IRIS Regtech Solutions LtdQ1 FY22IT - Software

IRIS Regtech Solutions Ltd

Q1 FY22 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 3

→The company expects a natural increase in Annual Recurring Revenue (ARR) next year, factoring in deferred revenues, targeting around Rs. 47 crores for FY23.
→They project revenue growth between 10% to 15% without external fundraising, with an adjusted expected growth of 11%-12% when factoring in deferred revenues particularly from South Africa.
→Growth is driven primarily by the CREATE segment, which saw a robust 26% growth, and steady growth in the US and European markets, especially through the IRISCARBON SaaS platform.
→Revenues have increased at a CAGR of 18% over the last five years, with expenses growing more slowly at 11%, indicating improving operational efficiency.
→The company plans to accelerate growth further post rights issue funding and with senior hires in the technology team.
→New regulatory mandates and expanding product offerings like ESG filings, IRP (Invoice Registry Portal), and transporter app segments are expected to contribute to revenue growth.

Category 3

→Revenue growth expected between 10%-15% annually without additional funding.
→Annual Recurring Revenue (ARR) increased from around Rs. 40 crores to Rs. 47 crores, indicating stable revenue streams.
→Deferment of filings in South Africa delayed Rs. 3.25-3.5 crores revenue recognition to next year, likely boosting future revenues.
→Rights issue planned to raise capital for growth in new markets and initiatives, potentially accelerating expansion.
→Operating costs rose by 18%, including a 12% rise in employee costs, but controlled for efficient spending.
→Profitability improving as company cleared employee dues and founders now drawing salaries.
→Cash generation projected around Rs. 4-5 crores next year from current operations.
→Growth fueled by new mandate opportunities (e.g., US energy market, European ESG filings) and technology enhancements.
→Attrition rate around 20%-21%, with talent acquisition stabilizing post funding slowdown in startups.

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Yes

→A rights issue is planned to raise equity funding but has been delayed to allow the market to price in recent company performance.
→The rights issue will not be priced at a significant discount; it may be at market price or even a premium.
→Promoters currently do not have the funds to subscribe to the rights issue.
→The rights issue aims to raise capital to support growth in new markets and initiatives, especially related to expanding XBRL reporting opportunities globally.
→No mention of specific new debt fundraising; focus is on equity rights issue.
→Company expects to generate Rs. 4-5 crores cash next year from operations at current performance levels.
→The timing of the rights issue will be decided soon after market conditions stabilize post-earnings call.

→The order book mentioned during the call is approximately Rs. 67 crores.
→This includes an ARR (Annual Recurring Revenue) component of around Rs. 47 crores for the fiscal year 2023.
→The ARR component includes a South Africa component of approximately Rs. 49 crores.
→Some contractual components of the order book may spill over into the next financial year.
→The company presented the current orders received in their presentation but did not disclose specific current pending orders during the call.
→Expansion into some geographies like Chile was mentioned with sales of licenses for SEC filings.
→Overall, the order book reflects both recurring revenue and multi-year contracts.

Yes

→The company plans to raise funds through a rights issue to support a bigger growth path and new initiatives (Page 6).
→The raised capital will be used for growth in certain markets with new opportunities such as expanded XBRL reporting mandates in the US and Europe (Page 6).
→No specific current or future capital expenditure amounts are mentioned, but the focus is on strategic investment in market expansion and technology strengthening (Page 18).
→The company is also strengthening the technology team significantly, with a very senior technology person joining soon, indicating investment in technology capabilities (Page 18).
→Overall, capital investment is geared towards growth, product development, and market expansion rather than heavy physical capex (multiple pages).

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