Ramco Systems Ltd Q4 FY2024 Concall Summary

Key Takeaways

• EBITDA turns positive, a milestone in the turnaround: The company achieved EBITDA breakeven this quarter and aims to sustain it, driven by cost reduction and partnership-led sales efficiency.
• Record Korean Air deal anchors credibility: A multimillion-dollar MRO contract (upward of \$10M) with Korean Air, one of the largest in Ramco's history, validates the product and is expected to attract other prospects.
• Order bookings jump 19% YoY: Bookings rose to \$27.9 million, with 60% of revenue now coming from cloud or SaaS customers, signaling a shift toward stickier, subscription-based relationships.
• Expense base reset to ~₹130 crores: Management has reduced costs to this quarterly run rate and offers it as a baseline for the next 4 to 12 quarters, though it declines to split fixed vs variable.
• What to watch next quarter: Whether the Ramco Payce launch converts roadshow demo interest into orders, and if the Korean Air deal begins to pull other aviation prospects into the pipeline.

Turnaround Milestone: EBITDA Breakeven

• Cost discipline delivered the result: EBITDA turned positive primarily because the company reduced a lot of cost, not because of a revenue surge.
• Partnerships optimized sales spend: Onboarding partners like BDO and Deloitte expanded market reach without proportionally adding sales and marketing expense, a structural shift in go-to-market efficiency.
• Sales force rationalized: Road shows and partner leverage allowed the company to spend only what was necessary while still expanding market presence.
• Recurring revenue grew 13% YoY: This healthy pace, up from 5% last year, provided a stable base against which the cost cuts could take effect.
• PAT remains distant: Management cannot say when the company will become PAT positive, offering only that it may be able to answer by the end of FY25.

Management: "We're happy to say that in this quarter, we have done EBITDA positive, and we will aim to also maintain it in the coming year."

The Korean Air Deal: Scale, Structure & Signaling

• Largest deal in company history: The contract is upward of \$10 million, secured after Korean Air conducted complete due diligence on the product.
• Strategic scope: The engagement will accelerate the tech transformation of Korean Air's new engine maintenance facility, set to be Asia's largest engine MRO facility.
• Revenue recognition spans 5 to 7 years: The contract follows the normal model of license sale, then implementation, then AMC, with revenue structured to be somewhat front-ended but management declined to confirm specific percentages.
• Credibility catalyst: Management believes that when a reference customer of Korean Air's stature selects Ramco, other prospects will look at the product, shortening the sales cycle in the niche MRO market.
• Contractual discipline improved: As part of the turnaround, the company tightened contractual clauses; the Korean Air contract includes SLAs and proper terms, reducing execution risk.

Management: "When someone like Korean Air chooses us, it gives us the extra credibility in the market. So other people who are really looking at it will absolutely look at our product because it has been chosen by someone like Korean Air."

Product & Market Expansion

• Ramco Payce launched: A modern SaaS-based payroll platform was introduced and demoed at over 13 roadshow events across India, Asia, Australia, New Zealand, and the Middle East.
• Roadshows generated accelerated pipeline: Management claims the events produced as many demo requests in a short span as would normally take two years of active marketing, attributing this to product superiority.
• Payroll is a horizontal market: Unlike the niche aviation MRO space, payroll offers a much broader addressable market, though management notes both segments are seeing active interest.
• Defence has a long gestation: The defence segment carries an 18-to-24-month sales cycle, so near-term revenue contribution is unlikely.
• Order book is healthy and busy: Many customers are on multi-country deals and teams are occupied executing in-hand orders, supporting the recurring revenue trajectory.

CEO: "What we could have done over a period of 2 years in terms of active marketing and selling those kinds of demo requests, we have got this through this roadshow event because of superiority of the product."

Revenue Mix & Order Book Quality

• Cloud and SaaS now 60% of revenue: This includes both implementation and subscription components, with the recurring portion (AMC/subscription) showing steady healthy growth.
• Order bookings rose 19% YoY: From \$23.4 million to \$27.9 million, reflecting both the Korean Air win and broader demand.
• Management declines to forecast mix: When asked for a revenue split between subscription and one-off given the \$188 million order book, management refused, saying it depends on where deals and implementations pan out.
• Standalone vs consolidated gap explained: The difference arises from intercompany transactions where the Chennai parent charges subsidiaries for offshore work, a normal consolidation artifact.

Cost Baseline & Forward Guardrails

• Quarterly expense run rate reset to ~₹130 crores: This is the result of the turnaround cost reduction and is offered as a guideline for the next 4, 8, or 12 quarters.
• Fixed vs variable mix undisclosed: Management declined to break down the expense base, limiting visibility into how costs might flex with revenue.
• No forward-looking statements policy: Management is cautious about making commitments, calling this a year of turnaround where it wants to invest, maintain customer excellence, and modernize products.
• Internal targets exist but are private: The company has targets for everything as part of the turnaround but cannot disclose them, though management insists a turnaround without targets is impossible.

Management: "We can't really disclose it. But absolutely, we are a very target-oriented company. We have targets for everything. That's part of the turnaround rate, how can you have a turnaround without a target? So we have it, but I can't really disclose that, unfortunately."

Guidance & Commitments

Key Metrics