Concall Transcript
Concall Audio
Management Commentary
When I stay look back, it is the journey of four years ago that we started on digital, digital suited us the best, because we are about large projects, we are about product, we are about solutions. As you know Majesco is one example of that, which was separated, but Mastek continues its journey as a digital transformation company. And to add to it, sales engine that we now have got through Evosys, which is booking large number of customers for us. This year we booked almost 160 customers and all of them are actually candidates for digital transformation if we choose to, which is where Mastek will come. So, the synergy of Evosys and Mastek is also another component of the growth apart from the growth in our base business of Mastek in digital transformation and Evosys in terms of Oracle ERP, HCM and SCM.
So, with that in mind, what we really want to focus now on next year’s growth. We had a very fruitful quarter where we have a three-year plan, which we have worked on. And given that we are completely focused on digital cloud space, we look it with a great promise because we are in a space which is growing the fastest. We do not do much of the old legacy jobs whose growth rate, as you know is not very high.
Growth Drivers
- I understand eVosys is bringing in lot of leads (Cross selling ) to Mastek core digital transformation business
- Completely focused on digital cloud space (not interested in legacy jobs)
- Our order booking, though we do not share it but just to give you a degree of magnitude, grew almost 90% year-on-year in the geography. And that’s what gave us a degree of revenue growth as well.
- BOPUS, Buy Online Pick Up in Store, has moved further into the touchless experience space which means that our need to deliver bespoke application on top of the digital or the retail infrastructure that is out there, is needed.
- Our head count stood at 3,792 at the end of March 2021. We added 190 resources during the quarter.
Achievements in FY21
- We signed our first £25 million deal with one of the existing customers. It’s a three-year deal with an ability to move it to 5+ years under extension clause that we have, which gives you a sense of around $35 million-plus as a deal opportunity.
- We also signed a new logo in the financial year, which was on a quarter-on-quarter basis, very tactical support and by the end of the financial year we were able to convince them for a long term engagement and it became our fastest £10 million engagement, from 0 to £10 million in a space of six months
- We also opened our first logo in the local government space, as most of you know that, through our Evosys engine, we have got a meaningful presence in the local government and we were trying to do that in the cross-sell and co-sell mode (I think this is HMRC contract HMRC awards £10m deal to support customs and border services | PublicTechnology.net )
- 3-year multi-million dollar deal signed to provide secure National Biometrics Exchange, Integration & DNA Services to the UK’s Home Office (£25 Mil)
- A special mention reserved to our healthcare customers in UK, essentially in the NHS space ( Panoply secures two separate contracts in partnership with Mastek | Sharecast.com )
- Became a digital transformation partner for a financial services customer of Japanese origin, operating in UK for a very long time. And they have necessarily wanted to partner with us in the digital space of bringing the digital apps in their landscape to address their customer (Deal size is not shared, from the tone of Mr Abhishek it sounds like not a big deal to shout )
- US business - which recorded a record number of new logos that came in this year, 13 of which 10 of them were in the non- retail sector
- During the quarter, we added 45 new customers, 10 customers of them have $1 billion-plus revenue in dollar terms which keeps us excited seeing the potential to further mine those accounts.
- UK geography continued to maintain its growth trajectory and delivered 11% growth quarter-on quarter in constant currency terms
Growth Levers
It is great satisfaction to me also that over last year we have built capabilities to get into this growth mode for the next three years
- We have added enough people in leadership
- We have added enough people in terms of skill sets and we would be adding sufficient capabilities as we move forward in terms of acquisitions that we would have as we move forward
- The three-year plan identifies the acquisition areas that we want to get into. We have a complete clarity what we want to do in-house and what we want to acquire, and we want to move with that as a charter to move ahead. And most important part is that, as we are focused on the growth charter, we are not letting up on our other standards that we have always lived which is about high corporate governance, transparency, and other standards that all of you value very much. So, I would stop here with a great satisfaction and a hope to move forward Mastek into the next year’s growth and next three years growth.
- Am happy to report that we have now landed our private sector Head of Sales. He joined us in early part of April. We have further solidified the leadership as Ashank alluded by having a Head of Delivery in UK joining us. He will have a dual responsibility of managing the geography as well as holding into the larger global Head of Delivery that joined us in the month of January.
- And continued investment in the capability and sales coverage is the mantra on which we are focusing on. Cloud capability and cloud space is at the forefront. AWS and Azure are according to us the opportunity to grow our business in both public and private sector space. And hence the sales coverage, continued investment in the sales coverage. Vertical capabilities are also our focus. We have figured out what our sweet spot are, which are the enterprise customers, which vertical should we focus on. Hence our ability to build capability in that space continues to be invested upon.
eVosys
Four segments that would drive our business.
- North America
Clearly is the largest market for Oracle and hence also the largest growth market for us. Our current market share is quite small and therefore the headroom that we have is phenomenal. This year we continued investing in North America, we had doubled our sales force last year and we continue to grow our sales force this year in going forward. And we are now starting to see a significant impact of that change in our business. We, this year closed our order booking in North America literally grew by more than 120% as compared to last year. And also, the number of new customers that we are acquiring are much more sizable, much more bigger and we are moving to the up-market kind of customer base that we are focusing on. While we are growing in North America in general, but the growth in North America is also very targeted to two key verticals that we really want to establish ourselves in that market. These verticals are healthcare and life sciences and manufacturing and retail. 35% of our business in North America this year came in healthcare and life sciences and around 25% came in manufacturing and retail. So, as
you can see while the North America business is where our real focus is in terms of growth, it is also super specialized in terms of the area that we really think we will be able to build a significant brand for ourselves and continue to grow there. I think this focus and attention that we have in Oracle cloud, but again a super specialized through key verticals that we think we will be able to build a significant brand and value for ourselves in, is allowing us to deliver results in that market.
- SAP Compete
The second key area focus for us is going to be the SAP Compete market that we are really aggressively going after. As I had mentioned in few of the earlier calls also, it’s a brilliant market for us because given our size and focus on Oracle, it literally makes us one of the only partners who is focusing on SAP Compete. Because most of the others in our size also run an SAP Practice and hence are not able to go after a Compete to the SAP business. And as you could also see from the notes that Oracle themselves are sending out, SAP Compete is becoming a significant market that Oracle is also planning to go after and trying to gain. And I think within that space we are really creating a strong name for ourselves. In fact, in the last two quarters, we have closed five really marquee customers, either winning them against SAP S/4HANA and in fact, out of the five, two customers were such who were using SAP-ECC as their legacy application. So, this continues to be the second big foray. It is also a market that is going to allow us to move a significantly forward in the UK and Europe region. It is a strong foothold of SAP. But I think our intentions and ambitions are to spearhead this Compete
- Managed services on cloud applications
As the cloud application business or the implementation business matures, more and more customers have now migrated towards Oracle cloud applications and that population continues to grow all the time. While some of them chose large 4-5 consulting firms for their initial implementations, as they turn towards managed services, their expectation of delivering output and value is growing. This is where niche specialized partners like us have really become important. That continues to become our next key focus of business, wherein we want to grow our business on managed services, not only converting or creating managed services on cloud applications for our install-based customers, but also competing and winning customers who had been implemented by other large consulting firms. This year also marked some really important deals in that segment with close of our largest managed services transactions this year in that
space. The managed services space is also very complimentary to the Mastek Evosys combination that we go after, because now we are not only a partner that can offer services around Oracle cloud applications, but with the combined team we can actually cover a much larger breadth of services looking at various technology platforms right from integration to cloud migration to DevSecOps, etc. So, that continues to be a key focus of our business. We had really
good growth in that segment and our intentions and ambitions are to grow our business or reputable revenue coming out of managed services by at least 10 points higher than where it is in terms of percentages.
- Co-sell and cross sell
The key essence of the transaction where we are really focused on trying to grow that business. This year has been a year wherein we had looked at various aspects of cross-sell and co-sell. We have tried various combinations that has been a year that has given us a lot of earnings in terms of what is going to work, what will require more enhancements and how do we sharpen our proposition. Very interestingly, we have identified very important key
propositions that we think are successful and we know where our target markets are, managed services being one that I already spoke about.
The other important aspect that we have already learned is going to be the combination of ecommerce plus Oracle CRM, and then the back-office ERP along with it. Very happy to report that we have closed multiple transactions working with Oracle impact, the Oracle e-commerce business for Mastek grew significantly this year in terms of the number of new customers that we have been able to acquire. So, as we create this combination of Oracle e-commerce plus Oracle CRM as an offering, it creates, or it makes us a significant partner from a retail segment as far as Oracle is concerned. And that will continue to be a key focus area from a co-sell point of view.
On the cross-sell side again, a lot of very important learnings that we have had. We have looked at our customers, we have also looked at the areas that we would want to invest in, we are also starting to see and win deals in the right segments, so local government, that Abhishek earlier mentioned and retail, being the two segments where we are seeing good wins in cross-sell and we are also sharpening our propositions and development of those as we move forward. Crosssell has had good success, and I think we know our strengths and weaknesses much better, and we look forward to a much more substantial cross-sell growth also as we move forward.
Lastly to sum up, I think these four strategies continue to be our key focus area going forward. I think they are all very-very relevant and now proven with the success that we have had in this year and in this quarter. We will continue to invest on all of these four lines to look at growing our business at even faster pace in the coming quarters and years. So, that is broadly a sum up of where we are
Things to watchout
And another development which will help us solidify our US business is a framework agreement that we are chasing with a large retailer. They are looking to transform their work. These are of Canadian origin and they are looking for off-shore support as well as in-Canada support that we are working on and we believe that, that will be a big driver for our growth forward.
Coming to US geography, we saw some compression in the revenue quarter-on-quarter which is primarily due to delay in some of the contract signatures. However, the lead and lag indicators as we see in the form of pipeline, order book and the discussion which we are having with the delivery in the headcount, we expect US to grow from this level.
New CEO
“So, as we have said earlier, area of fastest growth over next three years for us is going to be in US. That’s an area where we are not strong as a percentage of our revenue. And the kind of skills and capabilities we have that is the market which is best suited for us for future growth. So, we are getting a person who is going to have a deep experience in US market. So, that is the main thrust that we have. Obviously, the person apart from the US experience of marketplace, who bring a deep knowledge of running a large service business, because many of them are running much larger size business in fact, and they bring in the whole capability required to make it happen, be it in delivery, be it in HR, be it in getting the salesforce, etc. So, we are looking for a well-rounded person, who would lead the existing team which we are also proud of each one of them and some of them are here. But we will bring a person who will make all of them more effective. Let me put it that way.”
What are they going to do with the cash of 600 crore ?
We had outlined in prior quarters that in the defence space there are large framework deals, $100 million plus where we are participating as part of the consortia. And on our own as well, we are bidding for the bigger ones where we are getting to the last two last three that gets you the degree of confidence our solutions have our capabilities
we are also partnering with the behemoths who have been in the large accounts or in the large opportunities but need our expertise to take it to the next level. So, whichever way we have decided we are enjoying the space that we are in with the momentum and the conversion.
Risks
"Public sector, which has been our bedrock of growth in the organization as well as in the geography grew above 35%. However, private sector did have its own share of challenges. Most of you know that our clientele is between retail and financial services and they had that degree of compression driven by the COVID environment. But if we continue talking about our successes, public sector actually went from strength to strength, landing new logos, expanding
into the existing customers so, the twin pillars of our strategy deepening the relationship, as well as expanding the customer base"
Majority of the revenue is from UK (After BREXIT we are yet to see the real impact on UK economy , NHS spending has gone up because of covid, HMRC is cash cow )
Not many additions from the private sector , though they mentioned about Financial services ( don’t see any new logos added and appears to be lot of stress seen on retail sector side )
Little bit more time on the private sector business to give you a flavour, clearly caught compressed because of the COVID impact on our customers. Their businesses went as low as 10% of the pre-COVID level, as a result their discretionary spend went down. As a result, our businesses also compressed. We also lost a couple of customers
To conclude, our growth pillars in form of UK public sector and Oracle EBM cloud is firing. The kind of investment which we have made in private sector and also making in next coming quarters, we believe this pillar will also come to the party and all the pillars soon should start firing
