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    Newgen Software Technologies Q1 FY26 earnings call

    NEWGEN
    Information Technology·17 Jul 2025
    Management Summary

    Newgen Software Technologies reported a muted Q1 FY26 with revenues of INR 321 crores and net profit of INR 50 crores, resulting in a net margin of 15.5%. This was attributed to a seasonally weak quarter, further impacted by uncertain economic conditions leading to slower decision-making and smaller deal sizes. Despite these challenges, the company saw strong growth in SaaS/ATS/AMC revenues (19% YoY to INR 121 crores), won 12 new logos, and generated robust operating cash flow of INR 81 crores, while continuing significant investments in AI-driven products.

    Highlights

    5

    • SaaS, ATS/AMC revenues reached INR 121 crores, demonstrating a strong 19% Y-o-Y growth, indicating subscription revenue growth is back on track.

    • The company won 12 new logos during the quarter, contributing to future revenue streams.

    • Robust cash flow generation was observed, with net cash from operating activities at INR 81 crores for the quarter.

    • Significant investments are being made in AI-driven products and solutions, with AI-led use cases driving deals and customer discussions across verticals.

    • Newgen was granted a patent for data compression, bringing the total to 25 patents, and received recognition from Gartner and Forrester.

    Concerns

    5

    • Q1 FY26 was a muted quarter with revenues of INR 321 crores, impacted by uncertain economic and geopolitical environments.

    • Customers are taking more time and being cautious in decision-making, leading to slower license sales and subsequent implementation in Q1.

    • Average deal sizes were lower compared to previous periods, with larger deals (INR 20-50 crores range) experiencing slower decision-making.

    • Net margins for the quarter stood at 15.5%, which is below the historical target of around 20%.

    • Net trade receivables were INR 504 crores, resulting in a DSO of 123 days, indicating extended payment cycles.

    Key financials

    Single quarter

    09 metrics
    1. 01Revenue₹321 Cr
    2. 02PAT₹50 Cr
    3. 03Net Margins15.5%
    4. 04SaaS, ATS/AMC Revenue₹121 Cr+19%YoY
    5. 05Net Cash from Operating Activities₹81 Cr

    Order Book

    medium confidence

    Composition

    Tactical Deals(deal size)
    Larger Deals(deal size)

    Pipeline

    deal pipeline tcv

    Funnel continues to be strong with significant number of large deals.

    Cancellations / Deferrals

    • deferred:No cancellations reported this quarter, but some deals slipped from June to July and some previous large orders are in a slow-going execution mode.

    "Management noted a healthy funnel but slower decision-making and lower conversion of large deals, leading to smaller average deal sizes this quarter. They expect closures to improve in the second half of the year."

    Source:
    Prepared remarks
    Q&A

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Cash ₹81 crores

    Net cash generated from operating activities for the quarter.

    Guidance & targets

    3
    CategoryTargetPriority
    Profitability
    Net Margin
    around 20%
    		Medium
    Growth
    Overall Growth
    growth year
    		Medium
    Tax
    Tax Rate
    22.5%
    		High

    What to watch in Q2 FY26

    5

    Improvement in Deal Closures/Conversion

    coming quarters, leading to H2 improvement
    CurrentLower than anticipated in Q1
    TargetGradual improvement

    Why it matters

    Improved deal closures are essential for revenue growth and to overcome the muted Q1 performance.

    We believe that our funnel continues to be strong and closure would gradually improve in the quarters in the coming quarter, leading to improvement in overall growth in the second half of the year.

    Risks & concerns

    6
    RiskSeverity

    Uncertain Economic and Geopolitical Environment

    The quarter was muted due to global economic and geopolitical uncertainties, impacting customer decision-making. — Management acknowledged

    high

    Slower Customer Decision-Making and Project Starts

    Customers are taking more time and being cautious, leading to lower funnel conversion and slow license sales. — Management acknowledged

    high

    Lower Average Deal Sizes

    The average deal sizes were lower compared to previous periods, affecting overall revenue. — Management acknowledged

    medium

    Increased Wage Costs

    Wage costs are expected to increase to retain quality employees, which could impact profitability if not balanced by productivity. — Management acknowledged

    medium

    Localized Market Issues (India & Middle East)

    Specific issues like pullback in retail lending in India and visa blocks in Saudi Arabia impacted business travel and deal closures. — Management acknowledged

    medium

    Increased Competition

    More global players and local startups are entering the market, increasing overall competition, particularly in low-code space. — Management acknowledged

    low

    Q&A highlights

    8

    “Yes. I think implementation is more this quarter specific and it is on account of 2 things. One is also that the new deals also have some residual implementation, which we typically used to get billed, which has slightly been muted as the deals are much smaller. The second is also that some amount of our previous large orders, they are still in kind of a slow-going execution mode.”

    Analyst questioned the impact of smaller deal sizes and slower implementation on revenue, which management confirmed as a factor for the muted quarter.

    asked by Rahul Jain

    2 min read6 chapters

    Detailed Narrative

    01

    Muted Q1 FY26 Performance and Revenue Breakdown

    Newgen Software Technologies reported a muted Q1 FY26 with total revenues of INR 321 crores. The net profit after tax stood at INR 50 crores, translating to net margins of 15.5%. Despite the overall slowdown, the SaaS, ATS/AMC revenue streams showed resilience, growing 19% year-over-year to INR 121 crores, indicating a positive trend in subscription-based income.

    02

    Challenges in Deal Conversion and Deal Sizes

    The quarter was characterized by customers taking more time and being cautious in decision-making, leading to slower license sales and implementation. While 12 new logos were acquired, the average deal sizes were notably lower than in previous periods. Tactical deals ranged from INR 4-9 crores, but larger deals in the INR 20-50 crores range experienced slower decision-making and conversion, impacting the overall revenue momentum.

    03

    Strategic Investments in AI and Product Innovation

    Newgen is making significant investments in AI-driven products and solutions, leveraging machine learning and Generative AI to enhance decision-making, automation, and personalization across its workflow. These AI-led use cases are actively driving new deals and customer discussions. The company also secured a patent for data compression, adding to its portfolio of 25 patents, and received industry recognition from Gartner and Forrester for its offerings.

    04

    Balance Sheet Health and Operating Cash Flow

    The company demonstrated robust cash flow generation, with net cash from operating activities for the quarter reaching INR 81 crores. However, net trade receivables were INR 504 crores as of June 30, 2025, resulting in a net DSO of 123 days. This extended DSO reflects the slower decision-making and project starts observed during the quarter.

    05

    Outlook and Expected H2 Recovery

    Management acknowledged a challenging but transitional environment for FY26, with a strategic focus on AI-led transformation and disciplined execution. While Q1 was weak, the funnel remains strong, and closures are expected to gradually improve in the coming quarters⏳, leading to better overall growth in the second half of the year. Annuity revenues are also anticipated to pick up with project closures.

    06

    Localized Market Issues and Competition

    Specific localized issues impacted performance in key markets, including a pullback in retail lending in India and visa blocks for Saudi Arabia, hindering business travel and deal execution. The competitive landscape is evolving with more global players and local startups entering the market, particularly in the low-code space, though Newgen believes its vertical focus and product maturity provide a strategic advantage.

    This is an AI-generated summary of a publicly available earnings call transcript.