(Kunal Parikh) #546

The results are out:

  1. Revenue is up 18% on constant currency terms
  2. Reported revenue is up by 8%
  3. EBITDA is flat. The reason cited is that margins were suppressed because of unfavuorable currency movements.
  4. PBT is up by 13%
  5. PAT is up by 24%
  6. Headcount has fallen by 11%
  7. Cash as on Jun-17 is Rs. 251 cr.
  8. Zero Debt
  9. Clients billed have gone up from 93 to 460
  10. " As MPS is growing, our customer base is diversifying due to growth in larger accounts and addition of
    smaller customers through our platform business. Our core customer base has now expanded to 15 large
  11. Segment-wise reporting is very interesting. There is de-growth in content side of business(might be because of currency or client pressure on pricing). But Platforms business has shown great growth. In Q116 the revenue was Rs. 533 which has shot up to Rs. 1457. MagPlus and Think strategy might be showing good traction.

These are decent numbers but no word on acquisition yet. There is a con-call tomorrow and here are the details:


(Rohit Balakrishnan) #547

MPS Concall Q1 FY18 Notes. These are prepared by me and may contain some errors while taking down notes.


Recorded 18% CC YoY growth
Customer base is diversifying. Top accounts broadened beyond 10 customers and now includes 15 clients
Business is broadly two segments - a) Content solutions b) Platforms
Core markets - Publishers, content aggregators, Enterprises, Government
Looking to close out acquisitions
Market opportunity is larger on the platforms solutions side, the market is also growing at faster rate.
2,500-2,600 employee base would be the optimum level of employees going forward. May lead to reduction in employee costs
Automation of workflow with one of the top 3 publishers, 8 suppliers earlier, now only MPS. 3 year contract- given price discount upfront. Solution is now live with 70% of the workflow.
Growth in content solutions is going to be driven by smart engineering, depth in product /content development and paired with consistent delivery
In platforms there are multiple factors -
Faster time to market - Digicore
Content design for mobile first - Mag+
Think - very much entrenched with customer value chain.
Definitely room for organic growth in both content and platforms. Content solutions in single digits and platforms would be double digits.
Adobe V/s Mag +
Flexibility - For ex host your content on your; SDK
Customer service - Adobe does most of the service through re-sellers. But with Mag+ together with MPS will be able to provide valuable service.
In fact Adobe’s DPS has moved out of the market (SMB)
Mag+ - 80% of revenues from licenses and 20% services.
Mag + 400 customers
Think - 45-50 customers
Content solutions - 50 odd clients, most of the growth from top 15
80% of revenue comes from Top 15

(Mridul) #548

Thank you Rohit for posting the key takeaways! Just one question - was there any mention of 400 cr topline guidance they gave in q4 concall for fy18e - fy19 first qtr?

(TT) #549

The previously said 400 crore for FY18, give or take a quarter or two, and they repeated that again.

(ssgupt) #551

Thanks Sir, Good for beginners too!

(Jeeva Alex) #552

An interview with Rahul Arora about integration of recently acquired business, THINK subscription, and how it would fit in their current business model.

(Milan Shah) #553

The intimation of the Board meeting includes an agenda item about consolidation of MPS shareholding - not sure what this means - hopefully not more bad news. I wouldn’t be surprised if it was one more step towards transfer of control from Nitish to his son Rahul

(Milan Shah) #554

I think a measure of the sentiment that the MPS results for Q2 and concall have been done with, but there is not a single message on the forum while in the past we had animated discussion after these events.
The key takeaways during the call and some of these are my personal observations which may be incorrect;
1.It seems the management under Rahul is trying to slowly find new areas of business (i.e. platform etc.) as they believe organic growth from the traditional publishing business is very difficult to come by.
2.From a particular remark, it did look as if Rahul has a completely different view on acquisitions versus what Mr. Nishith had and for the first time committed to do one in 9 months time. Bear in mind that earlier forecasts from MPS have not been particularly adhered to.
3.He still maintains the $100mn revenues target for 2020 - not sure what the margins will be on those.
4.The one positive was that he mentioned that MagPlus margins are now at MPS levels. Also said that perhaps Magplus is number one in the market now.
5.Overall a lot of investors I think have lost patience and perhaps money on the MPS counter. Do remember that the QIP funds were raised at 800 Rs a share and HDFC, Goldman will be putting pressure on management to get earnings back and hence make some returns on their investment - so patience may still be key.
Comments and detail invited.
Discl; Have a good percentage of my portfolio invested in MPS

(arpitjain305) #556

As it turns out, Goldman has indeed exited today as disclosed in NSE bulk deals section

(rupaniamit) #557


I didn’t find transcript pdf anywhere of quarterly earnings discussions with management. I got access to the audio recording, but would prefer to read than hear.

Can anyone guide me to the transcript pdf?

Thank you!

(Mridul) #558

My take - MPS timed QIP at an opportune time for the company at 836 per share. Companies raise money when money is easily available. They probably thought they would manage a quick good acquisition then but haven’t found good opportunities other than MagPlus (MagPlus too was pretty small sized).

Their cash balance is ~300 cr on which they are already earning ~9-10% pretax return today (25 cr).
Their overall EBITDA margin is ~30-35%.

Hunting for a good acquisition target which is better yielding than the current cash yield, and which at the same time fits the overall work theme of MPS is probably turning out to be a big challenge. Rahul Arora said they are trying to hunt for something that is a mix of content and platform, or a pure platform. They don’t want to add pure play content as it is difficult to grow. Instead, they might go for some similar verticals where their existing knowledge-base can be of assistance.

I feel it is good that they are just not splurging out money on any ‘unworthy opportunity’. They keep saying that they are proud of their capital allocation track record and would like to maintain a clean slate there. They said they will try do MPS part 2 i.e. acquiring something and turning it around big time like they did with MPS. They are trying to have a EPS accretive acquisition of decent size, though don’t want to limit themselves to that. If an opportunity presents itself where they feel despite it being a loss making business, if they can turn it around, they might go for it. Critical thing will be the valuation they will be getting the business for. I think they are taking time as they want the acquisition to be min. 15-20% EBITDA accretive, which they can take up to 25-30% (close to overall company profitability levels). They said they are looking for a meaty company with revenue base of 10-30 million USD (60-180 cr).

I just hope they start paying dividends back again… as the cash they now got is already enough for a decent sized profitable acquisition. No point accumulating more money when they can be generous.

One worry is the decline in their content base revenue. I am not sure if they have lost any clients. They did say that they are taking a bit of hit to board clients with huge potential. So initial price points are lower which they will trade-off with better volumes. But volumes have not come back. Some client side slowdown is one of the causes the mentioned.

Good point - Platform based revenue and profitability is improving and is now close to content based EBITDA%. There is further room for improvement here. This is pretty good.

Q4FY18 is going to be sluggish in terms of revenue (similar to Q3). Expecting to acquire a new company in Q1/Q2 in FY19.

Regarding 400 cr guidance for year end, they shifted the goal post further by 2 qtrs.

Content solutions are forming a baseline this year and will grow around 5-7% from next year. Platform business will grow in double digits.

Disclaimer: Invested. Added more in last 3 months.