Their major buyer are government organisations like LIC, Armed Forces etc.
In govt. the financial year cycle for expenditure usually impacts procurement and a lot of bunching up happens at March end.
Thanks. Something to look forward in this quarter result, as q4 base is higher and if it grows on it then story will be even more stronger, but if they managed to spread out in earlier quarters then it will be punctured little bit, though from long term perspective it is nice to not have consistent revenue across quarters…
2019 Q4 results released.
Looks good going and traction in orders. To be observed further.
Results:https://go.newgensoft.com/acton/attachment/13651/f-3d19c8a8-dacf-451e-acb4-b04eb7fe1676/1/-/-/-/-/NewgenOutcomeBM15052019.pdf
Press release: https://newgensoft.com/wp-content/uploads/2018/03/Newgen-Press-Release-Q4-FY19-FINAL.pdf
Presentation: https://go.newgensoft.com/acton/attachment/13651/f-6572e079-cb5c-4c23-86ef-24f643eb7f51/1/-/-/-/-/Newgen%20-%20Investor%20Presentation%20Mar%202019%20FINAL.pdf
A good series to get a feel for the trial and tribulations of a tech startup is silicon valley. Especially if you want to get a sense of VC funding, patent battles, code theft , management and board battles etc. The series is a comedy but a lot of things in there to absorb and learn. Enjoyed watching it and getting a ringside view of how things work
I did not know that you could get a patent on a general idea without even having a working implementation. All news to me.
Newgen Makes its OmniFlow iBPS Platform More Intelligent with Process Insights
Process Insights to help enterprises deliver superior customer experience.
Software experts may comment on above. Their product looks to have good traction.
HI Bheeshma,
Are you referring to some link here? If so, please share the link
Key features of Process Insights v1.0 include:
• Scenario definition - Sets up real-world business scenarios through an intuitive, no-code web
interface, to create process scenarios and run simulations on deployed processes.
• Simulation - Simulates impact on processes under varying conditions such as resource
availability, cost, SLA, and inbound load.
• Visualization - Monitors simulation and process performance leveraging dashboards and
reports -to visually identify bottlenecks and severity with color-coded heat maps.
• What-if analysis - Helps predict the impact of real-life strategic and tactical changes in
business operations, by simulating multiple what-if scenarios.
• Forecasting and recommendation - Helps forecast workload based on past data and predicts process KPls based on simulated historical scenarios, to suggest the best course of action.
The above features are an add on to facilitate analytics, projections, forecasting etc. While they might be value adds to existing customers using the product, I would not be surprised to find other BPM products in the market offering such features.
Do we know who are newgen’s direct competitors in their space of offerings?
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There seems a dozen competitors to newgen with few having better ratings: -
Its a TV series. You can read more about it on wikipedia
There are a lot of clips on youtube which you can refer to, however watching back to back episodes is much more fun and informative
Best
Bheeshma
That’s wonderful. Thank you!
http://kfpl.karvy.com/images/2019/NEWG_8694/Newgen%20Annual%20Report%202018-19.pdf
NewGen Annual Report for 2018-19.
New Patent filed in India by Newgen. Headline seems good but could not get further details of the patent. Can the details be obtained from somewhere?
17 July 2019 Press Release.pdf (43.8 KB)
Disc: Not invested but tracking
The co posted very good results yesterday and continues adding new clients and new geographies. In the quarter it incorporated an Australian subsidiary which hasnt contributed yet to topline. yoy growth is 23%. The patent it received in July concerns assessing the quality of scanned documents.
The good part about this co is the multiple sources of revenue streams from different clients and different geographies leading to stability in the overall revenues. The Q1 profitability is typically the lowest in the 4 quarters and Q4 is the highest by a big amount.
There was some lease accounting standard change which i dont understand but impacted book EBITDA and retained earning calculations.
Best
Bheeshma
Disc - invested
Agree with you @bheeshma
The overall story seems good from a business perspective. Newgen’s presence in not so niche space (ECM, BPM, CCM - generic across domains) should help the business grow horizontally across industries and vertically through customisations/personalization, which the management does claim. This is unlike Majesco whose focus is only the Insurance vertical with deep domain expertise, in a way, not enabling it to grow across domains. Newgen’s growing SaaS/cloud revenue (annuity streams) shall only grow from here with further client additions.
One point though - While subsidiaries are established across geographies with their financials captured in the consolidated results, not sure why there is an Indian subsidiary too and thereby what does the standalone financials reflect. Any idea on this?
Regards
Iyer
Hi iyer , no clue why that subsidiary is there but it seems to have negligible assets and profits. In the related party transactions there seems to be some rental transaction with it.
NewGen Has tanked by 30 % in the last 2 sessions , though the results we ok .
There is no news as to why this has has gone south .
This is the best that i could find out , - https://www.smartkarma.com/insights/newgen-software-error-code-flashing
(https://www.smartkarma.com/entities/newgen-software-technologies) financials after it became public almost 20 months ago indicates a disconnect between revenue model and receivable ageing. Change in assumption for expected credit loss could not curtail provisioning for receivables. Further, an increase in other income for F19 was a one-off phenomenon backed by higher interest on un-utilized proceeds parked in bank fixed deposits and higher foreign exchange gain. Also, during Q2F20 the company has reported a loss in its India segment, which constituted 28% of the top-line.
Any boarders with further info please post.
here are my notes from going through the conf call. it was hand written, might have interpretted incorrectly here and there, so please excuse me in advance. Once the transcript is out, we can cross check.
Growth rate in EMEA and India was muted due to macro uncertainty, project closure were muted. Focused on operations and capabilities for the future.
we do see Oppr in the digital transformation space.
26 new logos in Q2 itself, including 5 logos for cloud deals. ( avg. size is 1.35 cr v/s last year avg. size is 1.6 cr due to a couple of large deals)
building senior mgmt, sales and marketing team esp for international mkts.
annual Salary increments for employees on par with markets ( to reduce attrition) have been completed, 3000~ employees in total for the firm.
employee cost is high because of above two reasons.
License deals less this year.
60% is annuity revenue, 27% inc YoY
8.2 cr for revenue, Cloud is 43% inc YoY, is a critical component for the firm.
On PnL: ( during the Qtr )
Costs are upfront for invst. in Sales, mkting and R&D teams, EBITDA of 9.1 Cr has taken a hit, PAT = 4.2 Cr
Net cash was 39 Cr, due to pay out of incentives for Salaries and Campus recruitments
11% of Rev = R&D
Gross & Net Trd. Rec. = 236 and191 Cr
Gross and Net DSO = 133 and 107 Cr respectively.
Seasonality of H1 is always low, H2 will pick up.
Banking & Financial Services (BFS) saw increased volatility. Demand is good. Decision making @ clients is slow due to macro uncertainty.
might also see some slowness - Q4 hopefully will make up for the lost growth (hopeful of closing large deals).Costs are upfront, and are higher, 17-18% this year, thus will impact margins -
Aust, USA and Europe investments should yield results in the coming years
On hiring and employee expenses:
one time nature very senior mgmt. hired.
Wanted to reduce attrition & increased salaries to maintain talent esp given that we are a product company.
Revenue is flat, but a Loss @ EBIT level. ECL provisioning is typically at EMEA and India
Costs are typically attributed to India, although we have global sales. India PnL is impacted esp from Cost aspect.[emphasis mine]
Headwinds in India & EMEA in Financial space, larger licenses deals have been impacted.
Q4 should be able to regain the lost momentum. This year we can not regain the lost opportunity in Q2n3.
Margin side, Cost is fixed @ 17-18%, unless Revenue grows higher, might be tuff, but in the coming quarters we plan to grow to prev guidance on margins?
12 logos from USA ( target 25 in 2020 ), but will not translate in to numbers, as most are cloud deals.
signing deal and gaining revenue ( given rev is back ended ) Q1 signed deal might not be until later than Q3. ( 2 qtrs lag), similarly for Q2 signed deals, # will be seen in Q4.
Q1 and Q2 historically have been similar and Q3 has been large from a number’s perspective. Last year was an anomaly, 40 Cr license, odd year, increased the base.
Growth in numbers is yet to be reflected. US & APAC no headwinds, BFS might see higher than 20% growth.
Will not shift to new tax regime, are going to use SEZ benefits.
due to mergers and acq.(?) deals which were very close to being done, have taken a hit due to slow down/uncertainty.
healthcare from last year, was a large # from our existing customer is not repeatable & HC is not growing; Banking, govt, BPO - this is growing. Banking & BPO is more possible, Govt might be slow.
License sale is supposed to happen in banking but got a hit. “our numbers dont reflect the macro, but the macro surely does affect our numbers”.
SaaS based sales is being pushed by our team
5-6cr net write off = ECL provisions is 12 qtr trend, based on this for each bucket of debtors, if trends change these provisioning changes.
180 days Debtors days, 96 crores is the receivable.
annual Sales is highest in Q4. Debtors days are highest thus following this; typically the closing of deals happens very close to the end of Q4 and thus it appears lopsided. its always better to check Sept Q YoY, thus taking in to seasonality.
[note from last Quarter call transcript - I think you should understand the US business is not only cloud business or only ATS business, it is historically similar to other businesses that it has a perpetual license sale, there are implementation cycles, which are milestone-based, and then there is support and cloud. So what is happening is that the new logo acquisition is coming on cloud. Predominantly ATS and new logo is more linear or incremental. But traditional implementation cycles, project completion cycles, support cycles are still Q3/Q4 heavy because as you collect more orders in Q1, Q2 those end up being slightly higher in Q4. So it cannot be completely linear. But as soon as the cloud base and the new logo start picking up and they become a substantial part of the revenue then we can expect them to be completely incremental.
@aerofire: to your notes from the smartkarma analyst, here are my observations:
especially read the previous quarter’s transcript which can be accessed here:
https://newgensoft.com/wp-content/uploads/2018/03/NewgenSoftwareTechnologies-Earnings-July24-2019-CLEAN.pdf
receivable ageing - debtor days - they are geographic specific and not that they are not receiving the contracted amount, it is getting delayed. I assume we can imagine if its the indian govt. departments, there might be delays. the company is aware of this and are trying to improve on this consciously. they have recommended to view this based on seasonality and sequentially. You can see Ashish Kacholia has done bulk of the talking in this Q1 quarter call.
Blockquote
- Ashish Kacholia : Does your contract with your customers leave some amount of ambiguity that they do not pay you? I mean, it seems to be a bad habit with many of your customers?
- Virender Jeet: We keep on working on the contracts too, but I think, it is a behavior of certain markets and certain territories rather than contracts. So I think we do not have similar issues in US on debtors having similar contracts. But we have issues in India and Middle East and Africa market.
- Ashish Kacholia : Okay. So it is just the client behavior, it is not the… In the US you are doing a 100% collection as per the contract?
- Virender Jeet: Yes, I think depending on how the revenue is realized, but we do not have any major collection issues.
Blockquote
on the other income variability aspect, they did note that it is due to FOREX. (from prev Qtr they had a gain), below is from prev qtry transcript -
Blockquote
Ashish Kacholia : Sir, I just wanted to ask your trends in the other income, the other income has fallen in this quarter. So what was this other income line? And how do you see this shaping up for the year versus last year?
Virender Jeet: So last year, the significant part of other income was coming from the FOREX gain. If you look at on a quarter front, the other income shrunk from Rs. 7.8 crores to Rs. 3 crores. So, it depends predominantly on the currency moment. So if the dollar situation improves then we should have better other income. On the other hand, if the rupee appreciates, very significantly, we may have some impact on other income.
last but not the least, for indian segment making a loss - it was explained that it was mainly due to the cost hitting the indian segment in spite of being a global product sales company. see above notes from conf call.
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@basumallick and @A_shah - in the conference call, they had explained about the process of generating revenues from these patents in the middle of a series of question ( Q4FY2019 Call in May):
Question: What kind of revenue you are expecting from your patents in 2020?
Virender Jeet: Most of our patents are a result of our core R&D work, which we are doing in our products and also most of the things are more at algorithm level or in terms of basic concept patenting or basic algorithm about imaging, about content processing, content management, so what happens to these patents - eventually get incorporated as a core technology in our products and then they, over the next two, three years come to market, so we are able to measure the revenue from our product sales as a result of our patents and other initiatives, but the patent directly does not have any correlation to our revenue, so these patents do reflect into our revenue by providing us a differentiated advantage or an opportunity in the market where we can stand out the competition but does not have a direct revenue number associated with that, it is part of your R&D, it is an outcome of R&D.
All in all, not necessarily correlatable if the patents lead to higher revenue, but helps them build a better product over a few years out. But then again with out these process improvements and tweaks (in the process discovering something and applying patents on that process), they would not land in the challenger/niche player category in the Gartner Magic quardrants…(not the only reason, but one of the many reasons )…
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one open area of question I am trying to research and figure in this business is -
-
What does their non-direct channel partners do for them?
-
how does the revenue sharing/ partnership play out?
One thing that caught my eye and i am trying to wrap my head around is, this statement in Q4Fy19 conf call - they alluded to this statement, bold emphasis is mine…
Blockquote
Question:And the second question was if I see the growth in the implementation revenue as well as support revenue, support revenue has grown quite well for the last two, three years and implementation revenue has grown at a very slow rate how should we interpret this data?
Virender Jeet: I think, one is typically implementation revenues are a factor of two things, we are having more partner enabled or influenced revenues where partners are implementing, so as a result as we grow, overall our implementation growth may be slightly muted compared to rest because we want to introduce partners because those end up becoming our channel for sales in future, so that is one of the reasons. Support revenues will keep on increasing because eventually it iskind of annuity to maintain critical implementations and relate to customers demanding higher degree of support for their installation, so as we have larger customer base the support revenue will keep on increasing, but some part of the implementation will be always transferred to our partner networks who will implement on their own, so we do not take that revenue.
Blockquote
For me it makes sense, if they are introduced say, by one of the system integrator partner listed here (Newgen | Low code platform for end-to-end automation at scale) say like, Deloitte or MindTree and they integrate with them either behind the scenes or they are plug and play kind of partnership & thus gain a customer in the process and build a stonger partnership…
but in the scenario above, are they talking about, say, if Newgen goes to a customer and then in the process, they introduce one of their partners say Finestra or Symitar,… & eventually when it comes time to implementation of the process/product/workflow - the partner Finestra takes the revenue from implementation and Newgen gets nothing? ( i know i am probably wrong here, just thinking about loud)
Can someone well versed here shed some light on this?
@basumallick/ @bheeshma - i see that you both have researched a bit on this company but in general can you talk to this?
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Jumping here as I know few other product companies (Guidewire/Majesco in insurance space) which are operating in a similar fashion. In above case, the parter receives implementation fees. Newgen, however, will receive full license fees (unless the parter take a slice of the licenses fee which I think unlikely). The benefit to Newgen is they get a customer and licenses and also AMC going forward. So in a sense margin accretive.
If the product is a cloud based, I think they would not much upfront and subscription revenue is backended as most of the benefit will arise during the later years as customer start using product more.
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