Nucleus Software Exports (NSE:NUCLEUS) Q1 2027 Earnings Call

0:00 Good afternoon, everyone. This is Akash. A very warm welcome to all of you for this Nucleus Software Earnings Conference Call for the quarter and year ended on 06/30/2026. For discussions, we have here from the management team, mister Vishnu Ardusad, our managing director, mister Parag Bisse, CEO and executive director, mister Ashokumar Bura, chief financial officer, mister Apoorva Chamaria, chief business officer, mister Anurag Mantri, chief operating officer, mister Mukesh Bangya, vice president, mister Abhishek Pallav, vice president, missus Swathip Akvarden, chief human resource officer, mister Babit, chief customer success officer, and mister Tapan Jayaswal, financial controller.

0:50 As you all are aware, Nucleus 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 forward looking statement, must be reviewed in the conjunction with the risk that the company faces. An audio and transcript of this call would be shortly available on the Investors section of the company's website, www.nucleussoftware.com. With this, we are now ready to begin the opening comments on the performance of the company. And post that, we would be available for the question and answer session. With this, I now pass it over to Mr. Vishnu. Thank you, and over to you, sir. Good afternoon, and a very warm welcome to all of you. And thank you very much for your continued interest in Nucleus Software.

1:40 I will request Bharat to give you a perspective. Good afternoon, everyone, and thank you so much for joining this call. So while we talk about our financial performance, but I also wanted to share a couple of important updates. We've been talking about our AI strategy, and there have been some questions also. So I wanted to inform that the groundwork undertaken over the past few quarters is beginning to translate into tangible progress now. Our enterprise AI foundation is now in place.

2:28 Alongside this, we are also undertaking an organization wide learning and upscaling initiative to equip our associates with the capabilities that are required in the in adopting this AI framework. Actually, recently, we launched our similar new GA, which the release... The full blown release 9.0, which, among other things, also brings embedded AI capabilities across the lending life cycle. That's the other thing I wanted to talk about. Another important thing, of course, we've already shared it in our press release, but I wish to welcome Mr. Bharat Godywala as chief customer success officer.

3:23 He brings nearly three decades of experience across banking technology and digital transformation, core banking, transaction banking domains, and he'll be looking after leading the initiative of customer success organization. Finally, we recently completed five years of our journey with one important partner in Slinka, which is Hetten National Bank. They are our Finexia customers. We completed a five years journey with them, and we just did a small celebration with them in. So these are the few updates we wanted to give and over for the financial updates.

4:11 Now it's with mister present the financial number. Over to you, mister. Hello. Good afternoon. Am I audible? Yes. Yes, sir. You're audible. Yeah. Our consolidated revenue for the quarter is at rupees 210.4 crore, a growth of 6.4% quarter on quarter and 3.4% year on year. Product revenue during the quarter is Rs. 176.6 crore at 83.9% as against 84.1% during previous quarter. India region constitutes 56% of revenue followed by 12% from Middle East, 11% from South Asia, 5% from Europe and rest others.

5:03 During previous quarter, India constituted 58% of revenue followed by 13% from Middle East, 11% from South Asia, 4% from Europe and rest others. Revenue from top five clients contributed 28.1% of revenue in the quarter as against 29.3% during previous quarter. Cost of delivery including cost of product development for the quarter is Rs. 160.4, an increase of 1.9% quarter on quarter and 5.1% year on year. It constitutes 76.2% of revenue against 70% quarter on quarter and 70.1% year on year.

5:55 Marketing and sales expenses for the quarter is 10% of revenue against 7.1% quarter on quarter and 6% Y on Y. General and administrative expenses for the quarter is 10.1% of revenue against 7.5% quarter on quarter and 8.3 year on year. EBITDA for the quarter is at Rs. 7.6 crore as against Rs. 34.6 crore quarter on quarter and Rs. 33.7 crore year on year. Margins during the quarter is 3.6% as compared to 15.4% quarter on quarter and 15.5% year on year.

6:44 Other income during the quarter is Rs. 17.8 crore, growth of 19.5% quarter on quarter and degrowth of 0.7% year on year. Income from investment and deposit is Rs. 18.9 crore and Forex loss is Rs. 1.1 crore. This growth is driven by mark to market gains on debt mutual funds resulting from falling interest rate in Q1. Forward covers as on 06/30/2026 are USD 2,000,000 at an average rate of INR 94.692 USD. Profit after tax during the quarter is Rs.

7:31 23.9 crore, degrowth of 30.9% quarter on quarter and 32.2% year on year. The order book position as on 06/30/2026 is Rs. $12.44 crore out of which 88% that is Rs. $10.96 crore is from products. On 03/31/2026, the order book position was Rs. $10.44 crore out of which 86% I. E. Rs. $8.99 crore is from products. Total cash and cash equivalents as on June 30 are at Rs. 977.9 crore as against Rs. 972.4 crore on 03/31/2026.

8:28 Receivable is at Rs. 174.7 crore as on 06/30/2026 as against Rs. 121.1 crore as on 03/31/2026. DSO increased to sixty three days as compared to forty two days during previous quarter. Total headcount as on 06/30/2026 is 2,059, as compared to 2,028 as on 03/31/2026. Attrition during the quarter is 3% as compared to 2% during previous quarter. During the quarter pursuant to a revision in the remuneration structure, the company recognized a reduction in its gratuity liability of Rs.

9:21 6.99 crore and compensated absence liability of Rs. 2.83 crore. The resultant impact has been disclosed as an exception item in the financial statements. To reward exceptional talent, the company during the quarter has granted restricted stock units to eligible employees under the NUCLEUS Software RSU Scheme 2026. Now I hand it over to Swati. Thank you. Thank you, sir. With this, we are now open for q and a session. I will pass over to you, mister Akash. Over to you. Thank you, ma'am. With this, we are now open for the Q and A session. The first question is from the line of Mr. Roshab Shah from Bugle Rock. Please go ahead.

10:32 Yeah. Hi. No audible? Yes. Yes, You're audible. Yeah. So sir, in the last call, we mentioned that we have lost one of the top NBFC as a as a client. And, obviously, they would have been in our top five customers. And because they had invested in a company who is a competitor in Nucleus, since they shifted to that in your invested company. So is it possible to let us know that isn't that this is for major top top of top 5% Could you be a bit louder? Your last part is not clear. So we got the consent, but what is the precise question?

11:18 So my question is, so is it possible to let us know that isn't this a risk for every of our top customers? Can they can invest in a company who would be like a comparable NUCLEUS and give them business to the competitor? I would say, theoretically speaking, it's a it's a risk, but how many clients would want to do that is the question. Theoretically, yes, that has happened once. But the practicality of it is because question... Company would also want to do business with so many other competitors. I would... Other customers. No. Because the plan which is there to be one of the major India team in the country.

12:09 So your voices are very clear. I will put you a bit louder so it can be helpful. Yeah. Am I audible now? Is he no loud? Yeah. Well, you are, but... Yeah. Please go ahead. Okay. So my... I'm saying that that client was one of the major NBSCs in the country. So just wanted to know what are you thinking on those part. Oh, we're thinking only about our... Whatever we can do best. So we are... Our investments in our products and r and d and AI, we can do what we can do better, and we are confident of our positioning in the market. We're getting traction.

13:01 So this is a one off case. That's what. So so my second question is, in the last two, three years, we are focused on to strengthen the sales and marketing team. But we are are not seeing that conversion into business. So one factor could be the loss of customers, but what could be the other reasons? Like, what are the gaps we are not able to fulfill? So, yeah, I'll let our CFO answer that part. So with respect to the question you are asking in terms of not reflecting in the business, so just to share, last quarter, we have dropped our biggest order book of 600 plus crores in a quarter.

13:56 That is a reflection of the work sales marketing team is putting together along with... Duly supported by our delivery function and other support functions. And continuing on that trend, this quarter also, we have locked the order book in excess of 300 gross. So I think that is a reflection of the work... Great work this team is doing in terms of tendering and building on the foundations such as we laid during all these years. It has been one. Okay. So just a question about customization. If a small NBIC can... The cloud... Obviously, a customer of a Nucleus comes to Nucleus for some customization, will they be... Will will you be open to it, or you'll have some criteria for customization of the software for different level of customers?

14:56 Hold. So I think when when we talk about customization, we generally encourage configuration and design. Fundamentally, we look forward into opportunities how we can make those business elements implemented through configuration. Having said that, when it comes to the regulatory part, then certainly, we have provisioned the way of delivery to our customer. Customizations are minimal and to an extent of some integration changes, which comes sometimes to our table, and that has been managed through the power of Extended Air.

15:46 Okay. Okay. Yeah. So... And my last question is, so as you say, you are trying to engage more customers in the Japanese market, but you are already present there since last twenty, twenty five years. And in the previous conference call, you are mentioning that you were trying to tap the Sorry interrupt, sir. I would request you to join back the queue for more questions, sir. Yes. Thank you. Thank you, sir. The next question comes from the line of Mr. Vinayak Narkhani from Hathaway Investments. Please go ahead, sir. Yes. Good afternoon. Just wanted to check out, if you can just give us some broad view on what are the other expenses that have incurred in increase so much in this quarter as compared to previous quarters, if breakup can be given?

16:44 Well, the same breakup, I'll not be able to share, but it is largely on account of personal cost. So since this is first quarter, salary revision has been factored into this. That we also reflect in subsequent quarters. In addition to that, we have also given our issues that has also impacted in a certain way our OpEx. Yeah. But employee expenses have grown by 3.8% quarter on quarter, whereas your other expenses have grown by 18% quarter on quarter. So I just want to know the other expenses. Have we incurred more on sales and administration? Or what is it that has caused this bigger jump your revenue has actually de grew?

17:32 So so it is a little bit of marketing expenses, which has increased since we are investing heavily in global markets. So in terms of that, some expenses has increased on that side. Little impact in terms of admin is because of increase in some diesel and power expenses because this war situation, the diesel price has fluctuated a lot. And that has also impacted a bit on that front. Okay. That's it from me. Thank you. Yeah. Thank you, sir. Participants are kindly requested to restrict with one question in the initial round and get back to queue for more questions. The next question is from the line of Mr. Hardik Bora from Vireya Capital.

18:22 Please go ahead, sir. Hi, good afternoon. Can you hear me? Yes, yes, yes. Yes, yes. You. So first question is on the just some color on the order book. It seems that in this June quarter and in the March quarter, put together, we would have won close to crores to INR1000 crores of orders. What I wanted to understand is that is the execution cycle of these orders meaningfully longer than, let's say, what our historical experience has been, or would it be in line with our past track record? So more or less, it will be in line of our existing track record. While, yes, efforts are being made to speed it up, bring in more efficiencies, but largely, it will remain as as our existing.

19:20 Okay. Actually, just a follow-up on this. We attended the AGM on Monday, and I think there was a comment about some EMC related aspect also being part of the order book, and hence, the execution cycle could be longer. I'm trying to clarify my understanding here. So we... Despite the sharp jump that we've seen in the order book, thanks to the marketing efforts that we put in, the execution cycle doesn't necessarily become longer due to some EMC aspect in it. Right? So the thing is with respect to EMC, this order book includes the AMC contracts also. And these contracts are long term contracts.

20:05 And that is how it cannot be exactly compared to implementation of a particular order, which will entail a shorter period rather than a AMC. That would be the case for our orders in the past as well? That would have been the case for past as well. Yes. Okay. Second question I had was on the marketing box. Hardik, sir, I'm sorry to interrupt you. I would request you to join back the queue for more questions, sir. Okay. Thank you. Thank you. The next question comes from the line of Mr. Mahak Singhvi from Max seven Investments. Please go ahead, sir. Yeah. What are the logo deletions in these three months?

20:55 Sorry? Logos. Yeah. So you all have not performed in India. Why is the revenue slow down and so is the segment result in India? As far as India is concerned, how many logos have left? So some of the logos have left, and in fact, we have added three new logos. So if none of the logos have left, then how come the Indian performance is slowed down? So it it depends on some one time event which has occurred in the last quarter with respect to one of our biggest customer to where we have got some part of the revenue as a special capitalization we should deliver for them.

21:45 Yeah. And right now, employee expenses are about 74.5% of sales, almost 75%. Are they going to We are requesting you to ask one more question. I understand, sir. Due to lot of participants in the queue, we request you to join back the queue again, sir. Okay. Thank you. The next question comes from the line of missus Samar Singh from TPF Capital. Please go ahead, sir. Yeah. Thank you for the opportunity. I think the main question I have is, our sales and marketing expenses, which have gone up a lot, have finally shown results in our order book. But there seems to be some sort of a mismatch between that converting into p and l. So could you just explain to us why... What is the reason why our order book has literally doubled from last year, but our revenues are down 3% Y o Y. So So our order order book is a composition of certain contracts, which are a little long long range, maybe extended up to five years also.

22:56 And there are certain orders which get 55 with a shorter period of time also. And that is why you might not be seeing exactly culminating into a shorter revenue cycle. And in addition to that, sales and marketing expenses, which you talked about, is yielding definitely the results in terms of healthy order book. Why? Yes. There are certain markets in which we are setting our foot. And in those markets, there will be certain expenditure which will yield or result in maybe subsequent quarters. So So my point is that the order book is starting to consume at some point, right, and start reflecting in the revenue. Yes. So when... I mean, when you go from 600 crores or 200 crore order book, you know, revenue should start go... Start going up, but they're not. That... I guess, I won't need clarity on that.

23:49 Yeah. So the implementation cycle also is slightly longer. It is not a quarterly phenomenon. It takes some time to implement the order, and it also depends on customer to customer depending upon the kind of complexity which we have to deliver. Also, depends on the volume which they have in terms of migrating their legacy systems to ours. So that is why, typically, this implementation cycle varies from customer to customer. And, sir, how many customers are in this increased order book of 600 that we've got over the over the last twelve years? How many customer... Additional customers does that represent? So if we talk about in last fifteen months, we have added almost €10.

24:38 Okay. Thank you. I'll come back in a minute. Thank you. Thank you, sir. Participants are kindly requested to restrict with one question in the initial round and get back to the queue for more questions. The next question is from the line of Anuj Sharma from State Foot Investments. Please go ahead, sir. Yes. Thank you for this. Just a request. One question won't even allow you to ask a follow-up. But... Yeah. See, just one observation from '23 to '25. You know, our observations were that we were a deeply discounted pricing structure, and we would want to correct that. And we did correct, which helped us to get a mar... Margins of '25 to '27. And we did comment that it is our aspiration being a product centric company.

25:26 Our margin should be in that range, which was consistent with industry dynamics. But over the past two years, we really surrendered and couldn't retain any of these benefits. So just wanted to understand this journey. And if if I just extend this journey, it seems that we, again, in the next few years, will again become a deeply discounted model waiting for another round of price correction. So, you know, just trying to understand where have we seen that kind of maturity which other product companies have seen? And that's question number one. So I won't... Yeah. I...

26:12 Your observation is... I think, I would agree partially only because what we had to do in the past, of course, gave us the benefit for some time. Yes. I think we have mentioned or you would have noticed that past couple of years, the new orders, new logos were not there. So which which kind of impacted us. Now second half of last year and this quarter is when our book has got back again. It's become strong again, which will, of course, result in revenue as the project start getting executed. So I... I'm not able to relate the past to present the...

27:06 But this is what the situation... What we did a few years back was something which was needed. That did give us a leeway for a couple of years. But now it is a new order that will give us both. Yeah. No. No. I get that. But my real question is you don't see product companies like this. Most of the time, product companies are able to extract efficiencies and productivity and are able to retain it. Nucleus somehow has not been able to do so. So I'm just trying to understand where are we different or what are our challenges which are not similar to other product companies? And I'm talking about successful product companies because many don't survive, but the ones who do and achieve a reasonable rate demonstrate some maturity in operating metrics.

27:57 So, Vishnuji, it will be, you know, just just understanding beyond what is it clearly that we behave unlike a product centric company, our our financials rather. So can't talk about other product companies. You would be comparing that better. But one thing which I can tell you is when our order books were low, we did not stop investments into product. So the... Our product investments did not stop because we have been maintaining that that we always have a long term view. So when we were not... Last couple of years when we are not getting new logos, we did not stop investments. And that could be reflecting what you are observing right now.

28:44 But now that the new logos and new orders are coming in, we should now again see an update. That's how I would respond. Yep. Yeah. Absolutely. As Parag has very clearly highlighted, that that is what has happened. You know, our commitment to our customers, existing and obviously prospective also, is is firm in terms of delivering the latest functionality and and latest technologies irrespective of how, you know, in the short term, we are able to service our stakeholders that that is represented by you.

29:30 So for us, customers are... Continue to be our highest priority. And in in in that, you know, in in that prioritization, yes, sometimes, know, shareholders would get affected, which is what has happened in this quarter. All right. I'll come back in the queue. Thank you. Thank you. Thank you, sir. The next question comes from the line of Mr. Rahul Jain from Kamayakra Wealth Management. Please go ahead, sir. Hello? Hello, sir. Please go ahead with your question.

30:17 Yeah. Hi. This is Rahul from Dollar Capital. So basically, if you could tell, first of all, congratulations on very strong order signing in last couple of quarters. It it would be great if you could explain us, are there most of this in a subscription model? And does the big part of those order are related to the subscription value, which would accrue over five to seven years? That is part of one of the question. Part two of the same question is that this model is moving towards subscription more and more. Do we see the implementation as a percentage of the order value reducing? And in general, if you could talk about how you expect this order book traction to translate into revenue traction? Will it be back ended during the year? Or it will be more even beyond that? Any color on this would be great.

31:18 So how will I show this side? While, you know, we don't give any future guidance on that trip, I'll not be specific on numbers. But, directionally, if I talk about these AMCs are basically... I will not call it as a subscription model, but it is based on certain amount which grows by certain percentage every year, and that may last up to five years. So we normally get into this contract for five years. And with respect to all the new logos, obviously, there will be implementation and licensing cost that definitely will try... Will get from the customer once the implementation starts. And that is where the significant part of the revenue will get accrued.

32:07 Certain part in the form of AMC will get accrued over a period of five years. Got it. Got it. So are you trying to also see that the jump might have also come up because of some AMC renewal on a longer chart or you're saying generic comment? I'm assuming the biggest jump would have come from the new logo wins. So not exactly. It is exactly coming from the new logos. Yes. A significant portion is coming from the new logos, but our reasonable part is coming from existing customer also. EMC getting renewed at a significantly better price.

32:58 Sure. Thank you. That's it from my side. Thanks for the call. Yeah. Thank you so much, sir. The next, we have a follow-up question from mister, Hardik Bora from Vireya Capital. Please go ahead, sir. Yes. Thank you for the opportunity again. So I was just looking at the marketing and sales expenses and the SG and A expenses. Both have increased to about INR21 crores. Now of course, we are seeing the order book already reflecting the efforts made on this front. But is there some lumpiness in these costs? Or are they expected to, you know, go down going forward? Just wanted to get some color on the sharp rise in the SG and A and marketing costs on a quarter on quarter basis.

33:49 Okay. As far as SG and A is concerned, I think this is the level by and large we will be maintaining. The effectiveness will will come over next few quarters, but the level will be at at at this level. In addition to that, we will keep looking for investing in those events or in those markets, which are strategic priorities to us and which can yield results in coming future. So that that calibration will go up, but, yes, largely expenses should not.

34:35 So there's no large one off that we need to keep in mind that came in this particular quarter per se? Nothing. Okay. Thank you. Thank you so much, sir. The next follow-up question is from mister Mahek Sangvi from MAK seven Investments. Please go ahead, sir. Yeah. Employed benefit expenses as a percentage of sales is around 75% right now. Is it going to come down, or is it going to remain the same? It should come down because it is as a percentage of revenue. And if you see, we have largely been hovering around the $2,210 crores, 15 crores. That is the number we are looking at. As, obviously, revenue increases, there will definitely be a decline in percentage you should see. Why? Yes.

35:30 We'll continue investing in our talent and hiring the AI native talent, and that may impact a little bit, but not much. Do you have any, like, margin control initiatives? Because even if you increase the revenue, expenses are eating up all the profits and nothing is left for the shareholders. So, yes, we are working on that. I I feel you will see the the effect of those efforts in subsequent quarters while we can't quantify it. But, yes, on ground, we are we are looking at this.

36:16 And in fact, we are focusing on high margin deals as well as we chart our course of growth in other geographies than India. Okay. I will join in the queue. Thank you. Thank you, sir. The next follow-up question is from Mr. Anuj Sharma from Stepford Investments. Please go ahead, sir. Just wanted to understand our pricing philosophy or pricing structure. You know, over the past, again, I would focus on the long term. How has our pricing changed in the last, let's say, three, five years. What do we do different in pricing? Because one of the challenges, again, for us was pricing.

37:05 So how have you worked on it? So, yes, pricing always remains a challenge in the wake of competition, but we have chosen to retain and be a premium player because the kind of product we offer in the market is extremely, extremely, I would say, strong and solid product. And in terms of effectiveness, in terms of features, in terms of various aspects of the product, we we believe in our product. And, yes, there is strict competition in the market while we don't talk about the competition. But, yes, that is also a little bit affecting in terms of our efforts to take the price up. So we'll maintain... We are maintaining the price segment. We want to continue that segment. And as situation improves, obviously, we'll take that up.

38:19 Okay. And in terms of geography, since we are now... When we have been for some time looking beyond India, which geography seem to be very promising for us in the in the medium term... Medium to long term? So I feel Middle East and Southeast Asia are all big bet. And, definitely, we have got our footing in US markets also. And we see growing in these markets little differentially than other markets. Got it. Got it. And one one small question. In terms of productivity benefits, do you see us getting any productivity benefits from AI?

39:10 Not now. Not now. Right now. But, yes, we are expecting those benefits to flowing as we strengthen our AI usage inside the organization. So it might come in... You wanna say something? So just a second. So while there is a visibility there, this is Abhishek. There is a visibility that but we have not actually started measuring in terms of what tangible benefits that or in terms of numbers. So we are holding it for this quarter, but we are on the right path. All right.

39:56 Thank you so much. Thank you, sir. The next question is a follow-up question from Samar Singh from TPF Capital. Please go ahead, sir. Yes. Thank you for the follow-up. Just on the order book over the last twelve months, the increase that we've seen, can you give some color on is it largely Finjanue? Or is there some synapse in there as well? The geography of the orders have come from? Largely just Finjanue. And the geography. America. Yeah.

40:44 Latin America, The US order that we talked about, India, Middle East, it's a mix. And then just on on, I guess, the North American market. I think we have been... Well, GM Financial has been a customer for us for a long time, but I think that's everywhere outside of the North American market. So if you can just talk about, you know, why has it been that, you know, customer who's used our products everywhere else in the world has not converted their US, you know, business to to Nucleus, And is that an opportunity for us going forward? So in two parts, one is that is the way the customer business is structured.

41:32 So they have a North America division, and they have rest of the world. So our contract has been with the... Outside North America. And, yes, future, there is a possibility. I can't rule that out. But the other customer that we talked about, other order we talked about, one US order that we got in the last year, based on that, we would expect to build upon that as well outside GMM. And was this also another sort of, like, a, you know, vehicle financier, or was it a bank? The client that we have in the Like, The US market works in this segment, or we picked up a very less segment in the auto finance area.

42:24 It is that customer. Got it. Okay. Thank you so much. Thank you, sir. In the interest of time, that will be the last question for the day. Now I would pass it over to Ms. Swati for her close... Closing comments. Thank you, Akash. Now we would like to thank all the investors for joining us today on this call. I would now pass it over to Vishnu, sir, for his closing comments. Once again, I would like to take this opportunity to thank you for your continued interest in nuclear software, and I would like to reassure you of our commitment to build a long term institution. Thank you. Thank you, sir.

43:11 That concludes our conference for today. Thank you for participating. You may all disconnect now.