Brightcom Group Ltd

NSE:BCG

Earnings Call Analysis

Brightcom Group Navigates Challenges with Strategic Actions for Recovery

In Q4 2023-24, Brightcom Group reported revenues of INR 704.6 crores and a profit of INR 37.46 crores, reflecting a tough environment impacted by geopolitical issues, particularly in Israel. However, the management remains focused on recovery, proactive leadership changes, and innovation as pivotal strategies. The company aims to enhance shareholder value through ongoing resilience and operational improvements. Despite these challenges, they project a commitment to growth in the Asia Pacific and EMEA markets, underlining their resilience and potential for future success.

Navigating Challenges: Q4 2023-24 Overview

Brightcom Group faced considerable challenges in the quarter ending March 31, 2024, largely influenced by global economic uncertainties and geopolitical tensions, particularly in the Middle East. The company reported consolidated revenue of INR 704.60 crores and a profit after tax of INR 37.46 crores. While these figures show some impact from recent hurdles, they also reflect the company's resilience in maintaining stability amidst turbulence. Key factors affecting performance included leadership transitions and disruptions from regional conflicts, which created operational bottlenecks.

Strategic Actions Towards Recovery

To counteract recent challenges, Brightcom is implementing several proactive measures aimed at recovery and growth. This includes a leadership renewal process, emphasizing the hiring of experienced professionals to enhance strategic direction. The company is diversifying its operations by expanding its market presence in North America and Europe to mitigate regional risks and reduce dependency on any single market. Investments in cutting-edge technologies and enhanced operational efficiencies are also being prioritized to secure a competitive advantage.

Performance Highlights and Segment Analysis

In Q4, Brightcom's adtech digital marketing segment generated a turnover of INR 610 crores, representing a year-on-year decline, yet underscoring its importance within the company's overall strategy. The software development segment reported INR 94.55 crores, down by 10.54% from the previous year. The return on investment remains a focal point, reported at 8.83, indicating a committed approach to optimizing shareholder returns. The company is also working on reducing outstanding days further to improve capital efficiency.

Leadership Changes and Their Impact

The transition in leadership within Brightcom is viewed as an opportunity for rejuvenation rather than disruption. The newly appointed executives bring fresh perspectives and a commitment to revitalizing the company's mission. Their focus includes enhancing collaboration, improving communication, and aligning initiatives with Brightcom's long-term objectives, bolstering the company's resiliency and strategic vision.

Leveraging Geopolitical Dynamics

While the ongoing conflict in Israel serves as a reminder of the fragility of global conditions, Brightcom sees its presence there as integral to its operational framework. The company's strategies include not just managing current risks but actively turning challenges into opportunities by reinforcing its Israeli operations while exploring alternate locations for team stability amid conflicts.

Commitment to Innovation: The Launch of Trenova

Innovation remains the lifeblood of Brightcom. The upcoming launch of Trenova embodies this commitment, blending advanced technologies with a clear understanding of market demands. Trenova aims to streamline operations and enhance service delivery. Continuous investments in emerging technologies set the groundwork for sustainable growth and reposition the company at the forefront of the adtech space.

Operational Resilience and Future Outlook

Brightcom has developed robust contingency plans that enable them to navigate crises effectively. Current geopolitical and leadership hurdles tested these plans, but the company has adapted well, embedding resilience into its culture. Looking ahead, Brightcom's strategic focus is on expanding into high-growth markets and diversifying revenue streams, positioning itself to thrive in a dynamic landscape. The leadership is optimistic about the future, projecting improvements in operational performance as the company stabilizes.

Technology at the Core: AI, Quantum Computing, and Audio Technologies

Brightcom's future aligns with the cutting-edge technologies of AI, quantum computing, and audio technologies. AI is being leveraged to create personalized marketing experiences by predicting consumer preferences more accurately. Quantum computing is viewed as a transformative tool for analyzing complex data sets rapidly, friendly to evolving market needs. Audio technologies are also emerging as vital components in creating engaging consumer interactions, effectively redefining communication in marketing.

Closing Thoughts

Despite the recent turbulence, Brightcom's narrative is one of resilience and potential. The company recognizes that every challenge presents an opportunity to learn and adapt. With a focus on strategic innovation, a commitment to operational excellence, and enhanced stakeholder communication, Brightcom is poised to navigate the future with confidence, aiming squarely at improving value for its shareholders.

Earnings Call Transcript 2024-Q4

[Operator]

Good afternoon, ladies and gentlemen. I'm Felicia, moderator for the conference call. Welcome to Brightcom Group Investor Conference Call. We have with us today, Executive Director, Mr. Raghunath Allamsetty; Mr. Kallol Sen, Head of Overseas Subsidiaries; and Mr. Shreedhar Reddy, General Manager Indian Operations.

[Operator Instructions] Please note that this conference is being recorded. Before I hand over to Mr. Raghunath sir, I would like to mention that during the conference call, certain statements in this release reflecting our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause results to differ materially from those in such forward-looking statements.

The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties with respect to fluctuations in earnings, our ability to manage growth, instance competition in online advertising, including these factors which may affect our cost advance, cost of resources and introduction of regulations that might impact the prospects, our ability to successfully complete the planned projects, general economic conditions affecting our industries. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

Now we would like to introduce Mr. Raghunath to take this conference forward. Over to you, sir.

[Raghunath Allamsetty, executive]

Good afternoon, everybody, and thank you for joining us today. I think it looks like we are joining every day and talking to you guys. Anyway. So your continued interest in Brightcom Group reflects not just the commitment to our shared vision, but also a deep belief in the transformative power of innovation and resilience. It is that support that inspires us to raise above the challenges, seize opportunities and strive for the greater heights. Today, I'm honored to share with you a detailed account of our Q4 2023-'24 financial results, the strategic measures we are implementing and the exciting road ahead for the Brightcom Group.

Q4 results navigating challenges with strength and determination. The past quarters has tested the mettle of business across the industry, and Brightcom Group is no exception. Global economic uncertainties, geopolitical instabilities and the natural dynamics in the rapidly evolving adtech landscape have presented significant challenges, yet through it all, our focus has remained unwavering, delivering value of our stakeholders while preparing for a brighter and a more sustainable future.

For the quarter ending March 31, 2024, we recorded a consolidated revenue of INR 704.60 crores and a profit after tax of INR 37.46 crores. While these numbers reflect an impact of the short-term hurdles, they also underscore our ability to maintain stability in the phase of turbulence. Understanding the challenges, several factors have influenced our performance this quarter. The temporary absence of the key leadership because it created operational bottlenecks. Simultaneously, the ongoing geopolitical instability in the Middle East, particularly conflicts in Israel, have disrupted the operations in critical regions.

These are not just numbers on a spreadsheet. They represent real challenges faced by our teams, our clients and our businesses. However, what sets Brightcom apart is our ability to view challenges as a stepping stone for transformation. These events have driven us to think strategically, act decisively and embrace changes with courage.

Strategic actions laying the foundation for the recovery. In response to these challenges, we have initiated several proactive measures to strengthen our position and ensure a robust recovery in the quarters ahead. This includes leadership renewal. We are reinforcing our leadership with this experience, professionals who bring fresh perspective and a deep understanding of the industry.

Operational diversification by expanding our presence in North America and Europe. We are reducing dependency on any single region, thereby mitigating the risks. Enhanced efficiency investments in cutting-edge technologies and streamline process are driving greater operational efficiencies. These initiatives are not just reactive measures. They are a part of our broader strategy, future proof of our business and position Brightcom as a leader in a rapidly changing market.

Performance highlights. Let's take a closer look at the performance of our key segments. The adtech digital marketing segment recorded a turnover of INR 610 crores. While it represents a year-on-year decline, it also reaffirms the significance of this core business to our overall strategy. Our software development segment reports a turnover of INR 94.55 crores with a relatively modest year-on-year decline of 10.54%. The return on investment, an important measure of the capital efficiency, stood at 8.83, showcasing our commitment to optimizing returns of our stakeholders.

Moving forward, we are started -- we are reducing the overall number of days of outstanding, which still needs a lot more work as I see it. These figures are not just data points. They represent our journey through a challenging quarter and the steps we are taking to emerge stronger.

Leadership transformation, embracing changes are driving innovation. Leadership changes are an inevitable part of any growing organization. At Brightcom, these transitions are viewed not as a disruption, but as an opportunity to redeem, repose and renew our strength and strategic vision. Our new leadership team brings a wealth of experience, innovative thinking and a shared commitment to our mission. They are already working on strengthening collaboration, enhanced communications and align efforts with our long-term objectives and infusion of fresh energy and ideas in positioning Brightcom to capitalize on emerging opportunities.

Geopolitical dynamics turning challenges into opportunities. The ongoing conflict in Israel has been a sobering reminder of fragility of global stability. But Brightcom, Israel is more than just a geopolitical location. It is a hub of innovation, technical excellence and an integral part of our operational framework.

Commitment to innovation and growth. Innovation is a lifeblood of Brightcom. Over the past 25 years, we have consistently pushed the boundaries of what's possible, creating solutions that redefine industry and drive meaningful challenges, which is commitment to innovation as strong as ever. The launch of Trenova is a testament to this spirit. Trenova represents more than just a new venture. It is a bold step into the future, combining cutting-edge technologies with a deep understanding of market needs. Alongside this, our strategic shift in the operation and investments in emerging technologies are laying the groundwork for sustained growth.

Operational resilience and continued planning -- contingency planning, sorry. Reliance is -- resiliency is the hallmark of Brightcom's journey over the years. We have developed and refined contingency plans to navigate crisis and ensure operational continuity. The current geopolitical and leadership challenges have tested these plans, and we are proud of how effectively they have enabled us to adapt. Our commitment to resilience extends beyond contingency planning. It is embedded in our culture, our processes and our vision. The resilience combined with the proactive approach to the risk management ensures that Brightcom is well prepared for whatever the future may hold.

The road ahead of the vision for the growth and the leadership. As we look to the future, our vision is clear and ambitious. Brightcom is not just a company. It is a platform for growth, innovation and leadership. Our focus on expanding into high-growth markets and diversifying our revenue systems, leveraging technology to create innovative solutions that meet the evolving needs of our clients.

Building a resilient and adaptive organization that can thrive in a dynamic global landscape. Every challenge we have faced has strengthened our resolved. Every obstacle has been an opportunity to learn, adapt and grow. With the support of our stakeholders, the dedication of our teams and the strength of our vision, we are confident that the best days of Brightcom are still ahead.

My closing thoughts. The road ahead may be challenging, but it is also filled with promises. By embracing change, focusing on innovation and staying true to our values, we are building a Brightcom Group that is not just resilient but truly exponential.

Let me now hand over to Mr. Kallol Sen, Head of our overseas subsidiary, who will share more about our strategy and update on the global business trend. Thank you for your unwavering trust and partnership. Together, we will create a future that shines brighter than ever.

Thank you, everyone. I'll hand over to Kallol now.

[Operator]

Dear participants, kindly stay connected while we connect the management on the call. I welcome back the management. Please go ahead, sir.

[Kallol Sen, executive]

Hello. Good afternoon, investors. Thank you for joining us in this meet. I am not too good, and I don't like giving speeches. So let me come straight to the point. Hopefully, I can wrap it up within 2 minutes. We are at a very sensitive juncture as far as revenue of Brightcom is concerned, given all the challenges that we've been facing since the last 2 years.

Now what is Brightcom? Brightcom is an adtech company. For an adtech company, adtech is definitely important. But the key element is people. We have within our group, a huge talent base, and it's about these people, managing these people. That is critical for our success. And the whole team has been subject to a lot of stress and tension since the last couple of years. Uncertainty, of course. So what we are trying to do is to make sure that we retain the team, we grow the team, we motivate the team to go in the right direction because everybody, like -- I can understand investors' worry and tension, but that also -- when you try to contact the team in Israel or the other team, they get panicky.

So what we are trying to do is to retain that team, help that team grow with trust and our confidence. We have chosen -- I mean, Raghu has spoken excellently about our global vision and the markets that we plan to get into, which is primarily focused on Asia Pacific and EMEA as the growth drivers. We are trying to do that thing, and we are trying to do it from a base operating camp of our Israel team. It's a fact.

We are trying to mitigate the risk that, that team is facing currently today because a large part of our talent pool is situated in Tel Aviv, and that place is at war. We're trying to shift or relocate some of that team to outside Israel without giving anybody any panicky feeling. We are trying to keep them motivated and help us grow our business in other areas in other countries. It will take time.

I thought there have been a lot of doubts and concerns about our situation, information and all the things. You know what, as Raghu had said yesterday also, we will get Trenova in place before the end of this year. And there are certain legal issues and all, which we'll have to make sure because what we're trying to do with Trenova is to shift the ownership of our subsidiaries from Brightcom directly to Trenova, so that, that becomes one holding company of the operating subsidiaries. These things take time. So please don't get anxious and don't get agitated. We are doing things hopefully the right way.

In terms of results, there has been improvement in the results since the last few months -- last few quarters, so things are improving. Hopefully, we'll be in a better position and be able to deliver better results next year once things have kind of settled down. That's all. I think those are key points, which I wanted to discuss. Thank you very much.

I'll let the moderator take charge and pass the baton to somebody else. I think Shreedhar is right next in line.

[Shreedhar Reddy, executive]

Thanks, Kallol. Good afternoon, shareholders. This is Shreedhar Reddy. Brightcom has built its reputation as a leader in integrating cutting-edge technology with digital marketing. In a world where consumer expectations evolve rapidly, our ability to combine advanced data analytics, automation and innovation ensures we stay ahead of the curve.

Digital marketing is no longer just about visibility. It's about creating personalized, impactful experiences, and Brightcom excels in delivering precisely that. Our robust platforms process billions of data points daily, transforming them into actionable insights that empower our clients to connect with their base audiences, effectively and meaningfully.

With a strong foundation in artificial intelligence, programmatic advertising and adaptive strategies, we have consistently set benchmarks in the industry, reforming our position as a trusted partner for global brands.

Today, I am pleased to share our 3 core technologies: Artificial intelligence, quantum computing and audio technologies are shaping our vision and strategy to further elevate our capabilities.

Artificial intelligence, the architect of personalization. Picture this, a family sits down for movie night, and each member sees an ad to highlight this for them. For the parent, it's a new home appliance. For the teenager, a trendy gadget. For the youngest, a toy they have been dreaming about. They are these perfectly timed, personalized moments in artificial intelligence currently working its magic.

At Brightcom, AI is the architect of personalization. It helps us go beyond one-size-fits-all marketing by analyzing massive amounts of data in real time. With AI, we are not just guessing what people want. We are predicting it with confidence. Our systems learn from very click everything and every interaction, projecting experiences that feel personal and relevant. For example, our AI-driven platforms adjust campaigns on the fly, ensuring our client details are always reaching the right audience at the right time. This level of precision isn't just effective, it's transformative.

It builds connections between brands and customers tuning everyday, interactions into lasting relationships. And we are just getting started. As AI continues to evolve, we are exploring even more ways for it to enhance creativity, improve efficiency and deliver exceptional results.

Quantum computing, the gateway to tomorrow. Now let's step into the future, a future powered by quantum computing. Imagine a world where digital marketing campaigns adapt in real time to shifting consumer behavior, where trends are predicted before they have even emerged. The world isn't far off. And at Brightcom, we are preparing for it.

Quantum computing is a revolutionary technology that can process complex data sets at speeds unimaginable today. For marketers, it means the ability to analyze vast amounts of information instantly, uncovering insights that were once above and out of reach. It's like having a crystal ball, but one powered by science.

While quantum technology is still in its early days, we are already laying the groundwork to embrace it. Our collaboration with Qulabz and other innovators ensures we are part of this journey from the start. We are investing in research, building partnerships and equipping ourselves. With the tools to lead, then quantum computing becomes a reality for marketing. This is more than preparation. It's commitment to being ready for whatever comes next. At Brightcom, we don't just respond to change. We anticipate it.

Audio technology, the soundtrack of engagement. Now think about the voices we interact with every day, Alexa, Google Assistant, Siri. The smart companions that are changing how we search, shop and connect. But here, the existing part, they are also changing how brands engage with their audiences, and Brightcom is leading the charge in this new trend here.

Audio technologies from voice search to interactive ads are creating opportunities to connect with the people in more personal and memorable ways. Imagine asking your smart speaker for a recipe, only to hear about the product that perfectly complements your meal. That's not just marketing, it's conversation.

At Brightcom, we are optimizing campaigns to make sure our clients and brands are part of these conversations. Our audio ads powered by AI act in real time to user performances, creating experiences that seems as natural as chatting with a friend. This isn't just about technology. It's about using technology to tell stories, spark emotions and build trust.

Our vision, Brightcom's story in the market making. Every story has a vision, a direction, a purpose. Our is clear. To redefine what digital marketing can achieve. We believe in creating marketing that is smarter, more efficient and more human where technology enhances creativity without replacing it. To achieve this, we are not just investing in AI, quantum computing and audio technologies. We are weaving them into the fabric of Brightcom's operations.

We are partnering with top researchers and innovators, learning from the best and building solutions that deliver practical value. This journey is about more than staying ahead of the curve. It's about shaping new possibilities for our clients and delivering lasting value to our stakeholders.

Closing thoughts. Here, at Brightcom, our focus on technology is about making real progress in an ever-changing digital world. Technologies we are embracing imagine are not just tools. They are the building blocks of our strategy, and the best part, the journey is ongoing.

Thank you for being part of it. Now we'll go ahead with Q&A, please.

[Operator]

[Operator Instructions]

[Raghunath Allamsetty, executive]

Before, I answer the question from the investors, I would like to cover the questions what we received on the e-mail to us to answer. Maybe I think that could be clear some kind of air between the investor's questions. And also maybe just -- maybe I think it will save us some time for repetitive questions, okay?

So the certificate of incorporation of status of Trenova, why the delay?

I would like this answer to be given by Kallol. Is Kallol online?

[Operator]

Yes, sir.

[Raghunath Allamsetty, executive]

Okay. Let me just go through the next question what I have received. Revocation process, the fee, fines and penalties split, compliances split for submission, December 14th circular minus 20 days.

The answer what I think we can give is, we're actually aware of the 20 days of deadline and the compliance guys are burning midnight oil to make things happen for the company. I am confident we'll get there sooner.

What is the management readiness in terms of funds in local accounts?

Funds generally move from subs to parents. For such initiatives, we have mobilized and we find with the timing.

The next question is why bring U.S. subsidiaries in India standalone with INR 109 crores borrowing?

The borrowings appearing in the stand-alone balance sheet is advances received from the subsidiaries. They are from past. The balances are being carried forward for last few years and if you notice, there has been only a slight reduction in these borrowings this year.

Regarding the AGM, fiscal year '24, tentatively any dates in mind?

Yes. We are working towards the target next. You will hear soon on the date. We'll send notifications as soon as we see the visibility. And I'm now opening for the questions.

[Operator]

The first question comes on with Vidyashankar Ramakrishnan, an individual investor.

[Unknown Attendee]

Sir, first of all, hearty congratulations, not just for these numbers, but within 6 months, we have achieved what the company couldn't do in the last 14 months. 30th September '23 was the deadline for the FY '23 AGM. It finally got done on 21st November, which is yesterday. So obviously, the next question, which you have kind of answered, because we have already bypassed the deadline for AGM FY '24, which is 30th September '24. And this is a key compliance requirement. And technically, the next deadline is 31st December. So I hope for an early Christmas. Let us not extend beyond 25th December is my request, so that...

[Raghunath Allamsetty, executive]

Absolutely. I think we are on the track as of now. I think we are predominantly working towards a day closer to that. And I think, you would really have an early Christmas.

[Unknown Attendee]

Now the FY '24 audit in the calendar, which was given last week, it said that it will be done before the Q1 release, which is on 30th November as the revised date. So are we confident of doing it before 30th November? Or will it take somewhere in December?

[Raghunath Allamsetty, executive]

We are pretty much confident.

[Unknown Attendee]

Pretty much confident. So by 30th November, we should be getting the FY '24...

[Raghunath Allamsetty, executive]

Absolutely.

[Unknown Attendee]

So that gives you the confidence to do AGM '24 well before Christmas. Great sir.

[Raghunath Allamsetty, executive]

Yes, we are working on that only.

[Unknown Attendee]

Other question kind of getting answered, but the management readiness in terms of funds in local account because if you see the SEBI penalty, even that is not paid so far. It was due on 7th November. So I want to ask...

[Raghunath Allamsetty, executive]

I think this question I've already answered now. We are pretty compliant with that, too.

[Unknown Attendee]

Correct. So we should be kind of closing all the pending dues in the month of November. That should be the sense of confidence that we can lend to my fellow shareholders also. So that is the burning question, why that -- which I think others also pointed, no?

[Raghunath Allamsetty, executive]

Absolutely. That's the reason we are confident of getting this closed before early Christmas for you, right?

[Unknown Attendee]

Correct. And revocation before 14th December.

[Raghunath Allamsetty, executive]

Yes.

[Operator]

Next question comes from Vidyadhar Nayak from NTT Data.

[Vidyadhar Nayak, analyst]

The last two years has been pretty bad time for the shareholders, and shareholders have been with the company. So we would like to -- I mean, I would on behalf of all shareholders like to understand, what is it that the management is going to do to increase the shareholders' value in the coming quarters?

[Raghunath Allamsetty, executive]

I think I covered this point in my speech itself. I think we are putting all our efforts and getting the new mindsets and the kind of operating skill sets and the new management into the game. So I think all these factors would help us in really achieving a very good value addition for our shareholders. I think that is pretty much our goal.

[Vidyadhar Nayak, analyst]

Just another question. I hope that this is -- this being the first of the interactions with the shareholders, we would be -- you would continue this on a very rigorous and a periodic basis to ensure that you come to the shareholders and talk to us on what's going on in the company.

[Raghunath Allamsetty, executive]

Absolutely, we should be maintaining that, and we will. I think we are sure that kind of commitment and communication to the shareholders so that both the company as well as the shareholders will have kind of a clear and transparent picture about the company's growth and other instruments. And I think the support from the shareholders is prominent for us to really take forward the company to the next level.

[Vidyadhar Nayak, analyst]

Just last point, I believe this recording will be available on the company's website in a day or two?

[Raghunath Allamsetty, executive]

Yes. Both, AGM and today's conference call also will be put on the website.

[Operator]

Next question comes from Shankar Rao, an individual investor.

[Unknown Attendee]

Actually, I wanted to -- when we see sheer 40% to 50% drop in the top and bottom line also, sir, is it due to the inflicted SEBI or it is indeed due to the Israel war?

[Raghunath Allamsetty, executive]

I didn't get your question. You are talking about the share price or the decline of the revenues?

[Unknown Attendee]

No, no, no. Sales and profit.

[Raghunath Allamsetty, executive]

Okay. Okay.

[Unknown Attendee]

Yes, that marginal...

[Raghunath Allamsetty, executive]

This is because of the geopolitical situation in Israel, and we took a hit on that. And one of the key factors was that as well as there is a frequent key management changes. So I think given that has got affected kind of revenue generation for us. So as of now, I think we are pretty under control and we are forging forward to really take a very big value addition to the shareholders moving forward.

[Operator]

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day. Thank you, sir.