Nucleus Software Exports Limited (NUCLEUS) Q2 2027 Earnings Call Transcript

Good afternoon, everyone. This is Mohana. A very warm welcome to all of you for this Nuclear Software Earnings Conference call for the quarter and off-year ended on September 30, 30th, 2023. For discussions, we have here from the management team, Mr. Vishnu Ardusat, our Managing Director, Mr. Parag Vaisi, CEO and Executive Director, Mr. Ashok Kumar Bura, Chief Financial Officer, Mr. Ranurath Mantri, Chief Operating Officer, Mr. Rappurva Chamaria, Chief Business Officer, Mr. Mukesh Bhangia, Vice President, Mr. Rabhishek Pallav, Vice President, Ms. Swathi Patwargan, Chief Human Resource Officer, As you all are aware, nuclear software does not provide any specific revenue earnings guidance. Anything which is said during this call which may reflect company's outlook for the future or which may be considered as a forward-looking statement must be reviewed in conjunction with the risk that the company faces. An audio and the transcript of this call would be shortly available on the investor section of company's website, www.nucleussoftware.com. With this, we are now ready to begin with the opening comments on the performance of the company and post that we would be available for the questions and answers session. With this, I now pass it over to Mr. Vishnu. Thank you and over to you, sir.

Thank you, and a warm welcome to all of you for this conference call. It is my pleasure to welcome you to the second quarter earnings call, and this I will hand it over to Parag.

Thank you so much, Vishnu, and good afternoon, everyone, and thank you for joining us for For this earnings call. Alongside our financial performance, I would like to briefly share a few important strategic developments from the quarter. We continue to make progress on our AI journey. This quarter, we continue to invest in upskilling our workforce with the objective of moving AI from a specialized capability used by a few to a core capability embedded across Thank you. Gartner, an analyst firm, a world-renowned, included Nucleus software among the example vendors in its 2026 market overview for commercial banking cash management, and Nucleus has also featured in Forrester's cash management solution landscape. Since the close of the quarter, our Generative AI-powered Visual Report Agent received the Most Innovative Practice Award at the CII National AI Awards 2026. We were also recognized as Oracle's 2026 APAC ISV Partner of the Year. During the quarter, we continued to strengthen our engagement with the banking and fintech ecosystem through platforms including Global Fintech Fest, FIBAC, the CII, NBFC, and HFC Summit, the CNBC TV18 Banking Transformation Summit, and Cyboss 2026 in Miami. On the leadership front, we welcome Sudhanshu Tripathi as Chief Marketing Officer, strengthening our focus on global market positioning and growth across key geographies. We remain focused on discipline execution and creating sustainable long-term value for our customers, employees and shareholders. With that, I will now hand over for the financial update to Thank you, Mr. Tapanja Aswan. Thank you.

As for half-year ended period, our Consulate revenue is at Rs. 438.1 crore, growth of 1.6% year-on-year. In dollar terms, revenue is 46.5 million, degrowth of 6.9% year-on-year. Product revenue during the quarter is at 84.4% as against 83.9% quarter-on-quarter. As for half-year ended period, product revenue is at 84.2% as against 84.9% year-on-year. As for geography revenue, India region constitutes 57.3% of revenue, followed by 12.4% from Middle East, 11% from Southeast Asia, 5.7% from Europe, and rest others. During previous quarter, India constituted 56.1% of revenue, followed by 12.1% from Middle East, 10.8% from South Asia, 5.5% from Europe, and rest others. As for half-year ended period, India region constitutes 56.7% of revenue, followed by During the previous half-year ended period, India region constitutes 57.8% of revenue, followed by 11.9% from Southeast Asia, 11.5% from Middle East, 4.8% from Europe, and rest others. Revenue from top five clients contributed 27% of revenue in this quarter as against 28.1% during previous quarter. As for half-year ended period, revenue from top five clients contributed 27.3% of revenue in as against 26.8% during previous half-year. As for expenses, cost of delivery, including cost of product development for the quarter is Rs. 167.9 crore, an increase of 4.7% quarter-on-quarter and 6.5% year-on-year. It constitutes 73.8% of revenue against 76.2% quarter-on-quarter and 73.9% year-on-year. As for marketing and sales expenses for the quarter is 11% of revenue against 10% quarter-on-quarter and 7.3% year-on-year. For half-year ended period, cost of delivery including cost of product development is Rs. 328.4 crore, an increase of 5.8% against last half-year. Abita for the quarter is at Rs. 15.4 crore as against Rs. 7.6 crore quarter-on-quarter and Rs. 23.1 crore year-on-year. Margins during the quarter is 6.8% as compared to 3.6% quarter-on-quarter and 10.8% year-on-year. As for half-year ended period, EBITDA stands at 23 crores as against Rs. 56.8 crore year-on-year. Margins during the half-year is 5.3% as compared to 13.2% in last half-year. As for other income, during the quarter is Rs. 16 crores, degrowth of 10% quarter-on-quarter, Regrowth of 0.8% year-on-year. Income from investment and deposit is Rs. 11.8 crore. Other miscellaneous income is Rs. 3.4 crore. And forex gain is Rs. 0.8 crore. For half-year ended period, other income is Rs.33.8 crore, degrowth of 0.8% from last half-year. Income from investment and deposit is Rs.30.6 crore. Other business income, Rs.3.6 crore. Forex loss is Rs.0.4 crore. This degrowth in investment income was driven by lower mark-to-market gains on set mutual funds due to increase in interest rate in Q2. Fogger covers as on 30th September 2026 are USD 2.5 million at an average rate of Rs. 96.87 to a USD. Profit during the quarter is Rs. 21.3 crore, degrowth of 11% quarter on quarter, and degrowth of 19.2% year on year. Standard period, profit after tax is Rs. 45.1 crore, degrowth of 26.6% in the last half year. Order book position as on 30th September 2026 is Rs. 1,317 crore, out of which 90% is product and 10% is projects. On June 30th, 2026, the order book position was Rs. 1,244 crore, out of which product was 88%, 88.1% and project was 11.9%. Total cash and cash equivalent as on 30th September are Rs. 942.1 crore as against Rs. 977.9 crore on June 30, 2026. Receivables at Rs. 220.4 crore on 30th September as against Rs. 174.7 crore on 30th June 2026. DSO stands at 80 days as compared to 63 days on June 30th, 2026. Total headcount as on 30th, September is 2026 as compared to 2059 on 30th, June 2000. Now I hand it over to Swati.

Thank you, sir. Now we are ready for our question and answer. Over to you, Moina. Thank you, ma'am.

With this, we are now open for the Q&A session. If you wish to ask a question, please press star and one on the telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star and one again. Participants are kindly respected to rest with one question in the initial round and join back the queue for more questions. The first question comes from Puja Agarwal from Indigual Investor. Please go ahead. Please go ahead, man. That is no responsible. I will take the next question. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. The next question comes from Samar Singh from TPF Capital. Please go ahead, sir.

Yes, good afternoon. Thank you for the opportunity. Regarding our order book, which has doubled, you know, over the last year to about 200, 300 crores, could you, you know, but our revenue is still around the same 200, you know, 220 crores, 30 crores. So, if you could just help me understand how much of the order book is now new customer license and implementation and how much is the AMC renewals?

So, this order book, we don't give the backup of this AMC and other revenues. If we talk about this order book getting into revenue, these are long implementation projects, and it takes time because these are complicated projects involving high volume data migration, correction, and then making The order book reflects our preference from the customer side for our product.

Okay, you know, historically, we used to calculate the order book. We used to have just one year of the AMC value in the order book, and we used to sort of renew that every year. So, is that the way we still calculate it, or now, so, for example, if you have a five-year contract, only one year of the AMC is in the order book, or is the full five-year of the AMC in the order book?

So, it is a combination. In some of the customers, it is for five years also, and in some of the customers, it is one year as well.

So, have we changed the methodology of calculating the order book? Because I think in the past, it used to be only one year of AMC was included in the order book.

No, never. We have always maintained the same practice.

Okay, and how do we decide whether it should be, you know, the full... I will interrupt you, sir.

Please join us with you for more questions. Thank you, sir. The next question comes from Bharat Sheth from QRIS Investment Advice Private Limited. Please go ahead, sir.

Yeah, thank you for the opportunity. To understand our, I mean, AI embedded on our all kind of application, and so how are we seeing, like, when you say that it's a huge data migration work, so how that typically with AI coming in, time reduction we are seeing vis-a-vis earlier, I mean, say two, three years, like, same kind of implementation.

Yeah, so this is Abhishek. AI is very well being used on all such analysis, but as Ashok talked about the complexity of these implementations in enterprise platform, a lot of care has to be taken before we actually scan through. So, end-to-end agents doing transformation, we have not reached to this stage, and there are significant amount of human-in-the-loop investment that's still on. But gradually, the direction is to move towards that. It is too early to stop on those fronts as of this moment.

Okay. Okay. And is there any other way, I mean, say when you are talking, so if you can give this, the order book is the world, I mean, like, So, I like to like color if you want to give earlier implementation time was say 3 years or 2 years, vis-a-vis now the current order book timeline. If you can give broader color, we don't want to be directionally if you can give some color.

From even 3 months to even 18 months. So, various projects have various at various stages and depending upon the LOVs which we get in the order. So, that is how each and every project has to be seen differently and that implementation cycle ranges from basically 3 months to 18 months and in some cases can spill over to even 2 years as well.

Okay. And so, last question on the profitability side, I mean, we have done a lot of investment and front-end, I mean, OPEX investment to, I mean, make our product, I mean, more versatile and marketing side also. So, if you can give color, when will we expect that our profitability to bounce back at an original level?

So, if you talk about the investment, we continue enriching our product, we continue investing in AI, we continue investing in upgrading our talent to make them AI natives and investing in people and resources who are AI trained. And if we talk about the reflection of that, that is reflecting our order book as well. And as and when the order book gets implemented, Obviously, that reflection will come in in respective quarters.

I appreciate, sir, but can it be a change from 28? Okay, thank you.

The next question comes from Brolin from Individual Investor. Please go ahead.

Am I audible? Yes. Yeah. So, just, you know, some taking forward participants, previous participants' question, This revenue run rate of 200 to 220 crores, we have been stuck in that range for quite some time now on a quarterly run rate basis, right, for almost like last 12 fourth quarters. And with the author book, you know, going up and you answered that, that some of them are multi-year projects, but there would be some projects where you can see the revenue Accrual in the near term, right? So when do you see us breaking this 200, 220 crore revenue run rate? How is the, if you can give some color of the order book, how much of our order book is backdated, where implementation will take time? You mentioned, you know, implementation can take anywhere between 3 to 18 months. So some color on, or is large part of our order book backended, or have we already started implementation in some part of our order book?

So, various projects are running in parallel across the globe. In India, SEA, Middle East. So, each and every project is at different stage of getting converted into revenue. And that is where it will start reflecting in subsequent quarters. If we talk about this particular quarter, you will see from last six quarters, this is one of the highest revenue we have clocked. Earlier, the revenue which we clocked seven quarters back, it was 228. And we are able to touch back to those highs again. While I can't really give you the future guidelines on these numbers, I can only mention that we are, we have a healthy order book and we have a healthy implementation cycle and that will start reflecting in future quarters.

Sure. So, one more question, if I may. You know, in the past, you have mentioned that in a way, we are running two, you know, Nucleus within our organization, where one part of Nucleus is transitioned to the new FinOne platform, right? FinOne Neo platform, and another is still on the older platform, and that is why we have to probably run cost base, which is higher. So, where are we in that transition? How long do you think we'll still be running two call centers?

So, I'll start from the last. From a call center perspective, it is all one lending call center. We don't differentiate between the two. Transformation, journey, I think past two speakers also reflected that these are enterprise products, And transformation, especially transformations, are time-taking and consume a lot of effort. So, difficult to predict a timeline, but at the same time, that remains to be a focus for the quarters to come and the next financial year. The focus on transformations is one of the key initiatives that the organization has at this moment.

Thank you and all the best. Thank you.

Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. The next question comes from Haddik Bora from Viraya Capital. Please go ahead.

Hi, good afternoon. Am I audible?

Yes.

Yes, hi. So, first question is in the orders that we have won over the last three quarters. There is a clear reflection of the efforts we put on the marketing side. Can you just throw some color? It seems that we won some orders in the range of 1,200 to 1,300 crores of orders for the last three quarters. What proportion of these orders would be won in India and how much of it would be outside of India?

It would largely, this is Apoorv Chamadya, CBO Nucleus Software. It would largely be in the same proportion of our current revenues.

As we invest more towards overseas markets, you will gradually see the shift. But for retrospective, you can take it as same proportion of existing revenues.

Okay. So, there's no major shift in terms of how we've been winning orders historically. The broad makeup is the same.

As of now, yes. And you will start seeing that shift now.

Okay. And just one question on the, if you can allude to any change in terms of the pricing and the profitability potential of these orders, are they different from what has been a historical experience? Are we facing some, you know, challenges on the pricing front? Or is it, again, the same as what history has been for us?

So, pricing is a lot of times defined by the heightened competition and different geography and different needs or different price point. So, a lot of strategic calls also needs to be taken to enter into a particular geography. So, more or less on a blended basis, obviously, it should remain in a range-bound fashion, which we are seeing. That is all I can say on that.

Sure. I mean, there is no unusual stress that you are facing, which you want to maybe highlight.

No, no. So, nothing of that sort. Our product is very robust and customer patronize our product and there is a lot of, I would say, cross-reference across industry, across customer and across geography as well. So, we don't see any kind of challenge in that way. Irrespective of competition getting item, that is not affecting us.

Thank you. With your permission, may I ask one more question?

Yeah, please. Go ahead.

Sorry to interrupt you, sir.

Yeah, yeah. Let him ask.

Let him ask, please.

Okay. Thank you. So, this was just on AI. You know, there are so many initiatives that you are taking. Your annual report is very descriptive of the effort that has been going into this front. Just if you can give us a longer-term view, How will this, you know, eventually start reflecting in our business? Will we start seeing maybe lower delivery costs over the long run, or will it first start reflecting in, you know, higher order wind rate, like what is happening? So where will we start seeing some of the impact of this work that we are doing on the air front? Just any color that you can give on the long run, not asking for any short-term opinion, but just how will it start reflecting in our business is what I was trying to ask.

So, our AI strategy has both inside-out strategy, which means that while we continue to focus on our SDLC to become, to get transformed to ADLC, at the same time streamlining the process and fixing the, or rather maturing the SDLC processes, that's the second part, and the Third part is ensuring that the collectors are available for people to access and look at through a structured platform. And so the core focus would remain in ensuring high quality releases with agility is the one. Second thing is the other part of the organization beyond product, increasing the operational efficiency as a whole. This is how we look at it. So we have an AI strategy and we are working on to ensure that we follow that.

Great. Thank you so much for your answers and all the best. Thank you.

Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. The next question comes from NJK, SKS Capital. Please go ahead.

Hello, good evening. So, I have joined a little bit late. I don't know if I missed anything on the number of new logos added in last quarter.

So, we have added in action, we have added five new logos this year.

Five new logos in last quarter.

Last year. Last in six months. This six months.

How about the last quarter? Two logos.

In Q1, we added three, and Q2, we have added two.

All right. And my other question is about the employee cost, which we are seeing that a quarter of a quarter just keep increasing. I mean, it increased about 15% compared to last Q2, FY26, and about 8% compared to last Q1, FY27. So, is it going to continue like this? I mean, for the last so many quarters, the margins are not improving and the employee cost is going up.

So, primarily the impact which you are seeing is on following accounts. One is we are investing on AI talents and currently the market is hitting up for AI talents. Everybody is counting for those talents, and obviously that comes at a higher cost than the current ongoing rates for the resources. Second is the labor cost, labor code change impact, which has come. This year, we have launched RSU policies for our employees, and that is also added to our cost.

Sure, sure. Because what we have seen, I mean, your competitors or all these IT product companies, now they are getting advantage of this AI and their employee cost is not going that much the way revenue is growing. And compared to nucleus, I mean, we are still seeing the cost is still going up. So is this something going to improve in H2 now? I mean, the margins are going to improve at least. Are we seeing that H2 will be better than H1?

So, the difference which I would just like to share is those are AI companies where they have AI as a revenue stream. We don't have AI as a revenue stream. We work as providing AI as an embedded extension for our software, which helps our customers to serve their customers better. And that is how you can, we cannot directly attribute this to that. While our AI strategy has been clarified just sometime back by Avisek as to how we are going to use AI internally and how we are going to enrich our product for our customers. And obviously, once this gets stabilized, obviously, margin will also see a reflection of that will be seen in the margins in the coming quarters.

Okay. And just last question about the employee. Your annual increments have already happened or it will be happening in next quarter?

Yeah, it has already happened.

It has been factored in. All right. Thank you and all the rest. Thank you.

Thank you, sir. Hi, am I audible?

I'm just a bit apologizing. There will be a bit of background noise. But yeah, so I mean, my point being that, you know, Europe as a geography, yes, is not the biggest one in terms of revenue mix, But it has been consecutively, you know, growing the fastest for, I think, now two good quarters. So, you know, just wanted to understand or get a sense, like, what are we doing right in that geography? And is there any way, you know, those strategies or go-to-market strategies can be reflected in other geographies for, you know, accelerated growth in the upcoming H2? Thanks, that's it.

It's, I think, while in percentage terms it may be reflecting like that, but this is on account of one customer which we have, where a few people have been onboarded to serve them. So there's no specific strategy per se there, which is very different than other regions. Thank you, sir.

Ladies and gentlemen, if you have any questions, please press star and one on our telephone keypad. Ladies and gentlemen, if you have any questions, please press star and one on our telephone keypad. We have a follow-up question from Samar Singh from TP Capital. Please go ahead.

Yes, thanks for the follow-up. You know, if I just look at our cash flow statement, our receivables are up quite a bit for the last six months. And on the same side, I think our advanced billing and deferred revenues are also up. So, if you could just help us understand what is happening on both these line items, please.

Yeah. So, in some case, the AMC got built at the last part of the month, which got collected subsequently within next 10-15 days. So, that is just an aberration for that particular quarter. Otherwise, if you see, it is more or less range-bound, and most of our data are getting collected within a reasonable time frame.

Okay. And the other part, which is the advanced billing and deferred revenues, I think that That is also a, you know, if you could help me understand that part.

Sorry, different revenue? Advanced billing. Yeah, so in case of AMC, it has been billed in advance. And the month or the quarter in which AMCs are getting billed, obviously, you will see a higher, I would say, advance billing for the customers.

Okay, so that part explains the increase in receivables, right? I'm talking about the increase in current liabilities, which normally is just our advanced billing and default revenue line item.

So if we bill AMC in advance, those advance amount will get collected and it will reflect in our liabilities. Because the subsequent period service is still due, that will reflect in liabilities.

Okay, all right. And, you know, amongst our…

Sorry to interrupt you, sir. Please join the queue for more questions. Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. As there is no more participants, so I would pass it over to Ms. Swati.

Thank you, Moina. We would like to thank all the investors for joining us today on this call. I would now request to Vishnu, sir, for his closing comment. Over to you, sir.

We want to thank you very much for your continued interest in nuclear software, and we would like to reassure you of our commitment to long-term value addition to the society and our customers.

That concludes your conference call for today. Thank you for participating. You may all disconnect now.

Thank you.