Thanks for sharing detailed notes, two observations i am not very comfortable with- AIF set up and consistent mentioning of fintech while largely it is Saas and product company. Any view/counter are welcome.
Discl-Invested
1 Like
All large and success ful Saas companies plug into the eco system. Like
slack
Salesforce
Hubspot
Marketo
Rippling
Mailchimp
Zoom
The list is long
Many of these are non fintech global examples and not even listed but the central idea is the same you need to hook up with others and allow others to hook up with you.
This move is inevitable.if intellect does not do this it will not survive for sure.
2 Likes
It is a product based SaaS solution, the management is fooling around with buzzwords like FinTech , Just bcos it is into banking/finance domain and delivers the solution through technology , will it become fintech? anyways that wont matter to me as long as they are delivering growth and profits, so i will probably ignore it.
5 Likes
Yes i agree, they are in the financial products business for so long but heard fintech first time so many time in concall, hence seemed little off. Maybe will have to read lot more about salesforce journey to understand what management intent to say and do.
1 Like
Intellect Global Transaction Banking (iGTB), the transaction banking specialist from Intellect Design Arena Limited, ranked No.1 in the world for Transaction Banking by IBS Intelligence, today announced that Fifth Third Bank, National Association, has launched CBX, the first true contextual banking platform. This platform strengthens Fifth Third Bankâ's position as a digital leader and positions the needs of corporate customers at the forefront.
The platform allows Fifth Third Bank to harness CBXâs capabilities, providing a simplified and consolidated view of assets and liabilities across a portfolio of domestic and international accounts, whether locally held or cross-bank, and allows for cash and liquidity management, based on scenario-based concentration of funds. Customers can optimize their working capital, in real-time, on a cloud-native, self-service platform.
3 Likes
Thanks. Looks like a âgo liveâ rather than a ânew winâ.
5 Likes
Intellects Technology Day for 2021 to be held on 7th of December 2021.
Use the link below to register:
Thanks,
AJ
Disclosure: Invested and added during the recent fall.
1 Like
Interesting to see State Bank choosing Intellect Wealth Qube - Digital Wealth Management suite for its digital wealth management transformation agenda. First win within Indiaâs PSU banks I believe.
See the press release:
AJ
Disclosure: Invested.
13 Likes
Intellect Technology Day 2 on 7th December 2021 - Presentation
Experts from Intellect presented and spoke about how Intellect, as a business, empowers
financial institutions globally to leverage the benefits of an API-first, cloud-native and microservices-based
architecture to scale up their digital journeys, with agility.
5 Likes
Good results. YoY Growth: Overall Revenue 33%: Growth for License 23% , AMC 11% and SaaS 113%
EBITDA 37% ,PAT: 25% Margin pressure still there on account of employee costs, hopefully this may be peaking now, the game of musical chairs in employees moving around has been going on for a while now.
One Destiny deal won, need to see the projections for the other pursuits. Will try to join the Investor call and post an updated after that as well. Their calls are quite detailed and worth listening to.
Disc: Invested since a long time and adding on dips
7 Likes
Decent set of results -
The good -
- Solid $ revenue growth - +11% QoQ, +31% YoY
- Nicely cash generative now. Cash balance is at 430Cr. 9M cash conversion is around 55%.
The not so good -
- Growth came from license revenue. SAAS/ cloud revenue is actually flat QoQ.
- EBITDA margin is stable QoQ at c.26%. Current EBITDA level opex is around 375cr. Up from 334 in 2Q and 308 in 1Q. In the press release Arun Jain says they have made investments in last couple of quarters to enable them to get to $300m runrate of revenue. Assuming the targeted 30% EBITDA margin is achieved at $300mn revenue, quarterly opex would be roughly 388cr then. Will look for confirmation from management on the call that this is the last quarter of heightened investments.
2 Likes
Reg opex around 375 cr.
Software dev expenses have increased by 20cr Q on Q
Selling/Marketing & other admin expenses which were between 93crs to 100 crs per quarter in the last year, has increased to 115 crs in the last quarter and now to 134 crs in this quarter.
Management in the last concall had informed their intention to strengthen the sales/marketing team in Europe.
Can expect some more insights from the concall today
2 Likes
Notes from the Analyst call
Revenue and margin visibility:
1 Prioritised growth over margins, but still targeting 20% revenue growth and 30 % EBIDTA margin
2 Preparing company for a 75 Mn runrate, from the current 60 Mn
3 Non-dilutive growth and positive cash flow focus still remains. Will not buy a deal, unlike competitors.
4 Pipeline Grooming- More qualification, the projected 75 Mn funnel shows only the ones that are in stage 4-6 of the pipeline
5 Setup a Strategic Advisory Board
6 Opportunity is still big, buy vs build is now in favor of buy. Management bandwidth is a constraint.
7 No longer differentiating between Developing and Developed markets as the ability to spend big is now similar in both markets
8 US market is still difficult, but have a toehold in some spaces, can land and expand from here.
Costs:
1 Salary: Added 400 people is 10 % (on a base of about 4000). Some of the costs will go up next quarter, not everyone was there for full quarter.
2 Partner network expansion- commission costs. Might go down in next quarter.
3 RSU dilution annually - 1.5-2.5 %. This looks like a âpromoter dilutionâ. Can look at buybacks when there is sufficient cash to prevent dilution.
4 Capitalizing 30 Cr of product development costs (out of 120 cr), this trend is likely to continue
Margin Levers
1 Pursuing more destiny deals - bigger deals
2 Brand/Product recognition- better pricing
3 Revenue Mix: Licence % is increasing compared to Services
Revenue Recognition - why are unbilled revenues high ?
1 License- could be 100 % upfront, or Milestone based based on the deal - Percentage of Competition, Cloud Deal- Pay per use
2 Unbilled revenue is mostly implementation as that is Milestone based
3 GEM - 25% upfront, 75 % Payment is due only when the Buyer updates the transaction (100 Cr out of 600 Cr). No delay in payment by the Govt.
Disc: Invested and adding on reasonable valuations
15 Likes
Thanks for the concall update.
Buy vs build âŚdoes it mean company is willing to partner or invest in startups and market their product umder its umbrella or it is outsource non core coding.
Also the new investment is in development/ upgrade of existing products and is it going to increase, continue stable state or reduce in coming years.
Thanks
One of the best performances in recent times by most of measures, @parag_patankar has nicely captured key notes, adding some qualitative points
- Mgmt was at ease, candid about choosing growth over margins( not that margins were not good)
- Mgmt is also aware that current leadership setup and limitations( though referred as bandwidth ) is built to deliver certain peak size deals( at max $50 M)
- Strategy advisory board of 8 members is a non intrusive method to help on growth agenda - mix of Operations + marketing + industry stalwarts
- First set of US wins opens up most imp markets, huge competition though
- Mgmt was open to admit that Developed vs emerging- digital transformation is similar profile now a days - not much pay disparity.
- Mgmt is Smart to fit platforms narrative and industry agnostic composable architecture ( clearly looking beyond BFSI, auto and so on)
- Build vs Buy - sense of urgency of Digitization acts as a tailwind, Intellect claims to have highly compressed go live timelines( one of the benefits to own implementation in house, unlike other products companies)
- Legacy BFSI and Fintechs both are their target customers, no affinity
- Competetion ( finastra etc) grew on acquisition, Intellect is built organically- pace may look, different
- Good hiring of about 10% capacity addition- note that there is non linear output in product companies, signs of future growth readiness.
- ESOPS have helped them to retain talent, reflects in performance, pinches at investors community - not a bad thing as long as growth is good
- Few years out expect 70% from SaaS model( already at 56%), this is high quality a d sticky growth - valuations for global SaaS players is on high single to early double sales multiple , Intellect is at 25 PE at Q3 annualized - ripe for rerating
Though there was muted reaction by market as tech is in pressure( tech overall under pressure), this will get noticed eventually, given higher share of SaaS/license revenue, journey keeps getting better.
Invested
11 Likes
The 56% You have talked about includes, (License + SaaS/Subscription + AMC). SaaS/Subscription is at 18.6 % of total revenues for YTD FY22, a significant increase of 112% from YTD FY21.
From zero revenue, 3-4 years ago, to 18.6 % of total revenues via SaaS/Subscription at an annual growth rate of more than 60 % is a real achievement.
its established competitor Temenos has 15 % of revenue from SaaS/Subscription, this tells us the acceptability of Intellectâs product.
if SaaS/Subscription increases at a current growth rate of more than 50 %, it will considerably improve the quality of revenues.
The SaaS revenues typically command higher valuation multiples in the markets, on the day when revenues via SaaS/Subscription is 56%, Intellect will be trading at 13 x the sales.
3 Likes
Intellect brags " ZERO DEBT PROFITABLE GLOBAL FINTECH COMPANY WITH CASH OF INR 4314 MN IN Q3 FY 22 ", heavy product development costs are behind, products have gained the traction, evident from the revenues which are building up, SG & A expenses are at 25% of the total revenues, yet the company has 26.12 % EBITDA margin.
With strong free cash flows, can hope for a Buy Back, intellect definitely doesnât have any use of 431 Cr.
At current valuations of less than 30 PE, buying back from the open market is highly likely.
3 Likes
Intellect recently applied for AIF approval which sounds more exciting with Fintech startup booming.
2 Likes
This may not happen in a hurry. Banks are still wary of putting critical data and Core banking flows on SaaS shared platforms. Also keep in mind the implementation revenue is significant, which implies banks are doing some customizations when they deploy, and this works better with On prem/ Private cloud deployments, and not true SaaS where the same standardized product works for everyone.
9 Likes