Please note that this conference is being recorded. I now hand the conference over to Mr. Hardik Sambin from ICICI Securities.
Thank you and over to you, sir.
Hi, everyone. Thank you, Ayesha. Good evening, everyone and welcome to the Q1 FY 2022 results of NuGen Software Technologies Limited. I hope everyone is sleeping safe and are well. Connecting with me today from the management side is Mr.
Divakar Nible, Chairman and Managing Director Mr. Barkar Rajan, our whole time Director Mr. Virendra Jee, Senior VP, Sales and Marketing and Products Mr. Arun Kumar Gupta, Chief Financial Officer and Ms. Dvipdy Mehra Chul, Head, Investor Relations.
I now hand over the call to Ms. Dvipdy for further proceeding. Thank you and over to you, Vipti.
Thank you, Hardik. Good evening, everyone. I am Vipti, Head Investor Relations, Media and Software, and I welcome you to the Q1 FY 'twenty two financial results. I hope everyone is keeping safe. Before we move on to the discussion, let me highlight that this call may contain certain forward looking statements, which concern Muse's future business prospects and profitability, which are subject to a number of risks and uncertainties.
And the actual results could materially vary from these forward looking statements that are made. Past performance may not be indicative of the 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 on or by behalf of the company. For any further details, you may please refer to the Investor Relations section of our website. I will now hand over to Mr.
Nigam for presentation of the results, both which we will have the Q and A. Mr. Nigam?
Good evening, everyone, and thank you for joining us at our Q1 FY 2022 post results conference call. I hope you and your families are keeping safe. I'll come straight to the results. We are happy to announce a robust growth quarter. We witnessed accelerated and broad based growth in revenues and profits in this Q1.
Revenues were at INR 160 crores, witnessing a growth of 21% compared to Q1 last year. Revenues across all geographies, business growth. EMEA, which was slow last year, witnessed a growth of 57% during this quarter. APAC witnessed a growth of 45%, U. S.
And India grew at 5%. In U. S, many of the cloud digital transformation projects are back ended in nature and this would take time to reflect in revenues. As an organization, we are staying focused on tapping the growth opportunities across digital transformation in enterprises. We understand the urgent need for expediting digital transformation initiative and we are here at every step to help organizations successfully implement this.
We are a reliable and stable partner for these enterprises. We saw continued strength in demand for digital transformation initiative across various segments. Banking and Financial segment, Services, Gourmet, PSU and Healthcare were the fastest growing segments during the quarter. We won 11 new customer logos in the quarter, notably in Middle East, APAC and UK region. Some of these logos are in the process of being built currently.
Some notable success stories this quarter include inclusion of an agreement with 1 of the leading banks in the Middle East region for supply of software licenses, ATS implementation and other support related services, The total size of the project is $5,900,000 spread over 3 years. We are working with another large financial services group in Finland, which is a provider of comprehensive range of banking and insurance services for private and corporate trust. We are also undertaking a project for a federal statutory board body under the purview of Ministry of Finance in Malaysia. As the markets are opening up, we hope to maintain the growth momentum. Our differentiated capability and deep contextual knowledge creates value for our customers as well as our partners.
We are continuing our operations in a remote working environment as we prepare towards transforming to a hybrid environment moving forward. We hope an early return to normalcy, bringing employees back to office as vaccination games play games pace. We have also been supporting them in every way possible, whether it is medical and financial assistance or any other form of support. Customer success has always been our top priority. Our major focus has been on ensuring uninterrupted and quality services to our customers.
We recently concluded our 3 day virtual customer events, Fusion Connect 2021, where we interacted and engaged with the customers across multiple locations, including India, Singapore, Australia, Dubai, London, Africa and in the United States. We had sessions from the management, industry and list our customers and partners where they share their experience with NuGen and a comprehensive local platform that is recognized by the industry. It automates processes using content services and communication management capability. NutrienMUN simplifies complex enterprise by business processes and information for superior employee and customer experience. We continue to invest for growth and work together, strengthening our industry recognition and position, especially in the mature markets.
Our effort transitioning to subscription model, Even in the last conference, I've been talking about this. Our efforts continue towards transformation to more stable subscription based revenues. Our overall annuity revenue witnessed a growth of 20% during the quarter, reaching INR105 crores and contributing 66% of the revenues. Our subscription revenue witnessed a growth of 14% and yield would be INR54 crores during this quarter. SaaS revenues witnessed growth of 29%, Bio Y contributing 9% to the revenues of the organization.
As I had mentioned last quarter, this model is expected to start doing delivering revenue optimization over the next few years. We believe that in time, we would be able to transform most of our existing customers also into cloud or on premise subscription model. This transformation would lead to enhanced visibility and growth in longer term. Enhancement of product platforms. Globally successful enterprises are relying on VisionOne to rapidly develop and deploy complex, content driven and customer engaging business applications on the cloud.
VisionOne is a leadership unified low code platform for complex, content driven business applications delivering modern customer experience. These proven industry products have been built over time and cover that wide areas of content services, process automation and customer engagement. We continue to make our products more intuitive, robust and comprehensive. We received 2 additional patent grants during the quarter, taking our total patent grants to 20 in India and the U. S.
We were granted patent for invention entitled Online Collaborative Signing of Documents and Methods and Systems for Managing and Archiving Electronic Messages. These patents are part of our core areas of content management, enhancing our product capability. We have been consistently recognized by leading industry analysts over the years. We are happy to share that during the quarter, we have been positioned as strong performer in Polyester's Wave for Content Platforms Q2 twenty twenty one. Building powerful new gen brands and enhancing marketing and sales organization.
This has been our continuous endeavor. We are targeting to invest across growth opportunities this year, including strengthening the fee, enhancement of our branding and digital business. During the quarter, R and D expenses comprised about 11% of sales and sales and marketing expenses comprised 20%. We have enhanced our system leadership through exemplary cases and such as stories along with our partners in target markets of North America, Europe and Air Canada. We are targeting Fortune 2,000 employees enterprises through these partnerships with system integrator.
We continue to build acceptance from some of the largest players and their largest customers have chosen our platforms. And these system integrators have implemented these solutions successfully. Profit and margin, our EBITDA was up by 46% by OY at INR 22.8 crores and profit after tax was up 137% by OIBDA at INR21.6 crores. Net cash generation from operating activities was 52 crores. As we continue to work on our better days, our net trade receivables have been reducing and were between INR192 crores at the end of the quarter, which resulted in a DSO 100 days on the back of robust sales and collection.
We continue to strengthen our balance sheet and cash position and are now ready to make deep investments on various fronts across technology, sales and marketing for long term growth. We will remain agile to address the challenges of current environment and drive consistent and cash with growth over the medium to long. That's all from me. We are now open for Q and A.
The first question is from the line of Mr. Hadid Samhir from ICBC Securities. Please go ahead.
Hi, Agid. So, just a couple of questions. So, particularly within U. S. Geography, so just wanted to know, have the spends been normalized towards software implementation and deployment, especially across medium small to medium I think credit union and how are they approaching low code software platforms now?
Is there any particular change in their approach towards implementing the system? Secondly, last year in FY 2021, our travel expenses would have been hardly 1% to 2%, which in normal course is around 8% to 10%. So as developed economies open, how do we see this expense line item going forward? Mr. Nigam earlier alluded to hybrid work environment, if you can throw some more light on it.
And in the earlier quarter, you would have mentioned that particularly our India business would decrease from second half onwards in this year. So is there any material update on the sales? I have further questions and I'll come back in the follow-up. Thank you.
Hardik, thank you for asking these questions. So I'll just try to cover and if I understood right, just you can tell me if I got it right. So about the U. S. Banking and our credit unions out there, I think as you understand that we are pursuing direct go to market out there.
We are targeting these roughly around 1200 institutes, which is banking, with their banks and credit unions. We are going solution focused out there and one of our differentiator is That has been one of the differentiating and we are still going strong with that. Our implementation cycles out there have reduced from 2 years back what used to take around 8 months, we have come to 3 months to 3 to 4 months depending on kind of the solution. So that has surely helped our cycles and our more and more customers are getting live and they are becoming referenceable. So that's what I understood from your first question.
I'll cover the rest. On the travel expenses, you're right. So travel expenses last year, there's a small part of they had come substantially down. So far, for the 1st two quarters of this year, we expect the travel momentum to remain as the same as last year. We don't see any substantial increase.
But we do expect in Q3 and Q4, there's going to be incremental travel happening. Having said that, I don't think in any time in future, in next 2, 3 years, we'll be able to reach the travel volumes which used to do because fundamentally the behavior of this business also has changed. And a lot of things which we have to do on-site now is happening easily remotely, right from sales cycles to execution cycles to integration. So that amount of operating advantage will anyway be always in the business now and that will reflect in some amount of gain in margins, which you have seen also previously. On the growth, as Mr.
Nigam said earlier that the growth is broad based, we are finding in spite of still the, what you call, restrictions due to COVID on travel, we are still finding lot of interest in cases. EMEA has recovered and that's come back strongly. APAC has continued its growth momentum in spite of the COVID situation not being great out there. U. S, we have strong funnel, but we did have some amount of slowdown in some amount of deal conversion.
So we expect that momentum to keep happening and close more deals. So our growth in U. S. And India were more muted right now around 5%. But I think India is generally we have said India on the Q1 we have been able to hardly do any business on the new logo side.
But on the U. S. Side, it is more to do with decrement of the revenue, which is slightly back ended because of the cloud based sales and cloud based implementations. And on the India side, you're right, I think we had earlier said that India, we are not still feeling that it can come to a 20% growth. We are hopeful that over next few quarters as things of COVID stabilize in India, we should be able to push the growth rates higher than the current rates.
But it is still a story which is unfolding. Harbin, does it answer your question?
Because there were many and Yes, yes. It answers my question.
The next question is from the line of Donika Voda from AUM and Payside. Please go ahead.
Hello, sir. The first question was and I think you answered this in the past. So what is specific about the company's business, which causes such a large seasonal change for the Q1 relative to the last quarter? Doesn't look like you have that many government kind of contracts, etcetera. But just don't mind explaining why is there such a big variation where normally in the technology services industry, we don't see such a variation?
Thank you for asking that. You're absolutely right. And so the only difference what you'll receive, we are a company still where a large part of revenue is license sales revenue. And if you look at any company which is doing the license sales revenue, there is a natural lopsided net, it gets aligned to the financial year, either of your customer financial years or your own financial years. That makes Q4 and Q3 slightly larger quarters for us.
And it has been historic, it has been for last 10 years. In fact, Q1 has been hardly ever we have been able to deliver any margins in Q1, where all the margins are unfolded in Q3 and Q4. As we have started shifting to subscription cloud and more sales in mature markets and going from the traditional markets, we have seen this logistics reducing. And with more and more subscription business and annuity business becoming a larger part of it, today the subscription and annuity overall becomes roughly around what around yes, so the 33 subscription and then with more ATS added. So around 60% of our business is more what we call recurring business.
So as this business moves to 75% to 80%, you will see that loss of business further reducing. And we are also doing aggressive shifting more and more macro markets. We are going only for subscription sales rather than the Jersey license sales. And we have made an internal plan in next couple of years, we should be able to smoothen out further. But this is the history of this company, this is the business model.
And if you look at historical sales, we have the smallest quarter as in the Q1 because we have very few licenses out there in Q1 compared to the Q3 and Q4 licensing. I hope that answers your question, Pritesh.
Yes. No,
it does. Thanks, I think we'll just look at the numbers and maybe follow-up if there's something. The second question was more in this context of this market, this light cold or low cold environment that it doesn't require that much detailed codification of the kind of solution. So it can give us some sense as to which is the strongest target side of the market that you are looking at with your solution. So how large is the market?
What is your current kind of share over there? How do you see that scaling up? And you mentioned your partner who's helping you kind of access that market. So how do you see working with them and in terms of both as well as economics, how do you really be sharing the revenues, etcetera?
Yes. So if you look at the area of low code is very wide. So enterprises globally are looking at when they are looking at their digital transformation cases, they are evaluating low code products and platforms to make sure that they follow very agile and a quick way of getting their solutions out to the market. So the horizontal market space for the low code is very, very wide. Traditionally, we start from the business process management market and content management market, which is roughly another $28,000,000,000 industry.
With digital and low code, they have not been very accurately estimated, but people estimate this could be a very, very wide market. So the market for us is we are dealing in the market wherever customers are looking at complex processes with complex content needs, because these are our 2 very, very strong areas. We have traditionally been very strong in doing very complex business processes and we are one of the leading companies in the world on content management. So where our customers' digital projects or transformation projects need these two technologies, we end up being very, very strong. So this is across all industries, across all markets.
And with the Global System Integrators, the initiatives which you have done, they have seen that these our products and technologies provide a great differentiation or great value prop to the customers when they take it. So it's very difficult to estimate the market size. Right now, I think we are not in also the shape of calling that we have a significant percentage of that share. This is a growing market. More and more customers globally are seeking to get low code.
So maybe in 1 or 2 years, we'll have more accurate sizes and estimates of the market. Does that answer your question?
I had a couple of maybe follow-up clarifications if you could help us. So this market that you're targeting, local, how is it sold? Is it more or less sold as a SaaS or is it like a license or how do you purchase a selling model over there?
So it's typically all these low code platforms are sold now in subscription model. So whether it's an interim subscription or a cloud based sales, both models exist. So lesser of licensing, but more of is
it sold is it sold by them and they do the other kind of integration services of your license? Or is it something that is sold on the strength of your product and they are acting more like a sales agent? So if the customer is paying INR 100 for a combined kind of solution, what part of that accrues to you and how much does how much accrues to the GSI?
Yes. So generally, this initiative which we are doing with Global System Integrators, we are doing with multiple of 3 and 4 of them. So we are approaching Fortune 2000 is on a target basis because these KSI have enrolled from those customers. The idea is for us, we still as a product principle have to do the platform sales. So we go along with the GSI and sell it to the customers.
And GSI becomes our implementation partner because of the fact that they have seen successes over the last 5, 7 years with us using our platforms. For them, the revenue can be multiple times because the revenue comes from all the services along with the product as well as global rollouts. While our product licenses can be anywhere between 500 ks to 1,000,000 to 2,000,000, they could have a multimillion dollar service teams build over years around that. So they are this is they are just not reseller. They are the ones who provide the solution.
They are the ones who implement this product. We are the ones who will able to sell the license and sell our product out.
That you would do for these clients, is it like you have a standard code and you just provide the interface to the customer who the next is based on a cloud? Or is that a reasonable amount of customization that you provide?
So what are the user platforms which have got all the ways of building systems over them. People can customize, configure these products, integrate these with their ecosystem, what a global system integrator would do as services and then roll them out. So these are single software platforms, which same platform is sold to everybody. So the platform does not change, but the platform provides you framework to
The next question is from the line of Deepak Poddar from Sophia Capital. Please go ahead.
Yes. Thank you very much. So just wanted to understand if you kind of given any kind of guidance for this year in terms of growth and margins?
Yes, that's
it from us. Thank you.
Deepak, we don't provide any guidances. And we have the only thing we are saying that we have been maintaining a historical growth rate of around 20% for many, apart from this COVID last 5 quarters, which have changed that. And our first aim is right now to come back quickly to that as soon as the market starts devising or even in the current state, if it became stable. So those are the plans. Q1, we have delivered more than 20% growth.
In fact, on constant currency, they're more than 23% growth, which gives us quite confidence that we can carry some momentum for the whole year. Now but I think it's too early days right now to give a guidance on that. We expect this year to be a growth. That's the whole idea. This has to be a growth year for us,
when we should be
able to come back to our growth momentum.
And in terms of margin?
Yes. So I think we have discussed this margin issue many times following. So last year margins are unsustainable because there were a lot of costs which could not be incurred in terms of optimization, travel, manpower, SG and A costs. Going forward, we have always said that we should be expecting to be having around 23% to 25% EBITDA margins and roughly around 19% to 20 margins and we should be able to reach them in short period of time and sustain them.
Thank you. The next question is from the line of Rajesh Butadi from Alpacific. Please go ahead.
Good afternoon, sir. Sir, is it possible for you to give a little bit more color in terms of the new clients win? For example, last quarter, you won the one of the largest fund globally? That's question number 1. 2nd question is, over a period of say 2 years, 3 years, how should we see the breakup between annuity revenue and subscription revenue?
And the third question is, if it is possible for you to briefly highlight how the subscription model works? Thank you.
Yes. So Rajesh, thanks for the question. On the new clients, we have roughly around RMB 11,000,000 and they were spread across places. And some of them we also had very, very large deals from financials issued in Middle East. We had some interesting wins in banking and insurance in APAC.
We have also some interesting win coming out of India. So we had a very interesting win coming in Europe through a global system integrator, a large group of banks, I think, Finland. Yes, it was Finland. So these are broad based wins. So and these then do reflect the kind of it is predominantly businesses in Banking, Insurance, Financial Services, Government and some Enterprise.
On the 2 to 3 year kind of horizon, so what happens is we are strongly focusing on growing the subscription and the cloud revenue part of it. In fact, most of the natural markets, 90% of our sales will be pushed through a subscription based model. So we expect that the percentage of this revenue will considerably grow in the next 2 to 3 years as because they've been compounding revenue. It may be difficult to project exactly the numbers, but maybe we can then if you contact Vipsy, like she can give you more details on what's going to happen. All cloud and subscription sales are sold predominantly in a consumption based model.
So for us, the most obvious consumption is PUTM per user per month. So customers end up buying this platform and depending on their usage, they end up, say, contracting for 100 users or 500 users or 1000 users. And we charge somewhere anywhere between $50, dollars 60 per user per month to $180 depending on the kind of components they are consuming. Does that answer your question, Harish?
So basically, as you move from annuity to cloud, your margins basically would improve?
Yes. So I think no, I think what happens is cloud, so basically we are trying to move from license to subscription. So both are mechanisms of license sales, so their margin profiles are same, but the revenue realization is very different. The revenue utilization in license is upfront, so it is jerky. But on subscription, it is more smoothened out.
As customers start using and consuming, it's more like a rental, so you start paying. So but on the what you call the margin profile, they are the same. In cloud, customer is using the same subscription license on cloud, then our costs are roughly around 10%, 15%. So the margin profile is slightly lesser than the license, but it's still a very high gross margin business.
Understood. So basically, just trying to understand your business model. In your annuity business, basically, so one is
your license, whatever number of license
you sell, that is 1 revenue. 2nd is the maintenance, AMC kind of revenue and that gets featured into annuity, am I right?
Yes, you're right. So once
you have the subscription revenue, whether that part also would have AMC and that will also reflect part of the annuity revenue?
Exactly. So subscription, cloud, AMC all reflect in the annuity part.
It. Okay. Subscription also reflects in annuity. Understood. So basically license revenue will reduce and subscription revenue will increase?
Exactly. So the license revenue may become stable or reduced, but we'll start pushing and making sure that all those things start coming more and more in subscription.
Got it. Thanks. I'll come back in queue. Sure.
Thank you. The next question is from the line of MG Puranik from Renown Securities. Please go ahead.
I have a question on the low code software. That's different. Low code software is built on an agile factory model. So we'll have large number of apps that are built, the APIs that are built. And the idea is to reduce complexity and simplify the whole process of software development.
And it expands market and user base. And it also creates scale economies. So in the process, what happens is you're expanding market in a big way. The process of software development expands faster because you are able to create software in much lesser time, maybe 1 is to 5, 1 is to 10. So how does that get reflected in your P and L balance sheet, in your P and L portfolios?
And also the TAM, the total addressable market, will it expand by 5 times, 10 times, will it be a big market expansion? So these are the couple of questions. Also, I want to understand how what kind of complexity you face in enterprise integration?
Okay. Yes. So I'll just try to answer and let me know if it's okay. So So I'll come to market size first. As we have said, low code is very horizontal, so it's opening up the market.
The market is opening up is all digital initiatives happening in enterprises do seek low code intervention. Now the digital landscape could be a $200,000,000,000 market and this could be a part of it, it could be 10% or 50%, we don't know right now. I think but you're right, our addressable market, which has been typically around content management, process management becomes very, very wide. Rather than those areas, we end up entering the digital transformation market of portals, channels, mobility everywhere. So that does open our market size considerably on that.
I wonder the other question about what the platform does and how it sits. So low code is a new terminology, but if you look at traditionally, most of us in this industry as a product play, we have been looking at various technologies, which typically make whole engineering cycles very participative, where business can participate, very visual. So you have already technologies which are about modeling, which are about quick integrations, which are about more of a visvic, what you see, what you will give in terms of UI interfaces. So low code is a combination of many, many technologies. Of course, integration is very important in low code.
So most of us are all low code platforms are very, very strong on the integration side, whether they are in built ready made adapters or they provide frameworks to integrate. So these are established areas. I think I would recommend that probably if you can look at Gartner's and Forrester's reports on LCAP and local, we will get much more detail about the overall market size, the region play, our strengths with our competition and where we can play and also about how integration plays in that. So, N. J, does it did I leave any part of your question?
And how quick is the software development process?
It's becoming difficult, but I got the last question. Let me try to answer that. Generally, what happens in low code, the spectrum, you could and these enterprises could have an overnight need of launching a particular survey. So you could do something in 24 hours. And you may be trying to reimagine your insurance for claims process, which could take months.
But broadly, the idea of low code is that you should be able to convince it substantially. You should be able to respond to customers and markets and competition at a speed which is acceptable. So most of the things which we do with our customers do span around few months to, let's say, 6 weeks, 8 weeks to 6 months. That is the kind of area we work on.
And with the progress of simplifying complexity, how good is that? Is it does it clearly do that?
I think it's very, very effective. That's where customers and globally, they will support that. And I think I would recommend that if you can go and have a look at the global LCAP market and how the complexity is, because they're very large technical area, this may not be the right form to talk about that.
Okay. I'm trying to understand, Ram.
It's the users, the non tech users, particularly when they are using a software, will they be able to use it with E?
Yes. They
will not expand it
and they told letters on market.
Sure, sure. It's very participative, so they're able to use. Use.
Thank you. Thank you. Thank you. The next question is from the line of Mayank Makar from IRAS Fencamp Private Limited. Please go ahead.
Hello. Firstly, I want to ask there is a very high other income this quarter. Why is the reason for that? And secondly, with respect to local platform, typically, what are the competitors that you think globally you have? Because primarily, most of your sales are to global customers rather than to Indian customers.
And whether the technology in itself is very replicable kind of technology, that means that any other software company can replicate the platform in whichever manner possible or is there something unique that is provided by NuGen?
Okay. So I'll take the low code issue. The global low code where the competition for us is pretty companies you heard about companies like Appian, Pega and then there are companies also like ServiceNow, OutSystems. These are the companies who play strongly in the global low code. Now the entry barrier for any new company to enter this is very, very high because if you look at any horizontal product play, you only see companies who have invested in that technology for at least 15, 20 years.
So most of the other companies you see in this competition, we are the companies who have started somewhere around 20 years back and are now recognized in these areas. So Muzen is one of those companies where we have spent, whether we call it, BPM, low code or any other name comes in the future. But the core underlying technology stack is what we have built over 20, 25 years. So there's a huge energy level barrier. So it's not so if a company starts today trying to enter this area, I think we'll take this 15 years before we see their name being recognized in the market.
So product companies have a huge entry variance. On the higher other income, I think I'll ask Arun to answer that.
Yes. Hi. So high other income is on basically on account of the forward cover, which we have taken in the current quarter. And this is basically the mark to market gain, which we have recognized in the other income. So the increase is on account of that for the future contracts, which we have already contracted to Lin vanilla forward.
Thank you.
Thank you.
The next question is from the line of Hardik Samini from ICICI Securities. Please go ahead.
Hi, Agin. So a couple of questions. So in terms of the relative supply side issues which are coming up in mainly in the software development or IT services market, so how are we seeing those trends And any major hikes or payouts which we are planning to give in this particular year? And secondly, in terms of the DSI leads that you were talking about, so earlier you would have mentioned we have approximately 40 new cases. So how has been the conversations around closures or any major conversions which can potentially happen in the next couple of quarters?
Thanks.
Yes, Hardik, thanks. So on the supply side, we saw the whole industry, we don't see the commentary from all the companies. There's a supply side issue in terms of cost of people and there is higher attrition rate. We are also finding our set of challenges out there and we have taken a series of steps to control them. We have in fact earlier, we had discovered some challenges earlier in last November only we had revised and given a substantial increment to our people.
We have also done increments for many people in Apprend. And I think we are now also contemplating that there will be some improvements happening in this quarter as well for a large part of our people. So there are going to be supply and we are looking at various studies to address it. I think we believe that in next two quarters it will stabilize. But right now, yes, on the supply side of the social is an issue.
On the GSI funnel, had given some indicative numbers last time. I think that funnel has grown by another 10%, 15% in the quarter. We do see positive growth and momentum in that funnel. But right now, the funnel prices are not such large that we can predict make exact predictions about that. Sorry, last quarter, we got one very important deal in Europe through one of the largest ASI.
This quarter, we are expecting to close at least more than 3, 4 deals. And let's see in terms of because right now, the funnel is not that large that we can do exact prediction. But we do expect this year to close around more than 10, 15 deals on the GSI front.
And just another last question from my side. So earlier in the opening remarks, Mr. Nengam mentioned increased investments in R and D and product development and sales of onshoring in the developed economy. So if you can provide some further comments around exactly if any specific commentary around where exactly you will be making those investments?
Yes. So I think investments we are I think we are always in that quarter, but I think one of the primary investments we are doing is all around natural market, which is either in U. S, Europe, Australia. And we have done substantial investments and we are looking at opportunities in investing in marketing out there, in product management and also expanding the sales teams out there. So this is a continuous one.
And over next few quarters, we are even thinking of accelerating it further. So that's the area. And most of the investments on the products and all are already in place. We will continue doing those over the next 2, 3 years. But on the sales and marketing side, we'll be slightly more aggressive in coming couple of years and but they will be predominantly in mature the mature markets.
And in that also predominantly in U. S. And Europe.
Okay, okay. Got it. Got it.
Thank you, Deep. That's it from my side.
Thank you, Hardik.
The next
Actually, I need to ask you about that future vision and expansion of company further for 5 years like that.
Yes. So it's okay. So it's about future vision and expansion what we are doing?
Yes, sorry.
Bharat, I think here
Actually, I need to ask an
expansion plan where the visions looks like further like?
Yes. So on the expansion side, we have as you know that we have built this company from India, Middle East, Africa and APAC. And last 4, 5 years, we have started investing in mature markets. So most of our goals around next 5 years are around expansion in
virtual market.
And there are 2 strategies we are focusing on. In certain core verticals like banking and financial services, we are going direct and having large dozens of direct sales team. But other most important driver also for us and being the global partner ecosystem and building most of the product companies beyond a size of $100,000,000
to $200,000,000
do grow strongly through a partner ecosystem. And that's what we are investing in. And we hope that in next 4
quarters Is there any equation plan you are planning for the future like?
Yes. So we don't have we have not finalized any plans on that. Once we have any plans on that, we'll surely come back to that. But right now, our own market and market opportunity is quite big. We are aggressively focusing on tapping into that.
And with the Global System Integrator growing traction and we're trying to position to larger Fortune 2,000 companies, I think our work for next 4, 5 years is quite chalked out and that's where we are trying to invest. So we hope that in next 4, 5 years, around 70% of our revenue starts coming from mature markets and rest 30% from the emerging markets.
Yes, that's great. Yes, okay.
Thank you. Thank you. Thank you. The next question is from the line of MG Durrani from Enam Securities.
You talked about Credit Union as a large market opportunity. What's your go to market strategy? What kind of partnerships you have? And how do you make it work? It's a large market.
And this small size each petit union may not be very large account, but smaller accounts. But there will be large number of smaller accounts. So how do you reach that
those who are
the partners?
Yes. So as I said, when we are talking of current unions, we were talking specifically about U. S. Financial market, which is typically banks and credit unions.
I understand that.
We target banks with somewhere around asset sizes of $2,000,000,000 to $50,000,000,000 and then credit unions also which have asset size about RMB 1,000,000,000 all the way up to RMB 52,000,000. They're all
Can you give some name of the semiconductors who would have been?
So let me first try to explain. So there are roughly around I can write around 300 sub credit unions who fall in that and roughly around 900 such banks. This out there, our go to market is very direct. We have already 30 to 40 customers of such
a way.
We have solutions in the areas of commercial lending, retail, digital onboarding, we are selling these directly to use through our direct sales presence out there. Our alliances are the Alliance Ecosystems. The Alliance Ecosystems could be the cornerstones of the world, the digital signing players, the core banking guys, FI server and also we have a lot of alliances, there are 40 ecosystems which we have built. But these alliances are not the sales alliances out there. They are the ecosystem for getting the system ready for that market.
Our sales out there is quite direct.
Does that answer your question?
No. But how do you motivate these guys? Because I've seen a lot of companies build partnerships. But motivating them to do deals, because it's sometimes it's too small a deal for them. But how do you
So again,
let me repeat myself, we don't have partners. This market is direct for us. For partners, we are only targeting Fortune 2,000 companies. That's a separate segment. This market of 1200 accounts is through my direct segment
because the deal
sizes out there are varying between anywhere between 200, 300,000 dollars 300,000 or around 500,000 dollars So it is not very lucrative for partner ecosystem play. But for our direct ecosystem, once we enter the account, we have more solutions to sell. So it's a direct sales strategy for us.
Okay. So what are the other solutions you will have, multiple solutions you have?
We do a lot of in lending, we do a lot of things, both in commercial and retail side. We have solutions in cash, we have solutions in digital onboarding with a very interesting use case out there, digital origination, opening of accounts.
So that came across
the account of $1,000,000
The potential of these accounts can grow up to an annuity of $600,000,000 to $800,000,000 less than $1,000,000 because they're not really with larger banks. But that's the potential. They don't have a potential to grow up to a $2,000,000 kind of an entity. I think I would say that they have a potential to grow around like 800,000,000,000,000
And you said the 30, 40 accounts have come through this channel?
Yes, yes. We already have directly, we have already broken into U. S. We have got overall around 75 customers with 30, 40 of these banks and credit unions over last 3 years.
So every year, a couple
of 100 accounts can come into your city?
The potential to get around 60, 70 accounts is there. Today, we are targeting roughly around 15, 20. And over a few years, we'll have to grow to that number.
And these are all subscription account, cloud size subscription accounts.
These are all cloud based subscription accounts.
Cloud based subscription accounts. When you say $600,000 revenue per account, that means over a lifetime of the project or the annual you're talking about?
I'm talking of basically the first order can be around 600 ks, which is around 300 ks of annual subscription. Then once you sell more solutions, then the overall annuity pie can go.
And the NVP can go again back to 300,000.
Yes, can keep on growing as you have more savings. Okay.
Thank you.
Thank you.
The next question is from the line of Zana Pohra from AUM Advisors. Please go ahead.
Hello again, sir. A question, I think, I'm sorry, we couldn't hear you too well. The customer the competitors that you mentioned, ServiceNow is one name we caught. What was the other name
is, if you could just speak a little bit slowly, sir? Appian Software.
Appian, is it? Appian. APPIN, okay. APPIN, yes.
Pega Systems.
Sorry, again please.
Pega. Pega,
okay. Pega, okay.
Pega Systems. And there are also horizontal completely low code, which is called Mendix and OutSystems.
Mendix, m e n d I x?
Mendix and OutSystems.
Out, o u t?
Okay. Outsystems. Okay. So one question maybe for the CFO, the balance sheet we saw, I understand, I understand the business of Advance customers or billings of about INR104 crore last year. Not sure we understood what it meant and the services model which has this as a feature.
So could you clarify exactly what are you referring to because it's becoming difficult to understand?
Line item on the balance sheet, you said advance from customers and billings of about INR 104 crores.
Advance from customers and billings.
On customer, yes. Is there something which you could this is what we got from the balance sheet? Just wanted to understand what that meant.
I'm sorry, we are not able to pinpoint on that.
Are you talking about deferred revenue? Okay.
That's yes, deferred revenue, yes. So how does that work, if you could explain, please?
Okay. So deferred revenue is basically when we are billing, for example, for annual maintenance contracts. So there I think we are billing for a 1 year period and whatever period falls in the next year or next quarter, accordingly that revenue is shown as deferred. So this is a good chunk of the deferred is basically majorly on account of this annual maintenance contract. And some amount of even that billing, where it is a period again.
The cash comes to you upfront, is it?
Yes, cash comes to us upfront. As soon as we bill, according to the payment plan, cash comes to us.
Okay. And that's why I should have. Okay, fair enough. That was fine. And second thing, I think you had some margin money of INR 30 crores as well.
Is this for performance guarantee or something like that for your solutions?
Which line item you are talking over that you
can expect this about? 30 crores.
30 crores, yes. And maybe you can take that offline now. I understand if it's okay.
You can come back with the question. Yes.
Yes. Yes. With Dixie on the email ID and she can speak.
Yes. Thank you.
Thank you. That was the last one. I would now like to hand the conference over to the management for closing comments.
Thank you so much for joining us for the call. For any other questions, you can connect to me or you can look at our website. Thank you.
Thank you. On behalf of ICIC Securities, that concludes this conference. Thank you everyone for joining us and you may now disconnect your