- 21 Jul 2022
- ICICIdirect Research
Newgen witnessed seasonal weakness in Q1; maintain 20%+ revenue growth guidanceNEWGEN - 451 Change: 7.35 (1.66 %)
News: The company reported 17.8% YoY revenue growth to Rs187.9 crore though it declined 18.8% sequentially due to season weakness. Subscription revenues ( ATS/AMC +SaaS) reported 32.9% YoY revenue growth to wherein SaaS revenue grew by 33.4% YoY while ATS/AMC grew by 32.7% YoY. Annuity revenues ( ATS/AMC+ SaaS+ Support) reported healthy growth of 25.5% YoY to Rs131.5 crore. License revenue were however weak as it reported 46.2% YoY decline to Rs15 crore. The weakness in license revenue was due to i) weak logo addition ii) rationalising some clients where scalability is an issue. EBITDA declined 15.3% YoY to 19.3 crores while margins were down 400bps YoY to 10.2%, impacted by higher employee costs amid high attrition and uptick in travel expenses.
Views:Q1 is seasonally weak quarter due to license nature of the business historically. Historical trend suggests that only 20% of annual revenues comes in Q1, while it gradually picks up in subsequent quarters. Annnuity and subscription revenues continued to show growth momentum. Logo additions has been weak, but the company is confident of closing the year with 50-60 logo additions and maintained 20%+ revenue growth guidance for FY23. GSI funnel is going strong as now the company is looking to close 15 deals in FY23 vs 5 in FY22 which would provide an incremental revenue opportunity. The attrition remained at the elevated level and the company exepcts to settle down in few quarters. It maintained EBITDA margin guidance of 23-25% range.