Ramco Systems LtdQ2 FY23IT - Software

Ramco Systems Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Capex

Yes

1 of 4 growth signals are positive — mixed outlook.

Revenue guidance

Category 3

→The company is confident about growth driven mainly by HRP (Human Resource Payroll) and Aviation segments, with ERP growth focusing on specific specialized areas rather than broad markets.
→Order booking has stabilized above $20 million per quarter over the past four quarters, indicating a positive trend for future revenues.
→Recurring revenue has improved, with a 15% year-on-year growth and an 11% quarter-on-quarter increase, showing positive momentum.
→Cloud orders currently comprise around 40-60%, indicating a shift to subscription-based, recurring revenue streams that are expected to expand further.
→Pipeline and deal wins, especially in HRP leveraging partnerships with companies like Oracle and Workday, are strong and expected to translate into revenue growth.
→The company aims for good to moderate internal growth and is making investments in technology and automation to enhance margins and accelerate implementations.
→Europe and other new markets show promise for further revenue growth.

Category 3

→The company aims for moderate to good growth internally but refrains from giving explicit forward-looking guidance at this stage. (Page 10)
→Consistent order bookings above $20 million per quarter over the past four quarters give confidence for future growth. (Page 11)
→Growth drivers include focused segments like HRP (Human Resource Payroll), Aviation, and selective ERP verticals where they seek dominance. (Page 11-13)
→The recurring revenue stream is improving with a 15% year-on-year growth and an 11% quarter-on-quarter uptick in revenue, indicating a positive momentum. (Page 4)
→Investment cycle in product development is nearing completion; now focus is on technology upgrades and automation to accelerate implementations and reduce costs, enhancing margins. (Page 12)
→They expect to approach EBITDA breakeven within the next three quarters given cost optimization and margin improvement efforts. (Page 9)
→Pipeline of deals and order book remain healthy, supporting future revenue growth potential. (Page 8, 13)

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→As of Q1 FY24, Ramco Systems reported borrowing of Rs. 8 crores.
→There was no direct mention of any plans for new fundraising through debt or equity in the recent earnings call transcript or fact sheet.
→Management indicated that they are focused on improving order bookings and revenue growth with existing resources.
→They are also undertaking cost-cutting measures and optimizations to reach EBITDA breakeven, suggesting reliance on internal cash flows rather than new fundraising.
→Any decisions on additional provisions or financial strategies are reviewed quarterly.
→Currently, no explicit guidance or announcements about future debt or equity fundraising have been provided.

→The unexecuted order book as of 30th June 2023 stands at approximately $196 million, the highest in the company's history.
→Approximately 25% to 30% of this unexecuted order book is typically consumed as revenue each year.
→During Q1 FY24, around $23 million in new orders was added, and $17 million was consumed from the order book.
→The unexecuted order book has remained relatively stable around $190-195 million over recent quarters, reflecting consistent order intake.
→Order bookings have stabilized above $20 million per quarter for the past four consecutive quarters.
→Strong pipeline and steady bookings across segments (HRP, Aviation, and select ERP areas) are expected to drive future growth and order inflows.

Yes

→The company is focused on continued investment in products and technology platforms as it is a product and technology company.
→There is no intention to reduce investment; rather, the focus is on ensuring the "right" investment decisions.
→Investments include developing new toolkits to ease and accelerate implementation and improve payroll processing times.
→Significant automation investments are underway to improve delivery capabilities, increase productivity, and reduce headcount.
→Investments in cloud-based SaaS business are expanding, supported by partnerships that help reduce marketing and sales costs.
→The investment phase in core products is nearing completion, with current efforts aimed at technology upgrades for better implementation efficiency.
→No explicit mention of large new capital expenditures but strategic technology and product-related investments continue to support growth.

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