Nucleus Software Exports Limited — Q1 FY26 earnings call

Call held 1 Aug 2025

Management summary

Nucleus Software reported a mixed Q1 FY26, with strong YoY growth in revenue and profitability, but a notable QoQ decline in key profit metrics like EBITDA and Net Profit. The company highlighted significant go-lives and progress in its lean journey, while also addressing concerns around rising employee costs, a CFO resignation without notice, and a temporary slowdown in order conversions attributed to increased regulatory scrutiny. Management expressed confidence in long-term product evolution and market expansion, particularly in North America.

Highlights

  • Consolidated revenue stood at ₹217.72 crores, marking an 11.43% YoY growth but a 4.91% QoQ decline.

  • EBITDA for the quarter was ₹33.74 crores, a 17.36% YoY increase but a significant 54.59% QoQ drop.

  • Net Profit after Tax (PAT) was ₹35.20 crores, up 16.56% YoY but down 45.66% QoQ.

  • EPS for Q1 FY26 was ₹13.37, compared to ₹24.60 QoQ and ₹11.28 YoY.

  • Order book position improved to ₹703.16 crores as of June 30, 2025, up 14.82% QoQ.

  • Cost of delivery as a percentage of revenue increased QoQ to 70.1% from 57.3%.

  • Marketing and sales expenses surged 209.43% YoY to ₹13.12 crores.

  • Total headcount slightly decreased to 1939 as of June 30, 2025, from 1945 in the previous quarter.

Concerns

  • CFO Resignation Without Notice

Key financials

  1. Consolidated Revenue ₹217.72 Cr +11.4%YoY
  2. Consolidated Revenue (USD) 25.46 Mn +8.6%YoY
  3. EBITDA ₹33.74 Cr +17.4%YoY
  4. EBITDA Margin 15.5% +0.78%YoY
  5. Net Profit ₹35.2 Cr +16.6%YoY
  6. EPS ₹13.37 +18.5%YoY
  7. Order Book Position ₹703.16 Cr +14.8%QoQ
  8. Total Headcount 1,939 -0.31%QoQ

What they filed

Q1 FY27: revenue down 3.7%, net profit down 31.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue202 206 229 218 214 +6%220 +7%225 −2%210 −4%
EBITDA32 33 74 34 23 −28%33 +0%35 −53%8 −76%
Net profit33 35 65 35 26 −21%21 −40%35 −46%24 −31%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹217.72 Cr Total
  • Product Business ₹184.91 Cr 84.9%
  • Projects and Services Business ₹32.81 Cr 15.1%

Guidance & targets

Profitability

  • Margin Restoration Profitability · ongoing · Medium confidence to get back to the margins that we had last year
    So, we will be an ongoing attempt to increase our top line and that is how we will be wanting to get back to the margins that we had last year.

    — Mr. Vishnu R. Dusad

Risks & concerns

  • CFO Resignation Without Notice

    high

    The former CFO resigned on the 21st (after the con-call on the 19th) without notice, which is an unusual and concerning event for a public company.

    Analyst acknowledged

  • Margin Depletion due to Rising Costs

    medium

    Employee costs jumped due to increments, and with no one-off items in operating expenses, margins are under pressure, requiring new sales to recover previous year's levels.

    Analyst acknowledged

  • Slowdown in Order Conversion and Increased Regulatory Scrutiny

    medium

    Experienced a slowdown in order conversion, with decisions now going up to board levels due to increased regulatory involvement, causing delays in closure.

    Management acknowledged

Areas of evasion (3)

  • Lack of specific forward guidance
  • Initial deflection on order book disclosure consistency
  • Future announcements

Q&A highlights

2 direct
Consistency of Order Book Disclosure Partial
No, actually, there was no conscious reason. I think we will also check at our end in the transcripts of last two calls. But there was no conscious. It would have been covered... We will check once again.

Highlights a potential inconsistency in investor communication and transparency regarding a key metric, requiring management to review past disclosures.

Asked by Vaibhav Badjatya

CFO Resignation Without Notice Direct
Mahak Singhvi: And he resigned without a notice. He just resigned on 21st. Mr. Vishnu R. Dusad: Yes.

A CFO resigning without notice is a significant red flag, indicating potential internal issues or disagreements, and raises questions about corporate governance.

Asked by Mahak Singhvi

Margin Depletion and Reliance on New Sales Direct
Mahak Singhvi: So, the employee costs are likely to remain constant in the coming quarters and operating expenses also do not have any one-off items. So, the margins are going to deplete this year? Mr. Vishnu R. Dusad: So, we will be an ongoing attempt to increase our top line and that is how we will be wanting to get back to the margins that we had last year. Mahak Singhvi: So, you are relying on new sales. Right? Mr. Vishnu R. Dusad: Yes, certainly.

Directly addresses the impact of rising costs on profitability and the strategy to offset it, indicating potential pressure on margins if top-line growth doesn't materialize as expected.

Asked by Mahak Singhvi

2 min read 6 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Nucleus Software reported consolidated revenue of ₹217.72 crores for Q1 FY26, representing an 11.43% year-on-year growth but a 4.91% sequential decline. In USD terms, revenue was $25.46 million, growing 8.62% YoY but declining 4.03% QoQ. Net Profit after Tax (PAT) stood at ₹35.20 crores, an increase of 16.56% YoY, but a significant 45.66% drop quarter-on-quarter. Diluted EPS followed a similar trend, at ₹13.37 for the quarter, up 18.53% YoY but down 45.65% QoQ.

Product and Services Revenue Dynamics

Product revenue for Q1 FY26 was ₹184.91 crores, showing a 9.94% YoY growth but a 7.34% QoQ decline. Conversely, Projects and Services revenue demonstrated robust growth, reaching ₹32.81 crores, up 19.83% YoY and 11.60% QoQ. This indicates a shift in revenue mix, with services contributing more significantly on a sequential basis, potentially offsetting some of the product revenue dip.

Profitability and Expense Trends

EBITDA for the quarter was ₹33.74 crores, translating to an EBITDA margin of 15.49%. While this was an improvement of 0.78 percentage points YoY, it marked a substantial 16.96 percentage point decline QoQ from 32.45%. The cost of delivery as a percentage of revenue increased to 70.1% from 57.3% QoQ. Marketing and sales expenses surged by 209.43% YoY to ₹13.12 crores, and G&A expenses increased by 50.12% QoQ to ₹18.15 crores, contributing to the sequential margin pressure.

Order Book and Cash Position

The company's order book position as of June 30, 2025, stood at ₹703.16 crores, a healthy 14.82% increase from ₹612.40 crores on March 31, 2025. This includes ₹608.70 crores from product business and ₹94.46 crores from projects and services. Total cash and cash equivalents also grew to ₹965.93 crores from ₹877.26 crores QoQ, indicating strong liquidity. Management noted a past slowdown in order conversions due to increased board-level involvement driven by regulators, but conversions have started to happen.

Strategic Focus: AI, North America Expansion, and Hoshin Kanri

Nucleus Software is leveraging embedded AI capabilities in its FinnAxia and FinnOne Neo products, with modules being implemented and customers leveraging them, though not yet billed as a separate business model. The company is actively working on North America expansion, including engaging senior sales leaders and pursuing proof-of-concepts with prospects. The 'Hoshin Kanri' initiative, a long-term philosophical approach focused on customer satisfaction and employee development, is expected to bring sustainability over the years, rather than immediate cost optimization.

Key Personnel and Disclosure Concerns

A significant concern raised was the resignation of the former CFO without notice on July 21st, after the earnings call on August 1st. Management confirmed the resignation and stated they 'did not have a choice.' Additionally, an analyst questioned the inconsistency in disclosing the order book number, which was omitted for two quarters before being reintroduced. Management committed to checking the reason for this change, highlighting a potential area for improved investor communication.

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