, these are high gross margin business. The expectation in the GSI business is that since GSI would be doing predominantly most of the services on their own, we should be able to enhance the kind of business which is of higher margin business.
So the high gross margin business will grow faster than the service business. So the margin profile should become better. Also it depends on how the deal structures will be valued and other things. But on theoretically, the GSI business should be higher gross margin business.
Got it, got it, sir. So on PIP itself, so we expect GSI to contribute around 50% to our revenue. And we clearly mentioned that our strategy going forward will be focusing on the Fortune 2000 clients. So one clarification I wanted. So in the earlier call, you had guided that per annum, we are targeting around 5 times and per customer billing is expected to be around $300,000 So probably 60 customers per annum in next 5 years, we can add around 300 customers.
So is the funnel enough to add 300 new customers for next 5 years? In the Fortune 2000, we already have 30 in the BFSI sector and 40, 40, 20, 20 other.
But, Vijay, I think we are you are right partly because when I said it will be 50% of our revenue, I said over 5 years, we should be able to reach here. So on the Fortune 2000, right, we have organically some clients, but don't sound because they're part of our traditional business. Now we are expecting that every year, last year we were at around 6. Our target for this year is to get between 12 to 15 new logos. And next year it will grow like 30, 35 and then it will grow.
Eventually it can become in 4th, 5th year it can become 60 to 100 logos a year. That's the journey we'll advocate. And you're right on the revenue realization or per annum revenue rates could be anywhere between $300,000,000 to $700,000,000 per account. That's how it gets built up.
Got it. Got it. So continuing on the same, so today, say, we have 550 customers and our top line is around 67,301,000,000, say FY 'twenty one. So our per customer billing is approximately $12,000,000 $12,500,000 So, Sanjay, when we say we start with $300,000 revenue, by what year we can reach a substantial revenue of say, dollars 6,000,000 or 12,000,000
So I think you're talking INR12,000,000 rupee is not dollars because so Sorry, INR12,000,000. Yes, yes, rupee. So see the idea is we unfortunately we don't see that way in the same model. The way we see is that between those £14,000 and £3,000 if we get 300 accounts, each account has a potential to grow a $2,000,000 kind of an annuity between $1,000,000 to $2,000,000 We should add roughly around $250,000,000 of revenue per year to us. And then on our organic side, we said we do a bank account sales in banking, insurance, government, that should add another $200,000,000 $250,000,000 over the next 5, 6 years.
This is how we audit that. Does that answer your question?
Yes, got it. And one last question. So we have been trying to enhance the revenue on the annuity side, but in Q2, again, growth from the sale of products was, say, northwards of 55% and annuity business grew only by 17% on y o y. So again, the sale of products, so how should I read these numbers?
So I think we are in the transition. We have not shifted from license to NEP. We are still focusing on our traditional license businesses, most of the parts of which is the markets which have
got a lot of business in
terms of new sales have been the ones which have been on license these days. I think the change has started. We are getting into a more aggressive phase of changing. I think from next quarter onwards, we are going to more aggressively pursue only annuity sales. And in some time, we have decided to stop the licenses.
And that should increase the growth percentage of annuity much higher. Because right now we don't see the same rate, But you are right, by the year end, we expect the annuity part to still go at a much higher rate than the traditional growth rate. So right now there may be some differences between how the revenue is realized and from APS and other things. But at the year end, historically we have always maintained a 2% to 3% higher growth on our annuity side than our other business. And that momentum should continue.
Got it. And one last thing, so we work on the 3 platform that is ECM, other is the BPM that is low code process automation and third is the CCM that is customer communication. So today in the NuGen's top line, what would be the significant contributor amongst these 3? And what is your aspiration for these 3 segments to grow? One understanding what I have currently is that probably the VPN would be having a high margin versus the CCM and the ECM having a lower margin.
Is the understanding correct?
No, not at the margin side, but most of our business use cases are going to BPM and do have an ECM as part of already. So our 60%, 70% of our cases will be a combination of ECM, BPM combined. So on margin side, because they're both licensed products, it doesn't matter which has what margin. On other hand, we'll have another 35%, 30% cases at TCM alone. And CCM is much smaller, it's less than 10% as of now.
So all have similar margin profiles, all have similar and all have their own growth potentials. Like the GSIs, we are thinking that should substantiate the ECM sale much faster. And on the banking and our vertical director accounts, the BPM sales will continue to grow. And CPM, we are finding new markets in insurance and other use cases, which we can push to CPM sales. They are also different products.
In most of the use cases we are using, under reason 1 we are using 1 or 2 platforms together. In some cases, all 3 platforms together.
Got it. Got it. Thank you so much, sir. Those were my questions and all the best for the remaining part of the year. Thank you so much.
Thank
you, Mr. Suresh.
Thank you. The next question is from the line of Harshal Parekh from ALF Accurate Advisors Private Limited. Please go ahead.
Good evening, sir. My question was on our license business. I just wanted to understand what are the margins in our license business and in the subscription business. So are they similar kind of margin? Are they having similar kind of margin profile?
Or is there any difference in them? Vijay, thank you for the question. I think they're absolutely same. It's only the way you are able to transfer the license. Generally in license, it's more perpetual, followed by only an ATM.
But on subscription, it is more renewed every year. So you get higher annuity every year. But inherently both are right of license which is transferred to the customer, no debt cost is situated there. So their margin profile is exactly same. Only when you're selling them in cloud, you have slightly another 10%, 15% overhead as the cloud service cost.
And then the pricing accommodates that. Okay. So the realization would be higher, but the margin profile is similar? Yes. Okay.
Okay. Sir, another question with respect to the travel cost. So historically, we see we have almost 10% of our revenues as travel costs, right? So I just wanted to know what could be the travel cost going forward? I mean, it won't be reaching the 10% levels, but indicative only, what would be the travel cost as a percentage of revenues?
You see, right now in coming next 2 quarters, we don't see it doing substantially to a number where we can talk of percentages. It may remain a couple of percent. Next year, I think the market completely opens up. We can almost reach almost 50% of that earlier number. We can reduce 5% to 6% as our salary cost.
But it's very difficult to predict right now. We'll have to wait for 2 more quarters to see how it goes. Okay. Understood, sir. And sir, my last question is on the employee cost.
So if you see historically, we have around 48% to 49% of our revenue is as employee cost. So now since we are increasing our contributions in the annuity businesses, so do we see the employee cost as a percentage of revenues going downwards? Yes. As our percentage of business is just higher gross margin, which is in terms of licensing subscription growth as an overall part of the revenue, the employee cost as a percentage of our revenue should come down. It should come down.
That's a normal expectation. Okay, okay, okay, sir. That's it for my question. Thank you.
Thank you. The next question is from the line of Kunal Shah from Kannilane Capital. Please go ahead.
Hi. Thank you for the opportunity once again. I'm more to understand on the global system integration part, right? I mean, we started the business, I would say, approximately the last 2 years, right? So it could help understand right now you're working with like solutions with some integrators.
How can we scale up working with more system integrators? What plans do we have? And I mean what different do we offer to the system integrators for them to start a business with us in the 1st place and then to scale it up from there. I mean, how should we look at it, sir, if you could help a little bit more on that particular part?
Yes. So, Nal, I think it's a journey. First of all, most of the product companies, once they reach a particular size, 6, 7 years, there are a lot of success stories with them in the emerging part of the market. There are a lot of success stories within Focus, PCS, HPL, in India, Middle East, APAC. And now that they have realized this particular expertise by analysts and see our product perform, they have got the faith and credibility on the product that they are ready to take it to their customer.
That's what has taken time and that's where we are right now. On the other hand, we have established ourselves as a different sales channel which is completely a GSI based sales channel. We are now working on mapping up GSI globally, mapping up the specific user accounts across multiple GSI, not only 1, and also working a lot on the GSI and agreement side. Because at the end of the day, GSIs have to be very comfortable selling those products there. We know how to implement it, how to service it.
So a lot of investment is happening on the enablement side as well as the DSI enablement system. So why you take us to the market is we are in the interim and detailed space. We are one of the few top four, 5 companies who are They don't have to explain who NuGen is, how that recognition is there. Secondly, they have a very high degree of reliability that with NuGen, they can make the client successful. We have seen the success stories.
And third, I mentioned that we have one of the most compelling stories in the industry when it comes to content sensitive process automation using low code. We are the number 1 in the world and that's what the GSRs are realizing slowly. It will take still time to establish the brand in the market, build the credibility, have more GSIs interested in us and meet our largest funnel. And that's what we are working on right now. Does that answer your question, Anant?
Yes. To larger extent, for this, follow-up on this particular part, what basically I'm trying to understand is your I mean that the roaming system integrators would before also working with probably would be working with somebody, right. So it is like, are we a little do we have cost competitive advantage for them to shift to us? Or I mean, how should one look at that particular aspect as basically more than I'm trying to understand, sir?
You're right. Absolutely. I think we have all the partnerships with all the major and we are a company landscape with their partnerships. So 2 things you should bring to table. The GSA account on that is based on 20,000,000,000 to 50,000,000.
For them, the stakes are much higher. So they always want a partner with high degree of reliability. That's what we have built. And the second is also on the cost advantage. Since we have a very robustly integrated product suite for BPM and BPM combined, which we call the MUSEAN 1, it provides a very compelling value prop in terms of total cost of ownership.
Our speed to implement is much better, our systems are much integrated and PSIs have realized that for certain areas, which are content centric process automation, we are the best to implement.
Okay. So we will be basically taking the market share away from the existing players, if I understand that correctly.
Partly and partly the market itself is growing. The low code is open, the huge market space, digital property is working, CCM is still a fast growing area, in the market. So market is expanding and also we are entering and tracking the market in areas where the other operators use it.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. P Mehra Chuk for her closing comments.
Thank you so much. For any other queries, you can connect to me or visit our website. Thank you.
Thank you. Ladies and gentlemen, on behalf of NuGen Software Technologies Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.