Ladies and gentlemen, good day and Welcome to Newgen Software Technologies Limited Q2 FY 2022 Financial Results Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Deepti Mehra Chugh from Newgen Software Technologies Limited. Thank you and over to you, ma'am. Thank you. Good evening, everyone. I am Deepti Mehra, investor relations, Newgen Software Technologies Limited, and I welcome you all to the Q2 FY 2022 results of the company. I hope all are keeping safe. Joining with me today from our management is Mr. Diwakar Nigam, Chairman and Managing Director; Mr. T. S. Varadarajan, non-executive director; Mr. Virender Jeet, Chief Executive Officer; and Mr. Arun Kumar Gupta, Chief Financial Officer. Before we move on to the discussion, let me highlight that this call may contain certain forward-looking statements concerning Newgen's future business prospects and profitability, which are subject to a number of risks and uncertainties, and the actual results may vary materially from the forward-looking statements. Past performance may not be indicative of the future performance. The company does not undertake to make any announcements in case any of these forward-looking statements become materially incorrect in the future or update any of these forward-looking statements made from time to time on or by, on behalf of the company. For further details, you may refer to the Investor Relations section of our website. I now hand over to Mr. Nigam for presentation of the results, which will be followed by the Q&A. Thank you. Good afternoon, everyone, and thank you for joining us on our Q2 FY2022 earnings call. I'm pleased to present another quarter of profitable growth with margins and cash improvements. To begin with, I'm glad to announce changes in the management structure. Virender Jeet has been promoted to take up the role of CEO and Tarun Nandwani has taken up the role of COO in the organization. Both have played key roles in shaping the company over the last 25 years and have been pillars of Newgen. With this transformation towards a professional structure, I firmly believe this will bring in new energy in the company and position us strongly to tap significant global opportunities. This internal promotion also reflects the company's core philosophy to invest in developing leaders in the organization and bring up Newgen as a family. We all continue to be enthused by the same vision, focus and strategy with renewed vigor. On the operational front, we continue to work on a hybrid model. The senior management is now coming to office 2, 3 times a week. Project teams are now coming to work together as and when needed. Face-to-face meetings are happening. Training in person are taking place for new joinees. Our sales and business people have started to move to customer location as things are opening. We hope that by the end of this quarter, this will get further streamlined. In terms of performance for the quarter, revenue witnessed a growth of 20% to reach INR 186 crore during the quarter. All the geographies have performed well and continue to grow steadily. During the quarter, especially EMEA region has witnessed a growth of 59% and India has witnessed a growth of 40%. We continue to help our existing and new customers in creating digital capabilities across their modern-day business needs. The quarter marked significant additional business from our existing customers again. We also added nine new logos during the quarter. Some of these logos are in the process of being built currently. Some key orders during the quarter included providing a solution for a subvention system to government organization in Singapore. Providing iBPS platform upgrades for leading private sector bank in India. Rolling out our commercial loan origination system solution for a leading bank in Kenya, offering full range of financial services. Providing an enterprise-wide banking solution support and a solution for banking entities in the nationalized bank in India. Our annuity revenues continue to grow stronger. Annuity revenues were at INR 115 crores, witnessing a growth of 17% YOY. This represents 62% of our business now. We continue with our transition towards subscription revenue, which witnessed a growth of 23% YOY, reaching to the INR 61 crores on SaaS. We witnessed a growth of 35% YOY. Banking and financial services and insurance continue to be our key growth drivers. Our offerings and opportunities. On the product front, our NewgenONE Platform is receiving good acceptance from the customers and system integrators. Newgen's market differentiation is based on our breadth of capabilities for automating complex processes at scale. Our platform manages rapid application development with business complexity, enterprise-wide data access, customer experience, and integration with backend applications. The future belongs to simplifying the way we work. Simplifying complex content and process requirements of our customers. This includes offering enhanced self-service experience, handling business complexity with full context and simplicity, automating processes, eliminating paper and manual interventions as much as possible, and using data insights to offer personalized services and products. Our platforms does just that. Reinforcing our strong position in the industry, we are featured in the 2021 Gartner Magic Quadrant for Low-Code as a niche player this quarter. This is our second time in a row that we have appeared in the Low-Code quadrant. The key focus areas of our platform direction from here on are to improve customer and employee experience, enable rapid application development, facilitate intelligent automation, and enhance the platform scalability, security, manageability, and deployment. Companies are fast adopting digital-first business practices and ways of working to withstand the changes caused by pandemic and ensure their long-term success. Newgen is the right long-term partner in this journey for the companies. As an organization, we are taking all the necessary steps for creating a solid foundation for continued and sustainable business momentum. Low-Code development is becoming a large wave in the world. With our iBPS platform, we are one of the frontrunners in Low-Code process developments. We are enhancing it for rapid app development as well. We see unlimited opportunities worldwide in this space. Profits and margins. We have maintained our growth momentum on the profit margins. Our revenue stand was up by 13% YOY at INR 47 crores and profit after tax up 28% YOY at INR 37 crores. We continue to invest heavily in our global expansion, our products, and our people. During the quarter, R&D expenses comprised about 10% of sales, and marketing expenses comprised 21%. Our balance sheet is strengthening with every quarter. We have a cash and bank balance of INR 298 crores, the net cash generated from the operating activity reached INR 104 crores for the first six months of the year. Our debtor days continues to show improvements. Our net trade receivables was INR 174 crores at the end of the quarter. Which resulted in net DSO of 87 days on the back of robust sale and collection. For the half year ended September 30, our revenues were INR 345 crores, witnessing a growth of 20% YOY, and a profit after tax was INR 59 crores, growing at 54% YOY. We are happy to be back on track on our historical growth path and hope that uncertain environment is behind us and markets open up quickly. On the GSI relationship, our partners are stepping up and taking greater interest in working with us. Our pipeline is strong and growing over the last year across markets in APAC, EMEA, and U.S. We are seeing action in newer geographies like Australia as well. With this, I end my commentary on the results and wish you a safe and happy festive season. We are now open to Q&A. [Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone wishing to ask a question, may please press star and one on your telephone. If you wish to withdraw yourself from your question queue, you may press star and two. Participants who have pressed star and one, you may ask for your questions. Ladies and gentlemen we will wait for a moment for the question to resemble. Participant who wish to ask a question, you may please press star and one. For the reminder, you may please press star and one.] The first question is from the line of Kunal Shah from Carnelian Capital. Please go ahead. Hi. Thank you for the opportunity, and congratulations on good set of numbers. I had one accounting query. Sir, Kunal sir, there's a lot of disturbance in your line. Okay. Just a moment. Sure, sir. Is it better now, sir? Absolutely. Please go ahead. Yeah. I had basically 1 accounting query. If I observe over the years, the accounts, I had 1 observation where our bad debts over the years have ranged, specifically in the last 3 years, almost in the range of 12%-15% of our PBT. Just wanted to understand how do we go about revenue recognition and about the collection policies and all. If you could basically help understand the revenue and collection cycles a little bit, it would be of great help. Sorry, Kunal, can you repeat the question once again? We couldn't hear you properly. Yeah, sure, Deepti. Basically, while going through the accounts for the last three years, I had an observation where bad debts, what we book in the accounts, forms almost 17%-20% of our PBT. That is profit before tax. Just wanted to understand how do we go about the revenue recognition and collections. If you could help understand the revenue and the collection cycles, that would be of great help. Hey, Kunal, thanks for the question. I will try to answer and probably we can seek more data from Deepti. You are right in terms of in any kind of a product business, we do expect some amount of provisioning and write-offs. Generally, they should remain in the range of between 1%-2.5%, depending on the markets you are operating in. Generally, we will have more cases of early default in markets like India and EMEA, and predominantly government and other territories. Okay. Right now the provisioning is happening through the ECL method, which is typically looking at the past trend. What has happened somewhere during the years where the currency issues were very predominant in Africa, we had higher provisioning on those years. As the times have changed in last few years, they have substantially started getting reduced. In fact, this quarter, we had almost negative provisioning in terms of having collected also what has been provisioned. It is improving. Also in the forward, we are looking there is going to be a point of default. It could be between 1.5% of the whole revenue. That's the way we look. We don't look it at the PBT level. From the revenue realization front, I think the realization practices are the ones which are very quite standard in the industry. On the license business, we have realizations as soon as the economic value is transferred, as soon as the license gets transferred and deployed at the customer site. On the services side, the revenues are realized as the services are rendered to the customer in terms of the milestones as well as realization of the effort we have put in. Does that answer your question? Yeah. I mentioned how does the collection part goes. Outstanding greater than 6 months or greater also forms a very good portion of the overall data. While revenue recognition I could understand, how does this collection go? I mean, is it linked to milestones on the basis when we receive from that 90 days or on completion of certain I mean, how does that part work out in both the segments of the business would be helpful as well. Yeah. On the license, generally, the collections are not linked to any milestones. They are realized as part of whether they are advances or on deployment of the software. On the services, they are on the milestone basis, predominantly on milestones. Those are the cases where sometimes the milestone delays do occur more significantly because there could be an acceptance of milestone which may take more time or a dispute on payment being after the milestone, you have an issue with the customer. Most of these generally would have been now, if you look at the 180 and above days collection, that amount has reduced substantially. I think, if I'm sure most more than 80% or 85% will be less than 90 days now. A small part of will be between roughly around, I think between INR 100 crores, around INR 30 crores is something which is above 180 days, which is a very small amount. Out of that, also more than 50% will be already provisioned in some ways. Okay. Just to understand- ECL has come down to almost 80 days. If I have understood correctly, we book the revenue on reaching that milestone, that would be very much in line with the time when the amount becomes due. In that case, there should not be any impact on receivable delays. You are eventually booking the revenue also when the amount is kind of becoming due, that is on achieving that particular milestone, right? Yeah, you're absolutely right. You have to compare historically, if you look at, we are in product license business. If you look at product license-based companies, whether they are Indian and U.S. companies, their generally DSOs are very high. Irrespective of the revenue realization practices, customers do end up holding payments because you are delivering products as well as services. Sometimes because of smaller issues, you end up holding payments for a longer period of time. That's when average DSO of a product company is generally very high. Now, it has started becoming better as the licenses have shifted to subscription. Okay. NOC-based licenses, then you have lesser of such problems. You will see companies who have shifted to NOC where majority of revenue, then their DSOs will be more closer to the service companies. On traditional sense, significant part of our revenue still is a license. We still operate in a DSO range of around 100, 110 days. Okay. Over last 3 years, it has come from roughly around 200 days to 100 days. Now, it's almost at 88 days. Okay. Contribution from mature markets and subscription part of revenue grows, this keeps on improving. Okay. Just two more questions as a follow-up to this question, sir. Historically, what is the amount that we have written off? Where we might have not provided, but we will have to write off. You said that it is in the range of 1%-1.5% of the overall revenues. Is that understanding correct, that is what something which eventually one has to write off? We can send you the data, historical data. In future, we look at that with around 1.5% of future revenue may be affected by provisioning or DSOs. Actually, last 2, 3 years, basically, there is a change in accounting standard also, which has also impacted this number. A major part of provisioning has happened because of change in accounting standard also in last 3 years, especially earlier 2 years. That has also impacted, but we can come back with the data more on this. Sure. Just one question again pertaining to this only. We work with a lot of system integrators, right? We are seeing good traction out there as well. How does the revenue recognition and the receivables work with the system integrators? I mean, we directly get from the end clients or basically, we are due to receive it from system integrators. How does that work? If you could shed some light, that would be helpful as well. That's it from my side, sir. On the system integrator business, predominantly our focus is on transfer of licenses or sale of subscription. Since the service components are lower, so the realization of license and subscriptions are more cleaner. Also our contracts can be both. They can be through a system integrator or through a direct end client. Both models do exist. We will have revenues coming in directly from end clients or revenues coming through system integrators. Okay. The DSOs more or less would be the same, about 90-120 days, or with system integrators, again, it would be a little on the higher side? No. I think we expect it to be much lower because as I told, there is no service component to it. I think this business is still forming up. We have established it over last one year, one and a half year. I think as the time goes by, our expectation is the DSO figures in system integrators should be lower than our business. Okay. Sure, sir. Thank you very much. I'll get back in with you if I've got any questions. Thank you so much. Thanks. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. Participants on the conference, if you wish to ask a question, you may please press star and one. The next question is on the line of Ashok, an investor. Please go ahead. Hello. Sorry to interrupt, Ashok. We're not able to hear you. Hello, am I audible? Yes, sir. Please go ahead. Yeah. Hi, sir. First of all, congratulations on a very good set of numbers. Also, I would like to congratulate Mr. Virender and Tarun for taking up the new roles. We expect good amount of synergies going into the new roles. Sorry. My first question is regarding the travel expenditure. Could you please throw some light whether we are back to the pre-COVID levels in terms of the travel expenditure or not? I have a follow-up on that. Sure. Thanks for your question. The travel expenditure right now is very, very small. It's almost negligible. I think our traditional travel expenditures will be in the range of around INR 8 crores-INR 10 crores a quarter. Right now, they may be less than INR 2 crores. We expect them to improve over next this quarter and next quarter to grow, but not to come to that level in next 1.5 years at all. Because some of the part of the changes in that model are more permanent. While as the markets open and the business takes up momentum, the travel will grow in size. May not be at the same level as it was at a historical level ever. Okay. If I understand it correctly, even if you take the best-case scenario, the max expenditure of the travel side would be another INR 8 crores-INR 9 crores of delta. Right? I don't know exactly. What I am saying is the estimation for us is that the travel costs will improve and increase over next quarter and quarter after that. Also next year they can substantially grow from the current number. I think that will also result in growth in the business momentum because the travel predominant is for the business. Okay. Thank you very much, sir. My follow-up question would be, sir, we have posted a very good set of number, even in the Q1 and Q2. On this quarter basis, actually, these are not our best quarters, but still we have delivered in a great momentum. First of all, congratulations on that. I would like to know if we take whether the same run rate is going to continue into our strongest quarters of the year, which is Q3 and Q4, and are we really heading to better estimates of 18%-20% growth, which you have guided in the previous call? Ashok, right now what we've seen in Q1 and Q2, we have almost come back to the growth rates which we had traditionally. I don't see any significant change happening in Q3. Q3, Q4, as you're rightly saying, are much larger revenue quarters for them. Maintaining growth momentum is more challenging than what is in Q1 and Q2. Right now, looking at the funnel and the way the markets are going, we hope to continue the growth momentum. Whether it's going to be 15%, 20% or 25%, I think we will not be in the position right now to comment on that. Okay. Thank you very much, sir. Normal guidance for the rest of the year. Thank you very much. Thank you. Thank you. The next question is from the line of Venkat G, an individual investor. Please go ahead. Hello. Hi, can you hear me? Yeah, Venkat. Please go ahead. Hi, sir. Good afternoon, everybody. Sir, first of all, thanks a lot for giving me this opportunity and congratulations on the good numbers this quarter. I'll keep short and sweet. Sir, I have gone through the data region-wise revenue numbers. We have done exceptionally well in India, APAC, and India. On the U.S. side, the numbers are little lower compared to year-over-year or quarter-over-quarter. Can you throw some light on the U.S. business? Yeah, thanks, Venkat. Thank you so much for. You are right. The U.S. growth are not at our expectation level. There are predominantly 2 reasons. Last year, I think, for Q1 and Q2, we had significant jump up in quarter revenues on account of one-time business, which was more on Paycheck Protection Program of U.S. We had a substantial number in revenue in Q1 and also a follow-up substantial number in Q2. Maintaining a growth momentum over that number was a bit of a challenge. However, on the other things, we have also compensated a lot of things in terms of our GSI initiatives are happening in U.S. and other things. We hope to fix the issue in the coming next few quarters. Okay. Thank you, sir. Thank you so much. Thank you. The next question is on the line of Rahul Jain from Dolat Capital. Please go ahead. Hi. Congratulations on strong numbers and congratulations for the management change and congratulations, Jeet, on the elevation. My question is pertaining to this U.S. as an end market. If you could give me a broad thought process, because of course, you just been answering to the previous question, you alluded that there was a one-time kind of an opportunity that we benefited from last year, and now we are kind of not following on the same runway. If you have to draw a 1-year to 3-year to 5-year kind of a picture, how you see this geography shaping up and what is the area of focus that would drive that kind of number for us? Rahul Jain, thanks for your question. Around the way we look at U.S. geography, we have two initiatives on the go-to-market going on there. One is we have our traditional market, which is the mid-tier banks in U.S., where we are capturing between six to 15 banks, depending on which year we are. That is a space of roughly around 1,000 accounts where we are going and penetrating that market. We already have around 35 banks as our customers, and that's what we are growing. Of course, last year, as you rightly said, PPP was a one-time initiative, but beyond that also last year, getting new logo acquisition was a challenge last year. To an extent, even this year it's not completely opened up, it's a bit of challenge. Over 2 to 3 years horizon, we think this is an area where we have a potential to get 20, 25, 30, even 40 accounts a year and grow that as a business. Beyond this, the segment and investment we are doing is in our horizontal sale of products to global system integrators. That's what we are investing deeply right now. There is enough product recognition from Gartner, Forrester, and system integrators have started recognizing. We are forming deep relationships with few of them. That is the U.S. market we are focusing on 14- 15 clients. This will be not our traditional customer base. We have been going on tier 2 accounts in most of the mature markets. With this, we should think of a further acceleration of sales. For us to realize our long-term ambition, the U.S. has to become the primary market and has to become a significant growth driver. In short-term, we could always have higher growth rates in APAC or Middle East. In the 3-5 years, for example, we expect U.S. to do much higher growth rate than 20%, 25% for us to reach the goals we have set for the company. I expect that in next 1 year, 2 year, the U.S. becoming the largest growth driver for the company. Right. If I would like to probably a little bit more on the 2 key drivers that you have identified. First of all, when you said, if I heard you right, you said you have a 1,000 odd bank in the mid-tier space, which is your key target market, and we already have 30 customers and 2,500 customers what we can tap upon. What could drive this client acquisition further for us in that market? Is it simply more foot in the ground or improved referenceability is what is going to drive it? Secondly, on the SI side also, we have this relationship for now for a couple of years, and we are seeing all these popular SI companies are doing pretty well on their own BFSI revenue growth in this market. Somehow they have not scaled up for us. What is stopping us in this SI channel? Yeah. Okay, I see on the bank side, you are absolutely right. I think the acceleration comes from two facts. One is if you have more referenceability and you have more penetration in banks, more you are able to sell because it's not a single market, it's quite wide market. Especially in the mid-tier banks, you need lot of local referenceability, solution referenceability. Some amount of our acceleration will come as we become larger and larger in that market. Of course, beyond that, it's all our own ability to execute on the sales and marketing side. On the SI side, there is more than the referenceability. It's about the brand, it's about the penetration into the GSI client base as well as mapping of their accounts. This is what has started yet. I think we have been very lucky to get very good wins earlier in the early stage. We got six, seven, eight wins. I think we are having roughly around another 60-70 cases which we are pursuing with the GSIs globally. There is some amount of delays in terms of order cycles because some of their order cycles are larger time frame than our regular cycles of 6-7 months. Out there the contracting is taking much more time. We hope that that establishes itself, and once we get the initial run rate going, then we should be able to address the universe much better with, as there are three or four system integrators who can cover these 2,000 accounts very well for us. We are hoping on the banking side, our organic model should suffice with more acceleration in sales and marketing. On the GSI side, some amount of brand building and some amount of getting better recognition from more GSIs and penetrating these larger accounts will help. Right. I have one more follow-up on this. When you said this 2,000-3,000 identified bank, I think this is the subset of some 5,000 odd community banks U.S. have. My understanding suggests that the India-centric GSI do not have a very deep penetration when it comes to these community banks. Correct me if I'm wrong on this part. Does that also mean somewhere we need to partner more domestic local service provider, which can add to the momentum? Rahul, let me clarify. The strategy which is for the 1,000 entities on banking and credit union is a direct sales strategy. We are not using the global system integrators for that. As you're right, they have no interest in that space. The ticket size will not service them. That is a direct sales strategy. We have already successfully executed it. We got our first 30 banks out there, and we are going to expand that on our own through our direct sales team. The GSI is for only focusing for Fortune 2,000 clients. That's a very different story. Okay. Right. Sorry. Basically you were referring to Fortune 2,000 customer. I was more thinking from a 2,000 bank. Basically because you said this is more like an horizontal approach for you, not limited to one particular vertical. Got it. Thanks for the clarification and best of luck for the time ahead. Thank you, Rahul. Thank you. Reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Ronak Vora from OHM Advisors. Please go ahead. Hi, sir. Sir, how do you see the order pipeline for the Low-Code application space? Yeah. Ronak, thank you for your question. Ronak, Low-Code is a huge interest area right now globally, and I think it's not a kind of a business opportunity on its own, but the kind of approach or a strategy or a product capability which most of the digital initiatives are expecting from their vendors. Products and platforms which have strong Low-Code capabilities have better chance of winning those digital initiatives. The way we see this is a very, very globally large market. Also there is lot of competition in this market, with Newgen being very strong on the process-centric application and content-centric applications. Our Low-Code capabilities end up providing a very big differentiating value to the customers. On the funnel side, all our cases are Low-Code cases for us because this has been the strategy we have been selling. Of course, it's been sold through process-centric, process automation sometimes intelligent Business Process Management, sometimes digital process automation. Low-Code is a new terminology by which we are driving. All our pipeline will be based on products which are Low-Code products. Okay. In terms of capabilities, how do we differentiate ourselves from the other synergies? Throw some highlight in case if you could give some case study for better understanding also. I think the best would be if you visit our website, you will understand that we have a very compelling offering for digital solutions which are process-centric and content-centric. Anybody who wants to develop a digital process which is process-centric and content-centric, we are one of the best companies in the world to deal with because of the inherent capabilities of our platform. That's where we are very strong and we are able to differentiate. Then with certain verticals in banking, insurance, government, our history of servicing customers and the use cases makes us very compelling for customers in these segments. Okay. Lot of information is available on our website. I would recommend that you can visit and see that. Okay. Can you give a number? How much would currently GSI be contributing towards sales? Where do we see GSI being a total part of our revenue within the next three to five years? Right now our partners, which are including GSIs and small partners, are roughly around between 16%-18% of the revenue we take from. We expect that in next five years, this should become 50% of our revenue. We can grow aggressively on our own, but with GSIs can almost reach 50% of the revenue. That would also mean that we can drive higher growth rates to that. Okay. [Thank you]. Thank you. The next question from the line of Heenal Gada from ICICI Securities. Please go ahead. Heenal, your line is on the talk mode. Please go ahead. Hi, [am I] audible now? Yes. Thank you. Yes. Hi. Thanks for giving the opportunity. Just one question in front of the India business. We saw a strong growth during the quarter. Are we expecting the same momentum going forward as well, or was that a one-off this quarter? Heenal, thanks for your question. Heenal, what you're seeing in India right now, the growth, which is on account of our lot of penetration into existing accounts, selling them new solutions and new products. We think that part of growth momentum will continue as existing accounts are giving us good business. I think we are also expecting it supplemented by some more new logo businesses which are going to get as the markets open in India. So far, the India, the government business, which was for us, was one of the big drivers of the sale. It's completely slowed down. We think over next two quarters, some part of that can restore back and push. Long term, we are hopeful that India business can maintain a 20% momentum. On short term and near term, we are not very bullish about India business. A single-digit growth or a slightly lower double-digit growth is what we expect. Okay. Thank you. Just secondly, on margins as well, how much do you think can we are exit rates in this year? Given that, the situation is normalizing and some of the costs are expected to come back. Not like a perfect guidance, but just if you could give like a range and how much do you expect? Broadly, Heenal, what we have done is we have already said that the business should be able to deliver at a growth trajectory. We should be able to deliver roughly around 19%-20% net margin and between 23%-25% EBITDA margins. I think this year we expect to be close to those numbers. Because Q1, Q2 are smaller for us, on Q2 we are already at close to that number. Q3, Q4 should significantly expand that. We should be close to that. You are right. On the cost front, some of the costs of which are more employee-centric costs are going up for whole of industry. We have also taken those costs so far. There could be a half a point or a one point difference because of that, depending on how the market turns. Okay. Thank you. Thank you. The next question is from the line of Nilesh Jethani from Envision Capital. Please go ahead. Hi, sir. Thanks for the opportunity. Congratulations on the great set of numbers. First question was on the margin profile. Wanted to understand what is the difference in the margin profile when we do sales via GSI and when we do our direct sales. Thanks, Nilesh. See, margin profile is dependent on the line of product which we sell. Like for our licenses, whether we sell them subscription or licenses, these are generally high gross margin because there's no direct cost associated with that. On the service components, which are like our software implementation and software support, the margin profiles are like service company margin profiles. Two parts of our business, which is the license and subscription and APC, AMC, these are high gross margin business. The expectation in the GSI business is that since GSI would be doing predominantly most of the services on their own, we should be able to enhance the kind of business which is of higher margin business. The high gross margin business will grow faster than the service business. The margin profile should become better. It also depends on how the deal structures will be valued and other things. Theoretically, the GSI business should be higher gross margin business. Got it, sir. On this itself, so we expect GSI to contribute around 50% to our revenue, and we clearly mentioned that a strategy going forward would be focusing on the Fortune 2,000 clients. One clarification I wanted. In the earlier con call, you had guided that per annum we are targeting around clients and per customer billing is expected to be around $300,000. Probably 60 customers per annum. In next 5 years, we can add around 300 customers. Is the funnel enough to add 300 new customers for next 5 years? In the Fortune 2000, we already have 30 in the BFSI sector and 40, 45 the other? Nilesh, I think you are right, partly. Because when I said we will do 50% of our revenue, I said over the next 5 years we should be able to reach there. On the Forbes Global 2,000, we have organically some clients, but that don't count because they're part of our traditional business. Now we are expecting that every year. Last year we were at around 6. Our target for this year is to get between 12-15 new logos. Next year it will grow to 30, 35, and then it will grow. Eventually, in 4, 5 years, it can become 60-100 logos a year. That's the journey we'll have to take. You are right on the revenue realization. Per annum revenue rates could be anywhere between $300K-$700K per account. That's how it gets built up. Got it. Continuing on the same. Today, say we have 550 customers and our top line is around INR 6,730 million, say FY 2021. Our per customer billing is approximately INR12 million-INR 12.5 million. When we say we start with INR 300,000 revenue, by what year we can reach a substantial revenue of, say, INR6 million or INR12 million? I think you're talking INR 12 million, not dollars. Sorry. Rupees. See, the idea is, unfortunately, we don't see it that way in the same model. The way we see it is that between those Fortune 2000 accounts, if we get 300 accounts, each account has a potential to give us INR2 million kind of an annuity, between INR1 million-INR2 million. This should add roughly around INR250 million of revenue per year to us. On our organic side, which are with your direct account sales in banking, insurance, government, that should add another INR200 million-INR250 million over the next 5-6 years. This is how we want to travel. Does that answer your question? Yes. Got it. One last question. We have been trying to enhance our revenue on the annuity side, but in Q2, again, growth from the sale of products was, say, northwards of 55%, and annuity business grew only by 17% on YOY. Again, the sale of products. How should I read these numbers? Yeah. I think we are in the transition. We have not shifted from license to annuity. We are still focusing on our traditional license business in most of the parts of which is the markets which have got a lot of business in terms of new sales have been the ones which have been on license-based sales. I think the change has started. We are getting into a more aggressive phase of changing. I think from next quarter downwards, we are going to more aggressively pursue only annuity sales. In some client we have decided to stop the license sale. That should increase the growth percentage of annuity much higher. Right now we don't see it the same way. You are right. By the year-end, we expect the annuity part to still grow at a much higher rate than the traditional growth rate. Right now there may be some differences between how the revenue is realized and for ATS and other things. At the year-end, historically, we have always maintained a 2%-3% higher growth on our annuity side than our other business. Got it. That momentum should continue. Got it. One last thing. We work on the 3 platform. That is ECM. Other is the BPM, that is Low-Code process automation. Third is the CCM, that is customer communication. Say today in the Newgen's top line, what would be the significant contributor amongst these 3, and what is your aspirations for these 3 segments to grow? One understanding what I have currently is that probably the BPM would be having a high margin versus the CCM and the ECM having a lower margin. Is the understanding correct? No, not on the margin side, but most of our business use cases are driven through BPM and do have an ECM as part of already. Our 60%-70% of our cases will be a combination of ECM, BPM combined. On margin side, because they are both licensed products, it does not matter which has what margin. On other hand, we will have another 25%-30% cases which are ECM alone, and CCM is much smaller, is less than 10% as of now. All have similar margin profiles. All are similar and all have their own growth potentials. Like with GSI, we are thinking let us substantiate the ECM sale much faster. On the banking and our vertical direct account sales, the BPM sale will continue to grow. CCM, we are finding new markets in insurance and other use cases which we can push the CCM sale. They're all three different products. In most of the use cases we are using under NewgenONE, we are using one or two platforms together. In some cases, all three platforms together. Got it. Thank you so much, sir. Those were my questions. All the best for the remaining part of the year. Thank you so much. Thank you, Nilesh. Thank you. The next question is on the line of Harshil Parekh from Alf Accurate Advisors Private Limited. Please go ahead. Good evening, sir. My question was on our license business. I just wanted to understand whether the margins in our license business and in the subscription business are having similar kind of margin profile or is there any difference in them? Thank you for the question. I think they're absolutely same. It's only the way you are able to transfer the license. Generally, in license, it's more perpetual, followed by only in APC. On subscription, it is more renewed every year, so you get higher annuity every year. Inherently, both are right of license, which is transferred to the customer. No direct cost associated with that. Their margin profiles are exactly the same. Only when you're selling them in cloud, you have slightly another 10%, 15% overhead as the cloud service cost, the pricing accommodates that. Okay. The realization would be higher or the margin profile is similar? Yes. Okay. Sir, another question with respect to the travel cost. Historically, we see we have almost 10% of our revenues as travel costs. Right? I just wanted to know what could be the travel cost going forward. It won't be reaching the 10% travels, but indicatively, what would be the travel cost as a percentage of revenues? You see, right now in coming next 2 quarters, we don't see it being substantially to a number where we can talk of percentages. It may remain couple of percent likely. Next year, I think the market completely opens up. We can almost reach almost to 50% of that earlier number. We can assume 5%-6% as our travel cost. It's very difficult to predict right now. We'll have to wait for 2 more quarters to see how it goes. Okay. Understood, sir. Sir, my last question is on the employee cost. If you see historically, we have around 48%-49% of our revenues as employee cost. Now since we are increasing our contribution from the NBT businesses, do we see the employee cost as a percentage of revenues going downwards? Yeah. As our percentage of business, which is higher gross margin, which is in terms of license and subscription grows as an overall part of the revenue, the employee cost as a percentage of our revenue should come down. It should come down. That's a normal expectation. Okay, sir. That's it from my side, sir. Thank you. Thank you. Thank you. The next question is from the line of Kunal Shah from Carnelian Capital. Please go ahead. Hi. Thank you for the opportunity once again. I am here more to understand on the global system integration part. We started the business, you can say, approximately the last two years. Right? If you could help understand, right now we are working with 2, 3 system integrators. How can we scale up working with more system integrators? What plans we have? What different do we offer to the system integrators for them to start business with us in the first place and then to scale it up from there? How should we look at it, sir? It could help a little bit more on that particular part. Yeah. Kunal, I think it's a journey. First of all, most of the product companies, once they reach a particular size, their products are carried by global system integrators. It's a worldwide phenomena. Okay. For us, it has taken a considerable time to reach around, roughly around INR 100 million revenue. Global recognition from all leading analysts, I think that was already there. What has happened over last 6, 7 years, we had a lot of success stories with them in the emerging part of the market. We have a lot of success stories within TCS, HCL, in India, Middle East, APAC. Now that they have realized with recognition from analysts and seeing our product perform, they have got the faith and the credibility on the product that they are ready to take it to their customers. Okay. That's what has taken time, and that's where we are right now. We have established ourselves as a different sales channel, which is completely GSI-based sales channel, where a lot of work is happening on mapping of GSI globally, mapping of the specific accounts across multiple GSIs, not only one. Also working lot on the GSI enablement side. At the end of the day, GSIs have to be very comfortable selling those products. They have to know how to implement it, how to service it. A lot of investment is happening on the enablement side as well as the GSI enablement side. Why it will take us to the market is, see, we are in the ECM and BPM space. We are one of the few top four, five companies who have consistently been in the Gartner and Forrester for last 10- 15 years. We are one of the top. When they think of a product to a global Fortune 500 customer, they don't have to explain who Newgen is. Now that recognition is there. Secondly, they have a very high degree of reliability that with Newgen, they can make the client successful because they have seen the success stories. Third, I mentioned that we have one of the most compelling stories in the industry when it comes to content-centric process automation using Low-Code. We are the number one in the world, and that's what the GSIs are realizing slowly. It will take still time to establish the brand in the market, build the credibility, have more GSIs interested in us and meet our largest funnel. That's what we are working on right now. Does that answer your question? Yes, to a larger extent. For this follow-up on this particular part, what basically I'm trying to understand is, sir, that global system integrators would prefer also working with somebody. Right? It is like, do we have cost competitive advantage for them to switch to us? How should one look at that particular aspect is basically more what I'm trying to understand, sir. You are right, absolutely. I think they have all the partnerships with all the major and we are a competing landscape, they have partnerships. Two things we can bring to the table. As I said, first of all, more than the cost, a high degree of reliability to make the project successful. Because our licenses could be INR 500,000 or INR1 million. The GSI account on that is based on INR20 million, INR50 million. For them, the stakes are much higher. They always want a partner with high degree of reliability. That's what we have built. The second is also on the cost advantage. Since we have a very integrated product suite of ECM and BPM combined, we call them NewgenONE. It provides a very compelling value prop in terms of total cost of ownership. Our speed to implement is much better, our systems are much integrated. GSIs have realized that for certain areas like for content-centric process automation, we are the best implement. Okay, so, you would be basically taking the market share away from the existing players, if I understand that correctly? Partly, partly the market itself is growing. The Low-Code is opening a huge market space. Digital process is opening. ECM is still a fast-growing area. ECM is a very fast-growing areas in the market. Market is expanding, and also we are entering and tracking the market in areas where the other operators lose space. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Deepti Mehra Chugh for her closing comments. Thank you so much. For any other queries, you can connect to me or visit our website. Thank you. Thank you. Ladies and gentlemen, on behalf of Newgen Software Technologies Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.