Hi all, what do you people think about the huge amount of cash on the company’s balance sheet? The company doesn’t seem to have a clear plan on what to do with it. And also about their approach to the clients, they are more focused on mining the current clients, rather than acquiring the new ones. Do you think this is the best approach? I think at some point they would exhaust the problems they can solve for a client.
In this case, huge cash on the balance sheet is not something to be held against the company. Offcourse, it shows some lacuna on the company’s part and is a monitorable. However, in my opinion, this is more of a regulatory issue. While raising money from public for corporate expenses, business expansions, working capital needs etc. is fine, SEBI (as a regulator) should disallow companies from raising money to fund acquisitions. At the end of the day, IPO is cheap money for any business.
Regarding other question, Data Science and Analytics is a growing market and is still in nascent stage. This is one area that can cut across horizontals and verticals.
There was specific question on this in the Q4 concall they had yesterday. Although the concall was participated by very few advisory firms, there were few relevant questions on future prospects including the future M&A plans. A question on huge pile of cash and future plans, mgt., seems almost sure on acquisitions in FY23 especially in Europe region, though they didnt give any specific timeline.
Disc: not invested, tracking for study purposes only.
Can someone post the details of the concall?
Following are my notes of the concall.
Latent View Analytics Q4 & FY22 Concall Summary
- Q4FY22 revenue grew by 9% QoQ and 48% YoY.
- EBITDA grew by 11% QoQ and 27% YoY.
- CPG & Retail segment grew by 113% in the FY22, and the Technology segment grew by 38%. The US contributed 95% of total revenues.
- Consulting contributed 15% of total revenues while Data Engineering contributed 25%. Business Analytics has the largest share of 60% in total revenues.
- Company added over a dozen new accounts in FY22. The company has 30 active Fortune 500 clients
- Company is investing in teams in Europe – UK, Germany & Netherlands. UK subsidiary was capitalized with £5M.
- Company witnessed a higher-than-normal attrition rate of 30%. But the company sees the attrition normalizing from Q4.
- Top 5 clients have been doing business with Latent View for more than 5 years. Their contribution to revenues grew from 52% in FY21 to 59% in FY22.
q1fy23-investor-presentation.pdf (1.4 MB)
Some good questions asked in concall:-
Poor fund utilisation which rised from IPO!
Funds keep eroding in bank,
One kind of capital mis-allocation!
That’s what I am thinking. They haven’t used funds over the 4 quarters after they raised them. Does anyone if this is a common behavior or is specific to Latent View?
Offcourse, specific to latent view.
It is not a misallocation. The company is trying to find the best fit for itself. Go through the concall of Q3’22 for more understanding.
Tracking closely, the next 1-2 quarter may remain muted and this may give an entry at decent valuations. Good and prudent management.
Q4 results came post market hours and at 1st glance, it looks very underwhelming
Investor presentation is here
The drop in margin is well explained by this graphic
PS - Have a position and cringing after seeing this. These investments are good for the future but IT co results are always judged QoQ and anything slightly deviant from that formula, will get a stick (unless, for once I get lucky !! )
“LatentView Analytics” is a global analytics and digital solutions company that offers various data-related services to businesses. They focus on helping organizations harness the power of data and analytics to drive business growth, enhance customer experiences, and make informed decisions.
Some of the services and solutions that companies like LatentView Analytics typically offer include:
- Data Analytics: This involves analyzing large volumes of data to extract meaningful insights, trends, and patterns. Companies like LatentView Analytics might employ various techniques such as data mining, machine learning, and statistical analysis to derive actionable insights from the data.
- Marketing Analytics: This involves analyzing marketing data to optimize marketing strategies, improve customer targeting, and enhance overall marketing ROI.
- Customer Analytics: Companies like LatentView might help businesses better understand their customers by analyzing customer behavior, preferences, and feedback. This can lead to improved customer segmentation, personalized marketing, and enhanced customer experiences.
- Predictive Analytics: Using historical data to predict future trends and outcomes. This can be applied in various areas, such as demand forecasting, financial analysis, and risk assessment.
- Digital Analytics: Focusing on analyzing digital data generated from online sources such as websites, social media, and mobile apps. This can provide insights into user behavior, website performance, and online campaign effectiveness.
- Big Data Analytics: Dealing with the analysis of large and complex datasets, often involving technologies like Hadoop and distributed computing frameworks.
- Consulting Services: Providing expert guidance to organizations on how to establish and implement effective data analytics strategies and solutions.
- Machine Learning and AI: Developing and implementing machine learning models and AI algorithms to automate processes, make predictions, and provide intelligent recommendations.
Concall Highlights :
- Reported positive Q1 growth, expects Q2 growth to be similar.
- Market uncertainty causing delays in closing deals.
- Optimistic about H2 growth, dependent on timely closures.
- No plans for further investments.
- Margin improvement expected with growth.
Challenges & Strategy:
- Focused on consolidating with a top tech client.
- Renewing entire book of work with third-largest account.
- Added annual work and new groups through consolidation.
- Identifies Generative AI as opportunity for unstructured data. Market uncertainty affecting timely opportunity closures.
- Generative AI’s potential in analytics landscape.
- Risk of Generative AI disrupting data engineering work.
- Acknowledgement of challenges in retail and BFSI sectors.
- Emphasis on longer sales cycles due to external uncertainty.
- Company remains optimistic about growth.
- Positive growth projected for Q2, Q3, and Q4.
- The company aims to achieve a growth rate of 5% to 8% higher than the industry average.
- They have made investments ahead of the curve and expect better margins when the macroeconomic situation improves.
- The deal sizes have fallen in the last two quarters due to uncertainty, but the company expects them to improve in the long term.
- The European business is going through a reset phase, but the company is having conversations with high-quality accounts and expects growth in the future.
- The company has seen growth in the BFSI sector and expects more closures in the next quarter.
- The impact of generative AI on the company’s data engineering work is still uncertain, but they see it as an opportunity rather than a risk.
- The company expects growth to continue in Q2 and Q3, but the trajectory beyond that depends on the closure of opportunities.
- Margins are expected to improve as investments have already been made and no further incremental investments are planned.
- The company is optimistic about the future and believes their investments will put them back on the growth track.
- Contracts aligned with clients’ fiscal cycles.
- Peaks at year-end, decreases as executed.
- High probability extensions considered.
- Market uncertainty affecting timely deal closures.
- Focus on overcoming Generative AI challenges.
- Return to growth after a slower quarter, with 4.7% sequential and 23.1% YoY growth.
- Company’s efforts resonate well with clients.
- New client wins include a large iconic restaurant and European tire manufacturer.
- Validation of Indian market strategy with a two-wheeler manufacturer win.
- Existing accounts grow significantly, with technology, CPG, and logistics sectors.
- Strong pipeline for growth anticipated in existing accounts and new logos.
Geographical and Vertical Distribution:
- US contributes 96% of revenues.
- Europe targeting 5%-8% contribution by FY '24.
- Technology vertical leads with 69.2% of total revenues.
- Industrials also show strong momentum.
Generative AI and Technology Disruption:
- Potential impact of generative AI on operations and growth.
- Challenges in applying generative AI to structured data.
- Use cases for customer sentiment and review analysis.
- Confidence in growth rate despite new technology.
Europe Business and Growth Strategy:
- Europe revenue decline attributed to existing account’s drop.
- Europe business in reset phase, positive signs with new accounts.
- Challenges due to longer lead times for relationship building.
Verticals and Challenges:
- Positive trends in technology and industrial verticals.
- Sluggish dollar revenue performance in retail and BFSI.
- Investments to address challenges in these sectors.
- Positive performance in existing BFSI accounts, longer sales cycles.
Generative AI and Analytics Landscape:
- Generative AI viewed as opportunity for unstructured data analysis.
- Importance of strong use cases and challenges in generative AI.
- Potential in predictive and prescriptive analytics with Generative AI.
Growth Trajectory and Expectations:
- Positive growth momentum, Q2 growth slightly better than Q1.
- Uncertainty due to longer sales cycles and market challenges.
- Q3 and Q4 growth projections tied to pipeline opportunities.
Margins and Investments:
- Anticipated margin improvement, investments made, rate hike impacts factored.
- 50% gross margin threshold in the US.
- Operates on managed services contract model, efficient resource use.
Strategies and Goals:
- Confidence in investments and capabilities for future growth.
- Focus on relationships, expanding capabilities, and winning logos.
- Aiming to regain lost ground through consolidation exercises.
New Accounts and Growth:
- The company added new accounts, including a large quick service restaurant, a tire manufacturer, and a two-wheeler manufacturer.
- Existing accounts in the technology, CPG, and logistics sectors showed significant growth.
- Latent View Analytics saw traction in value propositions such as on-shelf availability, multi-tier supplier visibility, and one customer view.
- The company has a strong pipeline for Q2 and expects growth to continue, although decision-making in the market is still slow.
Investments and Expansion:
- The company is investing in frontend capacity and has onboarded new members to the Advisory Council.
- Latent View Analytics aims to increase its presence in Europe and is actively evaluating M&A opportunities.
- Long-term, the company aims to continue investing in frontend capacity and expects to see growth in high-tech clients and value propositions.
Attrition and Workforce:
- Attrition decreased by 10% in Q1 and the company has 300+ campus hires.
- The company closed the quarter with a headcount of 1,091.
- Billing structure mainly fixed monthly rates.
- Maintaining margin thresholds despite smaller deals.
- Top five customers contribute around 60% revenue.
- Average revenue per employee around $60,000 to $65,000.
- Onsite-offshore ratio approximately 1:5.5.
There is a big runway ahead for especially : Data Analytics when it comes to Generative AI, hope the company has something better to offer.
They are working on a proto type using generative AI now for the structured/unstructured data for CPG customers wherein they can analyze the review, feedback and predict customer sentiment to improve sales
Secondly they are working on a proto type using generative AI for industries who are mostly into component making - wherein AI helps in detecting & predicting the shortage of component in market - so that business can cater to those demand upfront by building inventory or production.
Have not been tracking this company for quite sometime now. Is there any further update on utilisation of the cash? This was long overdue. Thanks!
Anyone actively tracking this company? Share price increased by around 10% In a Single day with big volumes.