CE Info Systems Ltd Q1 FY2023 Concall Summary

Key Takeaways

• Strong quarter, broad-based growth: Revenue grew on an open order book, with the Automotive & Mobility segment up 65% YoY and Consumer Tech & Enterprise up 37% YoY.
• Order book provides multi-year visibility: The opening order book of ₹699 Crores is higher than the prior year, and management’s track record converts this to revenue over three to four years on average.
• International revenue is a pipeline story, not a P&L one yet: Management called foreign software/API/SaaS sales a one-to-three-year journey and confirmed nothing substantial was booked in Q1.
• Margins are strong and management wants them stronger: PAT margin was 46% this quarter; the stated ambition is to stay in the 30–35% PAT range and achieve the higher end of that band.
• What to watch next quarter: Whether the order pipeline continues to build and convert, any early signs of foreign revenue traction, and the pace of Gtropy’s integration and contribution.

Revenue Drivers & Segment Performance

• Open order book execution: Broad-based performance was driven by new launches, new OEM go-lives, fleets embedding IoT solutions, and enterprises using digital transformation products.
• A&M segment surge: Automotive & Mobility grew 65% YoY, a function of the open order book; when consolidated, the majority of Gtropy’s revenue also fell into this segment given its logistics customer base.
• Consumer Tech & Enterprise momentum: The segment grew 37% YoY, also driven by the open order book, with revenue from new-age business clients tied to their own app usage and transaction growth, which management sees as a healthy sign for upsell.
• Map & Data lumpiness: Growth in Map & Data was neutral or lumpy on a YoY basis because it is driven by milestone-based contracts, especially in C&E and automotive; management said annual numbers make more sense for this business.
• Standalone strength: The standalone business continues to do very strongly and is growing quite well.
• Automotive billing model: Billing with vehicle OEMs is per vehicle sold and also on a yearly basis.

Rohan Verma: "we were pretty happy with how the quarter went, it is going inline with kind of what our efforts has been over the last few years and we remain kind of committed to working hard, building products and engaging with our customers..."

Order Book & Pipeline

• Opening order book: Stood at ₹699 Crores, higher than the opening order book of FY22, which management offered as directional colour in lieu of specific revenue guidance.
• Conversion timeline: The track record is about three to four years on order book to revenue conversion on average.
• Pipeline health: The order pipeline continues to become larger and more interesting; Q1 has begun well on both pipeline and order booking.
• Government business: Order booking in government is gradually building; management is being careful to remain a platform and product player on a SaaS model, working closely with system integrators.
• Customer retention: The company has a track record of very strong retention numbers, driven by continuously enhancing products and services aligned to customer needs.

Rohan Verma: "the track record is about three to four years on order book to revenue kind of conversion on average."

Product & Technology Investments

• Mappls RealView launched: 360-degree panoramic street imagery was launched a few weeks back; the entire data collection for it was expensed over time as part of R&D expense.
• 3D Metaverse Maps: Launched and being invested in; monetization will mirror existing products (licensing maps, building APIs on subscription or transaction basis, or building SaaS solutions charging based on usage), with real estate, VR, smart city, and road infrastructure seen as interesting future market segments.
• Mappls app compatibility: The app is now compatible with Android Auto and CarPlay.
• Mappls app monetization model: The app remains free to use; focus is on growing distribution of gadgets through retail and automotive OEM dealerships, with a gadget-led revenue model (sell gadget upfront plus subscription service). No plans for an ad business model on the app as of now.
• HD digital map twin: Management will align investments toward market opportunities for a four-dimensional, high-definition, information-rich digital map twin, aiming to be the most cost-efficient and technologically savvy player in this space in India.
• R&D commitment: Expenses on data collection and innovation will continue; the company is used to those expenses and makes them cost-efficient by leveraging data collection in multiple ways.

Rohan Verma: "we believe that our offering is stronger in terms of the value proposition to customers, the coverage is wider, the technology is better, there is 3D Metaverse Maps. So in that sense for last 14-15 years we have competed in a world where Goggle exists, but we have shown the track record and we believe we continue to show the track record of being able to build a better product"

International Expansion & New Markets

• Foreign revenue timeline: Management reiterated this is a one-to-three-year journey and they are not counting on revenue being significant in FY23 itself; Q1 had nothing substantial to report from a revenue point of view but good efforts from a pipeline point of view.
• Senior hires in key regions: The company brought in senior folks in various capacities in APAC, the US, and Europe to explore and reach out to customers in those markets.
• Competitive positioning in automotive: Management argued that OEMs do not want to outsource all in-car technology to big tech companies, positioning MapMyIndia as the alternative.

Rohan Verma: "We have also said that look this is going to be a one-to-three-year journey, not that we are counting on revenue being significant from that in this year itself."

Margins, Costs & Capital Allocation

• PAT margin ambition: Management wants to maintain 30% to 35% PAT and 35% to 45% EBITDA, and would like to achieve on the higher end of the range; Q1 PAT margin was 46%.
• Effective tax rate: Rose to 28.1% in Q1 FY23 from 17.3% in Q1 FY22.
• Other expenses volatility: Fluctuations are driven by legal and professional fees, provision against bad inventory, communication and cloud hosting, and advertisement expenses; advertisement is the main item that can vary beyond the normal range, while other items will probably stay within 15% to 20% of sales.
• Cash balance preserved for growth: The ~₹300 Crores cash balance is preserved for growth opportunities including acquisitions, own investments, and re-energizing the brand; management wants to ensure no shortage of cash when any opportunity comes up.
• M&A pipeline active: Multiple opportunities are being evaluated in different spaces (India and internationally, enterprise and consumers); nothing specific to announce today, but management is being careful about which ones to pursue.
• Working capital from Gtropy: Some investment may be required to support Gtropy from the gadget side, which leads to generating the SaaS part of the business, but not expected to be an alarming number.
• Working capital from government: Pressure on working capital from government business does not come too much, maybe a little bit, but not much.

Rakesh Verma: "we did 46% this quarter, so I guess what we are trying to communicate is we would like to achieve on the higher end, which we already exceeded last quarter. So, if you are looking at a shorter range then look at the higher side of it rather than the lower side of it."

Strategic Updates & Ecosystem

• Gtropy integration underway: The acquisition was made to strengthen the IoT business and create a dedicated management and business to scale mobility segments; integration is still in progress, with some revenue and some thought still to be fully integrated.
• Nawgati Tech stake acquired: A ~3% stake was acquired in Nawgati, which has a video analytics SaaS product focused on oil and gas sectors, monitoring congestion, wait time, and traffic at fuel stations.
• Public transport win: One large state road transport corporation in South India went live with MapMyIndia and Gtropy IoT and SaaS for public transport bus tracking and a citizen app.
• Biggest risk as a company: Management identified the biggest risk as stopping innovation (not coming out with newer products or enhancements) and stopping active engagement with customers.

Rohan Verma: "See, our biggest risk as a company is if we stop innovating that is if we do not keep coming out with newer products or enhancements on our existing products that will not hold us in good strength and the other is, if we stop engaging actively with our customers that will also impact us."

Guidance & Commitments

Key Metrics