Ramco Systems Ltd
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Ramco Systems Ltd
Earnings Call Analysis
Summary
Q4-2024
Ramco Systems reported quarterly revenue of $63.92 million and turned EBITDA positive, showcasing a strategic turnaround. Recurring revenue grew 13% year-over-year, and Q4 order bookings rose by 19% to $27.9 million. The unexecuted order book stands at $188 million, driven by significant deals, including a $10 million-plus contract with Korean Air. The launch of the SaaS-based Ramco Payce platform has garnered strong interest, with successful roadshows and high demo requests. Future growth focuses on platform modernization and leveraging key partnerships with Deloitte and BDO.
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Ladies and gentlemen, good day, and welcome to Ramco Systems Q4 and FY 2023/'24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anmol Garg from DAM Capital Advisors. Thank you, and over to you, sir.
Thank you, [ Neerav ]. Good evening, everyone. On behalf of DAM Capital, we welcome you all to Q4 FY '24 Conference Call of Ramco Systems. We have with us Mr. Abhinav Raja, full-time Director; Mr. Subramanian, CEO of the company; and Mr. Sandesh Bilagi, Chief Operating Officer; Mr. R. Ravi Kula Chandran, CFO; Ms. Gayathri, VP Finance; and Mr. Vijay Raghavan, Company Secretary. I'll now hand over the call to Mr. Abhinav for his opening remarks. Thank you, and over to you, sir.
Good evening, and thank you, everyone, for joining the Q4 FY '24 earnings call. As you might have already read, we announced our financial results last evening, and we'll go over the results and highlights on our call today. We reported a revenue of USD 63.92 million, and the global consolidated income of Ramco Systems Limited was $64.41 million or about INR 529.9 crores.
In the past few quarters, we've been indicating that we'll take all our efforts to get the company back to EBITDA profit and positive and consistently improve the bottom line from there. And we're happy to say that in this quarter, we have done EBITDA positive, and we will aim to also maintain it in the coming year.
Our emphasis on innovation is helping us build transformation and drive future growth. One of the significant milestones this quarter earlier was the launch of Ramco Payce. It's a modern SaaS-based platform, which is giving good traction [indiscernible] various markets. To date, we had over 13 events across India, Asia, Australia, New Zealand, Middle East, where Ramco has been -- Ramco Payce has been demoed to several customers and prospects, and we've received tremendous response and a lot of demo requests to this. This is a testament of Ramco's commitment to innovation and excellence in payroll.
Additionally, we've also secured a record multimillion-dollar deal, which is one of the largest deals in the history of Ramco Systems signed with Korean Air. This strategic engagement will accelerate tech transformation [indiscernible] new engine maintenance facility, which would be Asia's largest engine MRO facility.
Our commitment is to bring in rapid technology modernization across all our offerings to ensure we have the best-in-class design enterprise apps with the best user interface embedded with generative AI, along with a rich feature set inside. Ramco focuses on offering an enhanced scalable and stable platform, thereby aiming to ensure there's good client satisfaction and good business agility as well.
With this brief background, I'll hand it over to Sundar to walk you through further details.
Thank you, Abhinav. Good afternoon, everyone, and thanks for joining this call. Let me quickly take you through the company's performance over the quarter and the year. As Abhinav already mentioned, the revenue stood at about $63.92 million. And also we turned EBITDA positive last quarter. Despite challenges and headwinds, our recurring revenue grew at a healthy pace of 13% year-over-year compared to 5% last year.
Q4 witnessed a 19% year-over-year increase in order bookings from USD 23.4 million to USD 27.9 million this year. Our unexecuted order book stood at a healthy $188 million, giving us a good start to the next year. Our cloud orders that are primarily subscription-based SaaS solutions continue to grow at a healthy pace and with a 60% revenue recorded from the cloud or SaaS customers. This really forms a part of our recurring revenue. We signed 11 deals over the years about $1 million. And in Q4, we added, as we mentioned before, the Korean Air, which is a very large deal for us.
On partnership on alliance front this year witnessed the onboarding of Deloitte and BDO as a key strategic partner to redefine the payroll landscape, and we continue to work with them very closely on getting into the market. Our turnaround efforts are underway, and we are beginning to see positive signs of progress. EBITDA turning positive is one such. Our strategic direction will remain focused on platform modernization and transformation. With our rich and extensive IP and the power of SaaS-enabled platform, we continue to offer cutting-edge technologies and swift deployment, thereby delivering excellence.
In closing, I want to mention that our customer centricity, our focus on operational excellence and the new product lines such as Payce will bode well for the future. We are confident that our growth plans and strategic directions drives significant value for our stakeholders. And thank you for your continued support. I have nothing else to say. We welcome your questions now.
[Operator Instructions]
The first question is from the line of Manan Poladia from MKP Securities.
Sir, first of all, congratulations on turning EBITDA positive. Sir, my first question is with regard to the Air Korea order that we've gotten. You said it's our biggest order in one of the history and you said it's a couple of million dollars. I know you usually don't give numbers, but if you could indicate as to whether it is a sub-$5 million order or north of $5 million.
Secondly, if you could also indicate what sort of timeline would we see this revenue trickling in or something like that or just so that we can get a sense of how MRO orders will work in the future?
So Korea is -- we said it's the largest order, it is to the north of $10 million, let's put it that way. We don't want to give an exact number. We don't give -- but when we say it's a large deal, it's north of $10 million. But again, that is not indicative of all the MRO orders, right? It depends on what kind of the product implementation that we contracted to do. So this is fairly large, and this is north of $10 million.
And the execution timeline, if you could give us a sense of how that revenue should trickle in?
Typically, our execution timelines, including the AMCs would really -- we'll be looking at 5 to 7 years. That would be the indicated timeline.
And that would be front-ended, right? Like I'm assuming the first 2 years would be maybe 40% and then 15%, 20% going forward later on or something of that sort?
kind of it is structured in a very similar way, but not exactly those numbers.
Right. Fair enough. I understand that. Also, sir, secondly, we've launched Payce recently. Congratulations on that. My question is, have we been seeing a lot of traction in Payce? I know it's only been maybe 2, 2.5 months or so since we launched it. But what sort of traction have you been seeing? Anything on that?
So in terms of -- there are definitely 2 parts to it. Right now, we are doing the road shows, and we have done close to around 9 road shows across the world, including 2 in India, we have done it in Australia, New Zealand -- actually 13 plus, even yesterday we had completed one, so many road shows. It has been received very well by the participants. And in fact, the number of demo requests have been significantly high. So that is a very clear indicator of the future of Payce. The amount of interest and the amount of -- the kind of the feedback that we have really got from those events have been phenomenal. But it has to convert into a deal. So right now, there is a very active interest in demos, and we are doing those demos to those customers at this point of time. What we could have done over a period of 2 years in terms of active marketing and selling those kinds of demo requests, we have got this through this roadshow event because of superiority of the product.
And just to add, I think these conversations, given that we deal with mid- to large-scale enterprises. Typically, it takes 2 to 3 quarters before it transitions from demo to possibly orders and then [indiscernible]. So we'll only start to see this post-H2.
Right. Just one last question, coming back to the MRO end of things. Now that you've received such a large order from a flag carrier and a national carrier, et cetera, it seems fairly large. I'm assuming by your side. If you could just give me a sense of are we seeing more traction in terms of MRO orders now that we've landed such a big client? Like is that working in terms of the advertising benefit that we get from having such a large carrier on our clientele list?
Yes. I think it is both yes and no question. The reason is that, see, if you look at our payroll, market payroll, it's a very horizontal market. So which means that we can renew any customer in any industry to see our customer prospect, right? That is something we can always do. But whereas the airline MRO, right, particularly in Indian MRO and airframe MRO are very niche fields. So not that there are too many operators there, but we have seen a lot of active interest.
It is based on the solution that we have at this point of time. So we do see an active interest. I think the market potential is pretty good. But the number of opportunities that we are chasing are few and they look pretty good.
Next question is from the line of Dhananjai Bagrodia from ASK Investment Managers.
[Operator Instructions]
So what are some of the challenges as that you all have now revamped your product, you all have done the hard work of now getting the product up to date. So how are we seeing traction? I know it will take time, but how are we seeing traction? And would that be something where we will see fixed costs be similar, let's say, this year and next year but the j-curve-hockey-stick growth, which you will see with our customers that would be significant for us. Is that something we're looking at?
That is something that we are expecting at this point of time. But remember that we are in very initial stages. And as we tell the road shows were very good, 13 plus events went very well. The demo requests have been very good. B2B cycle is typically 6 to 9 months for somebody to do. So by the end of maybe the next quarter or possibly in the H2, we will get to know what kind of traction that we will have in the market with this piece. That is number one. But in terms of our fixed costs, we have done multiple things. One is that you have seen our EBITDA getting positive because we have reduced a lot of the cost that we really have. That is number one.
And second thing is that by onboarding partners like BDO and Deloitte, we are also looking at primarily how do we really expand our market. How do you go or reach to more customers without really adding more sales and marketing to our effort? So that is also working pretty well. But we will see the real momentum going into the Q3 of this year.
So sir, coming to that, just to understand now [indiscernible] BDO and who've done the contract with, how does the contract work in terms of sales expense because is it -- do we do a profit share with them? Is it a revenue share? Or do we book it up on our cost? How does it work?
It is more -- very simple contracting model because they provide services to their end customers. And they do have contract routine customers, and we have the price point to BDO or Deloitte that is one model. The second model is that we provided -- we provide services to the end customer. And in the countries where we don't have a presence, they provide service. So it's a very transparent model and a very simple model, it's not too complicated by any means.
Fantastic. And lastly, how is sales force been in terms of now revamping them with the new products? Is that all trading been done? Do we have any more additional expenses on that part?
We will have additional expenses. We have provided for additional expenses. But again, with our partnerships and the road shows, I think we have like hugely optimized cost with respect to that. So to that extent, what we have done is that we have spent, we have spent what is really necessary, but we have really expanded our market presence.
And we'll also be very selective in terms of which markets we'll add more sales folks as well. We don't want to expand too aggressively into new areas because we think the depth is quite large in our existing markets itself. The overall payroll market is over $50 billion globally, right? We are still a very small company compared to the whole size. So we will first ensure in the first 12 to 18 months, we get good traction in the existing markets and then we can always explore the territories of further growth.
So to answer your question about when can more aggressive growth come from, I would say since we're part of the -- since we are in the turnaround journey as well right now, I would say it will still take another 12 to 18 months to expect any accelerated growth. Right now, it's all about EBITDA and cash control, making sure that we remain profitable as a company.
Next question is from the line of Vivek Kumar, individual investor.
Sir, my question is on this MRO deal. So if you take away the deal, can you maintain what are the basic traction that you feel you can maintain in the defense thing, also one year back, we were told that there are defense opportunities in U.S., so if you can give some commentary on this? Our order billing traction in defense, where are we seeing opportunities in aerospace and defense and U.S. defense opportunities, these 2 things. Because [indiscernible].
Yes. We -- last quarter, we had already, at that time, we said that it is being focused for even into the heavy segment, which is the smaller segment and we are ordering into MRO and as well as the defense-related area. And that was the guidance we have given. And from the defense, it usually takes a very long gestation period. That time also, it's around 18 to 24 months, what we are seeing.
And right now, MRO has moved faster than other because this is in the non-defense area. So this has continued and probably more of the opportunities what we are seeing serious ones are in the MRO area, and will see how our defense strategy works on. But the other deal which we had announced at that time, General Atomics which has gone live as per the plan. But that is the one color I can give. So we are -- see how it's progressing.
You are still positive on U.S. defense because you have invested fairly there...
We have not a significant investment. It is the -- we had our offices and subsidiaries, which we have created from the structural perspective, that are not from the lot of investment we have not pushed this. But we knew it was going to be taking long term, and we are just seeing that. And it's also seen that the spending coming from the government and other multiple factors which will determine that. But currently, as we said, we are more bullish on the MRO side.
Yes. And also one other thing to add is that, we have the same product that can cater to different segments. We don't have to go and build it again. So if we have an engine MRO that can really cater to the civilian structure that can cater to the government structure, so our product is that robust. So that is the power of the product. So at this point of time, wherever we are seeing opportunities we are pursuing those opportunities aggressively. And while we pursue all these opportunities as literally what can really help us in terms of refining and making our products more rich. So that is what we are really looking at.
So if I can take a 2- to 3-year view, what are the products we think will drive our order booking and sales and which are finding tractions, which markets of its products, a few things are going to drive...
As an organization, right? I mean since we are in -- as Abhinav mentioned, we are in the turnaround process and terminal journey takes time. But having said that, we are not really focusing on the market as actually payroll is #1 because payroll is a large market for us. And in terms of it's a very horizontal market, and we are present in this market, and we see an opportunity to grow. So that is undiluted focus. That is number one. The second one is that with respect to the aviation, wherever we are in Chile, that can be really rolled out in other countries, Chile is there. And the MRO is an opportunity. This is a very niche product we have in this segment. We have built those products already. It will be long sometime, pretty soon, but the point is that we focus on this. So we keep -- as an organization, we keep our focus on these 2 industry verticals.
But having said that, there are other industry verticals also we are present. So where we are doing what we said in our script, primarily, we have the modernization while we could keep modernization the other pieces -- other products that we have. So I would say these 2 are very high focused. And while all other things are getting modernized and refined. So that's how we really look at it. We don't want to really focus on too many things at the same point of time.
[Operator Instructions] Next question is from the line of [ Harsha Mulchandani ] from [indiscernible].
I wanted to understand -- this year, where do we target in terms of execution of the order book and can we expect the EBITDA to reach double digit again this year or it would take longer?
We don't want to get -- we don't want to make any forward-looking statements, and we are very cautious at this point of time because it is also a year of turnaround. We want to make sure we make all the investments. We continue to deliver excellence to the customer. We continue to model in a product.
So we think we will stay EBITDA positive. But beyond that, we don't think we can really give any forward-looking statements.
Okay. And also wanted to understand between the standalone and consolidated numbers, there was a good growth on the stand-alone business. And overall numbers were flattish at a consolidated level. So is there something which has moved between the businesses and if you could help us understand what's driving the stand-alone number more than the consolidated number?
The standalone number considers the intercompany transactions within the subsidiaries, [indiscernible] subsidiaries, we charge them for work being done from Chennai on an offshore basis. So that will make a difference between the consolidated numbers and the standalone numbers.
But it's a better view to see everything in a consolidated because they are not independent from that perspective. So our business is interlinked all over. So a better way to look into results into the consolidated one.
Okay. Fair. And just last one more question. We closed the year at almost more than INR 500 crores of top line. So out of this, you said 60% of the revenue was tax-related. So is it on the entire top line or some subset of this top line for the year?
Can you please repeat, what is that? 60%...
Out of INR 526 crores top line, what revenue is recurring in terms of your SaaS revenue-led revenue? And what is the implementation or one-time revenue split?
Yes, it is mostly from whatever we get that 60% is from the cloud orders, which could be the implementation, it could be in the subset, It will be a lot of things. It's based on the cloud-based deals that we really go to the market with -- interest from that. I mean that you are seeing a still increasing pattern. And for the subscription, if you want to really look at it, you have to look at in terms of the AMC or subscription back, which is also showing a steady healthy growth. The recurring revenue is showing a steady healthy growth. The cloud orders also showing a healthy growth.
Yes. recurring order, if you see in our fact sheet, recurring revenue, what we have given, it is still recurring revenue, it doesn't include any services there.
Unfortunately, though this is about INR 320 crores, the recurring revenue is INR 320 crores. We want to back the number.
Okay. So out of INR 526 crores, INR 320 crores is recurring revenue. That understanding is correct, right?
Yes.
Correct.
Next question is from the line of Viraj Mithani from Jupiter Financial.
My question is regarding this coordinated order, which is upward of $10 million. Can you tell me what will be -- what has changed after that and what will be positive for us after this -- we are more in terms -- we are more visible to the other big airlines in terms of MRO?
Yes. So I think if you really look at it, it is one of the largest airlines in the world and it is very reputed. And when -- they made a selection based on a complete due diligence. They spent a lot of time with us. They made the due diligence. They played around with the product. We make sure that it is robust [indiscernible] Korean Air chooses us, and it gives us the extra credibility in the market. So other people who are really looking at it will absolutely look at our product because it has been chosen by someone like Korean Air. So that has made a very big difference. Right now, we are focused on executing it. So that is our immediate focus is that right now.
And sir, are there any performance benchmark on that order, I suppose if you are not able to do it, the order would be canceled or reduced or something like that?
No. I think we do have SLAs and they have SLAs in terms of how to really help. It is a good contract that we really went to them with, with all the necessary clauses. We have made sure that the one area that we have really improved as part of the turnaround is to have the right contractual clauses, and that is something that we have really tightened, and we are pretty confident about our delivery because this is based -- because they have come and they have played around with our product, and they were satisfied and that's why we got the order.
So I don't think there is any issue out there. But having said that, we -- as an industry, as a company, we are always paranoid. So we'll make sure that we deliver it extremely well.
Okay. And that's very nice to hear sir. And how is this order structured like it be executed over what period of time, you said say 5 to 7 years...
Viraj, sorry to interrupt you. Your voice is not coming clear.
Okay. Am I clear now?
Yes, can you speak something?
I'm clear now? Am I clear now? Okay. Sir, how will this order be executed? Like can you explain me the execution of this order, like would be the SaaS income in AMCs or how? As a layman if you can explain to me.
I have explained it earlier on this call. However, in the normal contract like license sale and then the implementation, then we get into [ AMC, ] so nothing different from any other. We just answered some previous color on the same...
So it is like 20%, 40% and then the AMC. This is the way to look at the order.
Into further detail on that one, I think it would -- customer contracts, we don't discuss but it's the usual norm, whatever was there, I think it is the similar what we've said in previous response...
And sir, this is another question. Last question from my side. Since we have turned EBITDA positive this year, at what level of order inflow will be PAT positivity like just your sense on, I won't hold you account, it just -- it is layman for me to understand the company.
So see, right now, the turnaround is underway, and we are seeing green fruits at this point of time. We have seen some good wins, good contracts and EBITDA has become positive. A lot of good things are happening. But we are not able to answer your question when it will get PAT positive at this point of time. Maybe sometime by end of this year, we'll be able to answer that. Right now, we are not ready to answer it.
[Operator Instructions]
Next follow-up question is from the line of Manan Poladia from MKP Securities.
Yes. So my understanding basis our last couple of calls, there has always been that expense reduction has also been a part of our turnaround strategy. And I think we've done quite well on that side. We've come down to INR 130-odd crores or so of run rate. My first question is an accounting question related to that. Is that the sort of run rate we should considering for the next 4, 8, 12 quarters?
I think you can take that as a guidelines. There is a baseline run rate or the expenses if you're asking, yes, you can consider that...
Could you give me a mix of what percentage of that is fixed and variable?
No, we don't want to get into that at this point, but we can take the overall cost to be there.
Right. Sir, my second question is on something that one of the previous gentlemen asked with regards to about INR 320-odd crores being the recurring book and INR 520-odd crores being the implementation, et cetera, one-off revenue. Given that we already have, I think, a $188 million order book, is it?
Yes.
Is it possible to say that the mix of subscription as well as one-off revenue in excess since we already have that order book available with us. Is it fair to give some sort of forecast with respect to mix and how much we will grow?
No. We don't want to get into the forecasting business because it depends on a lot of things. But what we would say is that our order book is healthy and many of us we have one of the multi-country deals. It depends on where the deals pan out, where the implementation pan out based on the customers, how they are working. So we would not let into getting into the forecasting thing, but all we can say is that our order book is pretty healthy, and our teams are busy executing those orders.
Right, sir. That's great to hear. Just one last question. If you have any internal targets of -- at what pace you would like to grow? I'm not saying this is a forecast or anything if you could just give me whatever you internally feel and what you target for your team?
Yes. That's why it is internal. We can't really disclose it. But absolutely, please believe me, we are very target-oriented company. We have targets for everything. So we are -- that's part of the turnaround rate, how can you have a turnaround without a target? So we have it, but it's -- I can't really disclose that, unfortunately.
2, 3 things here. I think Sundar clearly, looking to be healthy order book, recurring revenue and EBITDA positive. You link all these 3, you'll know what we are saying.
[Operator Instructions] As there are no further questions, I will now hand the conference over to the management for closing comments.
Thank you all for joining the Q4 call of Ramco Systems. I hope you've got a decent sense of our numbers. As we have mentioned earlier, this is a year of transformation for us. So our main focus will be on executing the orders that we have in-hand well, making sure that customer satisfaction continues to improve, making sure that we also maintain EBITDA positive.
And more importantly, also ensure that the new products that we have launched to gain good traction in the market as well. So we look forward to giving you more exciting updates in the coming quarters, but thanks for patiently listening and joining the call. Have a good day.
Thank you very much. On behalf of DAM Capital Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.