Nucleus Software Exports Limited — Q3 FY26 earnings call

Call held 11 Feb 2026

Management summary

Nucleus Software reported a mixed Q3 FY26 with consolidated revenue growing 3.06% QoQ to INR 220.03 crores and EBITDA increasing 41.77% QoQ to INR 32.72 crores, driven by improved cost of delivery. However, net profit declined 21.22% QoQ to INR 20.70 crores. The company added two new logos this quarter, bringing the total to seven for the financial year, and continues to focus on migrating legacy customers to its new platform, a process expected to take 3-4 years. Capital allocation discussions highlighted a cautious approach to cash deployment, considering potential AI investments.

Highlights

  • Consolidated revenue of INR 220.03 crores, up 3.06% QoQ and 6.97% YoY.

  • EBITDA at INR 32.72 crores, increased 41.77% QoQ.

  • Cost of delivery as a percentage of revenue improved to 70.4% from 73.9% QoQ.

  • Added two new logos in Q3 FY26, contributing to seven new logos for the financial year.

  • Total cash and cash equivalents grew to INR 971.60 crores as of December 31, 2025.

Concerns

  • Net profit decreased 21.22% QoQ to INR 20.70 crores.

  • Order book position slightly decreased 2.15% QoQ to INR 656.68 crores.

  • Migration of legacy customers to the new platform is a 'time taking journey' expected to take 'next 3 to 4 years'.

  • Cost of delivery is expected to increase due to new labor code changes.

Key financials

  1. Consolidated Revenue ₹220.03 Cr +7%YoY
  2. Total Revenue (USD) 24.92 Mn +2.1%YoY
  3. Product Revenue ₹185.58 Cr +6.2%YoY
  4. Projects & Services Revenue ₹34.45 Cr +11.6%YoY
  5. Cost of Delivery (% of Revenue) 70.4%
  6. EBITDA ₹32.72 Cr -0.91%YoY
  7. Net Profit ₹20.7 Cr -40.8%YoY
  8. EPS ₹7.86

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.

Order book

high confidence

Total value

₹656.68 Cr

as of 2025-12-31 quantified

-2.1% QoQ

Composition

  • Product Business (product) ₹588.74 Cr 89.7%
  • Projects and Services Business (contract type) ₹67.94 Cr 10.3%
The order book position saw a slight decrease QoQ, but management noted that conversions are starting to happen and there is a significant pipeline for coming quarters.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹2.94 Cr
    • Computer and service ₹0.18 Cr
    • Office equipment's ₹0.01 Cr
    • Plant and machinery ₹0.17 Cr
    • Furniture and fixtures ₹0.15 Cr
    • Software ₹2.43 Cr
    During the quarter, there is gross addition of fixed assets of INR 2.94 crores consisting primarily of INR 0.18 crore on computer and service, INR 0.01 crore on office equipment's, INR 0.17 crore on plant and machinery, INR 0.15 crore on furniture and fixtures, and INR 2.43 crores on software.
  • Liquidity Cash ₹971.6 Cr Includes balances in current accounts of INR 41.15 crores, various schemes of mutual fund INR 634.30 crores, fixed deposits of INR 263.17 crores, investments and tax-free bonds of INR 32.98 crores.
    Total cash and cash equivalents as on December 31, 2025 are INR 971.60 crores against INR 961.66 crores as on September 30, 2025. This includes balances in current accounts of INR 41.15 crores, various schemes of mutual fund INR 634.30 crores, fixed deposits of INR 263.17 crores, investments and tax-free bonds of INR 32.98 crores.

Guidance & targets

Revenue

  • Revenue Earnings Guidance Revenue · Future · High confidence No specific guidance
    As you all are aware, Nucleus Software does not provide any specific revenue earnings guidance.

    — Moderator

Migration

  • FinnOne to FinnOne Neo Migration Timeline Migration · Future · Medium confidence next 3 to 4 years
    But if we have to talk about some timeline, then maybe I think next 3 to 4 years.

    — Parag Bhise

Client Additions

  • New Logos (FY26) Client Additions · This financial year · High confidence around seven logos
    if you talk about this full year, we have added around seven logos this year.

    — Ashok Kumar Bhura

  • New Logos (Q3 FY26) Client Additions · This quarter · High confidence two logos
    As far as added logos, we have added two logos.

    — Ashok Kumar Bhura

Client Base Composition

  • FinnOne Neo vs FinnOne Customer Split Client Base Composition · Current · Medium confidence 50-50
    Yeah, in terms abroad bifurcation, that would be 50-50 in terms of number of customers, roughly.

    — Parag Bhise

  • Future FinnOne Neo vs Old FinnOne Split Client Base Composition · End of next year · Low confidence 60-40, or 70-30
    And by the end of next year, sir, are we targeting it somewhere around 60-40, or 70-30? ... Definitely, the approach is that. Whether it will be 60-40, 70-30, that is difficult to say.

    — Parag Bhise

What to watch in Q4 FY26

FinnOne Neo Migration Progress

next quarter
Current Time-taking journey, 3-4 years expected
Target Updates on migration pace or customer base split

Why it matters

Migration to the new platform is a key strategic initiative for future growth and product relevance.

But if we have to talk about some timeline, then maybe I think next 3 to 4 years.

Risks & concerns

  • Slow Migration of Legacy Customers

    medium

    Migration from FinnOne to FinnOne Neo is a 'time taking journey' (3-4 years) due to customer comfort with old products and heavy investment required for conversion.

    Management acknowledged

  • Increased Cost of Delivery due to New Labor Code

    medium

    Manpower costs, included in cost of delivery, are expected to increase due to recent labor code changes, impacting the P&L.

    Management acknowledged

  • Uncertainty in AI Investment and Capital Allocation

    medium

    The company is holding onto cash due to the potential for 'a lot of investment' in AI, deferring decisions on shareholder returns until a clearer picture emerges in 1-3 quarters.

    Management acknowledged

  • Slight QoQ Decline in Order Book

    low

    The order book position decreased slightly QoQ from INR 671.10 crores to INR 656.68 crores, though management expressed optimism about pipeline conversion.

    Management downplayed

Q&A highlights

4 direct
Migration from FinnOne to FinnOne Neo Partial
It is difficult to quantify that the migration process is on. We are getting customers moved to the new platform. I had also mentioned earlier that it is a time taking journey. Our customers are comfortable with our existing products so, though technology obsolescence is a challenge, but any change is difficult.

Analyst sought clarity on migration progress, a key strategic initiative, and management indicated it's a slow, challenging process for customers.

Asked by Raghav Maheswari

Sustainability of Cost of Delivery Direct
The cost of delivery includes the manpower cost as well. So, that definitely is going to increase based on the recent labour code changes.

Management confirmed that the improved cost of delivery is not sustainable and will increase due to external factors (new labor code).

Asked by Raghav Maheswari

Capital Allocation and Cash Deployment Partial
Rahul, as of now, we would like to stick with some cash. Because as you know, this Al thing has heated up. Lot of stuff is happening. It might require a lot of investment at our end also. We are trading that part steadily and we will look into that maybe once a clear picture emerges in the next one or two, three quarters and that is where we will be in a position to decide which way we want to go.

Analyst questioned the use of accumulated cash, and management indicated a wait-and-see approach due to potential AI investments, deferring a decision on shareholder returns.

Asked by Rahul Jain

AI Strategy and Customer Demand Direct
Al strategy is part of our product roadmap and the organizational long term and immediate strategy. So, we have a strategy that is being built, and there is a draft version that has already taken a shape. As far as Al breaking into the product, that is embedded, yes, that is part of our product offering.

Management clarified their approach to AI integration, confirming it's embedded in products and driven by customer inputs, rather than a separate offering.

Asked by Rahul Jain

Challenges in Australian Market Scale-up Partial
No challenge. I think the market is high yield market, but at the same time it is not as such a dense market as India or Middle East. So that is one. So, no challenge as such, it is just that things are moving slowly.

Analyst probed slow growth in Australia, and management attributed it to market density and slow pace, not competitive challenges.

Asked by Rushabh Shah

Deal Closure Delays and Pipeline Conversion Direct
So definitely better than earlier quarters. We have been saying, that we are getting traction from the market and now we are seeing that conversions have also starting to happen. A few that has happened, which Ashok talked about. Yes, there is a significant pipeline that we have, which we hope to convert in coming quarters.

Management provided an update on deal closures, indicating improving traction and a strong pipeline expected to convert in future quarters.

Asked by Sanjyot Khare

Progress on Partnerships Partial
So, of course, partnership with partners like AWS, Oracle, that is steadily progressing. I think we had updated about a global head of partnership joining in. So, groundwork has started, and we are in, I think, exploratory stage as of now. These things take time.

Analyst inquired about partnership initiatives, and management confirmed progress with major tech partners, though acknowledging it's a long-term effort.

Asked by Chinmay Nema

Bifurcation of New Client Additions Direct
These seven are all lending.

Management clarified that all seven new client additions this financial year are specifically for their lending products, indicating a strong focus in this area.

Asked by Raghav Maheswari

3 min read 7 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

Consolidated revenue for Q3 FY26 stood at INR 220.03 crores, marking a 3.06% QoQ increase from INR 213.51 crores. EBITDA saw a significant 41.77% QoQ jump to INR 32.72 crores, primarily due to an improved cost of delivery, which reduced to 70.4% of revenue from 73.9% in the previous quarter. However, net profit for the quarter declined by 21.22% QoQ to INR 20.70 crores, and EPS was INR 7.86.

Order Book and New Client Additions

The company's order book position as of December 31, 2025, was INR 656.68 crores, a slight 2.15% decrease from INR 671.10 crores in the previous quarter. This includes INR 588.74 crores from product business and INR 67.94 crores from projects and services. Nucleus Software added two new logos this quarter, contributing to a total of seven new logos for the financial year, all of which are for lending products.

FinnOne Neo Migration Strategy and Challenges

Management highlighted that the migration of legacy FinnOne customers to the newer FinnOne Neo platform is a 'time taking journey,' estimated to span 'next 3 to 4 years.' This process is challenging as existing customers are comfortable with older products, and conversion involves significant investment for them. Currently, the customer base is roughly split 50-50 between FinnOne Neo and the older FinnOne versions, with a future target of 60-40 or 70-30 in favor of Neo.

Cost Structure and Future Outlook

The cost of delivery, including product development, improved to 70.4% of revenue this quarter, down from 73.9% QoQ. However, management anticipates an increase in this cost going forward due to the injection of new labor code changes, which will impact manpower costs. Marketing and sales expenses were 7.8% of revenue (INR 17.20 crores), and G&A expenses were 6.9% of revenue (INR 15.10 crores).

Capital Allocation and AI Investment Considerations

Total cash and cash equivalents increased to INR 971.60 crores as of December 31, 2025. When questioned about deploying this accumulated cash through special dividends or buybacks, management indicated a cautious approach. They stated a desire to 'stick with some cash' given the potential for 'a lot of investment' in AI, with a decision on capital deployment expected in the next 'one or two, three quarters.'

AI Integration and Market Strategy

AI is a core part of Nucleus Software's product roadmap, with capabilities like assisted care decisioning already embedded in its GA.5 offering. The company is actively engaging with customers and thought leaders to align its AI strategy with market demands, including GenAI and machine learning models. They plan to embed AI as part of its product offerings rather than as a separate branded solution, leveraging its layered architecture for geographical nuances.

Geographical Focus and Industry Tailwinds

The Australian market is characterized as a 'high yield' but 'not dense' market, where scaling up is a slow process despite a strong product impression and sales presence. In India, the company sees strong traction in growth areas like the MSME sector, gold loans, finance against securities, and co-lending, which are expected to be key drivers for future growth, aligning with broader industry tailwinds.

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