Nucleus Software Exports Limited — Q4 FY25 earnings call

Call held 19 May 2025

Management summary

Nucleus Software reported a strong Q4 FY25, driven by significant QoQ and YoY growth in revenue and profitability, primarily from product sales and operational efficiencies. The company successfully added three new logos and saw incremental business from existing customers. Management highlighted a strategic focus on AI product innovation, platform expansion, and a 'lean journey' for the upcoming year, while maintaining a healthy order book and below-industry-average attrition rates.

Highlights

  • Consolidated revenue for Q4 FY25 stood at ₹228.9 crores, marking an 11.27% QoQ growth and 8.84% YoY growth.

  • Net profit for Q4 FY25 surged to ₹64.8 crores, an 85.14% QoQ increase and 24.37% YoY increase.

  • EBITDA for the quarter was ₹74.3 crores, demonstrating a 125.15% QoQ growth and 28.10% YoY growth.

  • Product revenue for Q4 FY25 was ₹199.6 crores, growing 14.19% QoQ and 11.26% YoY.

  • The company added three new logos in Q4 FY25, contributing to revenue growth.

  • Order book as of Q4 FY25 end was over ₹600 crores, covering both products and services.

  • Employee attrition rate (voluntary + involuntary) was reported at around 11% or lesser, below the industry average.

  • Full year FY25 consolidated revenue reached ₹832.3 crores, a modest 0.70% YoY increase.

Key financials

  1. Consolidated Revenue ₹228.9 Cr +8.8%YoY
  2. EBITDA ₹74.3 Cr +28.1%YoY
  3. Net Profit ₹64.8 Cr +24.4%YoY
  4. EPS ₹24.6
  5. Order Book ₹600 Cr
  6. Attrition Rate 11%

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.

Guidance & targets

Strategy

  • Lean Journey Strategy · entire year (FY26) · Medium confidence take it to the next levels to derive maximum benefit
    Our lean journey, what we have been talking about, remains our focus, and we plan to take it to the next levels to derive maximum benefit. I'll close with these remarks. Thank you very much.

    — Parag Bhise, CEO and Executive Director

Product Development

  • AI Use Cases Implementation Product Development · next couple of months and quarters, the year after · Medium confidence bring as many as used cases into implementations
    Strategy is to bring as many as used cases into implementations in next couple of months and quarters, the year after.

    — Abhishek Pallav, Vice President

Product Strategy

  • AI Focus Product Strategy · this year (FY26) · High confidence functionality, robustness, Al and environment is going to be the focus
    that's what was meant by that portion of the release that's going to be the focus this year in addition to building our functionality and focus on robustness, Al and environment is going to be the focus in a nutshell.

    — Parag Bhise, CEO and Executive Director

Risks & concerns

  • Geopolitical dynamics impacting market expansion

    medium

    Management noted that geopolitical dynamics make it difficult to comment on specific expansion strategies, particularly in regions like North America.

    Management acknowledged

  • Uncertainty in future employee cost projections

    low

    Management was unable to provide a 'rough-cut quarterly employee cost' going forward, citing ongoing investments in people and potential changes.

    Analyst not addressed

Areas of evasion (3)

  • Specifics on North America market strategy (e.g., target bank size or geography)
  • Detailed annual revenue breakup (license, implementation, AMC)
  • Exact normalized employee cost for future quarters

Q&A highlights

2 direct, 1 evasive
Employee Attrition Rate and Retention Strategies Direct
Our attrition, for last couple of years is our average is less than the industry average, substantially less than the industry average. Our voluntary plus involuntary attrition would be at around 11% and lesser.

This question directly addresses talent retention, a key operational risk in the IT sector, with management providing a specific attrition rate and outlining their multi-pronged retention strategy.

Asked by Rushabh Shah

Operating Profit Increase and Cost Reversal Impact Direct
Yes on account of provision reversal, the benefit is of INR 8.5 crores. See, most of the growth in the operating profit that you see is because of the growth in revenue that has happened, we being a product company, we don't see a proportionate rise in cost when we get our revenue up. So that is the reason you would have seen that most of the revenue increase that we have experienced in this quarter is sitting as part of the profitability.

The analyst sought clarity on a significant jump in operating profit, and management provided a clear breakdown of the impact from provision reversals and the inherent operating leverage of their product business model.

Asked by Mihir Manohar

North America Market Entry Strategy and Sweet Spot Evasive
So, Rahul, we'll as I mentioned, we have a very strong strategy about a very specific line of business and specific industry in that geography, right? I won't be able to share that specific right now, but we'll make a beginning you know wherever there is a strong possibility and opportunity...

Despite repeated probing, management declined to provide specific details on their North America market strategy, citing complexity and geopolitical dynamics, indicating a sensitive or nascent stage of their approach in this large market.

Asked by Rahul Jain

2 min read 5 chapters

Detailed narrative

Strong Q4 FY25 Performance Driven by Product Revenue and Efficiency

Nucleus Software reported a robust Q4 FY25, with consolidated revenue reaching ₹228.9 crores, an 11.27% QoQ and 8.84% YoY increase. This growth was largely propelled by product revenue, which stood at ₹199.6 crores, up 14.19% QoQ. The company's operating leverage as a product company, combined with efficiencies, led to a significant EBITDA jump to ₹74.3 crores (125.15% QoQ growth) and net profit of ₹64.8 crores (85.14% QoQ growth). A provision reversal of ₹8.5 crores also contributed to the improved profitability.

Strategic Focus on AI Product Innovation and Platform Expansion

Management outlined a clear strategic focus for FY26, emphasizing AI product innovation and platform expansion. The company has developed a list of AI use cases for both retail lending and transaction banking products, with some capabilities already rolled out and more in the pipeline for the coming months and quarters. This AI initiative is embedded across all product lines, involving reskilling engineers and enabling AI horizontally, indicating a comprehensive approach to leveraging artificial intelligence.

Customer Acquisition and Geographical Traction

In Q4 FY25, Nucleus Software successfully added three new logos, a combination of domestic and international clients. The company also secured incremental business from existing customers, contributing to the quarter's revenue growth. Geographically, Australia and North America were highlighted as strategic regions, with Australia showing traction from long-standing relationships and North America being a focus area with a specific strategy for a particular line of business and lending platform, despite the vast and complex market.

Employee Retention and Cost Management

Nucleus Software reported an attrition rate (voluntary plus involuntary) of around 11% or lesser, which is below the industry average. Retention strategies include continuous engagement, career growth, development, and a compensation structure with variable bonuses linked to individual and organizational performance. While employee costs saw a reduction in Q4 FY25 due to year-end true-ups and provision reversals (including ₹8.5 crores), the company confirmed adding employees in the last quarter, indicating ongoing investment in its workforce and technology.

Capital Allocation and Order Book Health

As of March 31, 2025, the company maintained a healthy cash and cash equivalent balance of ₹877.3 crores. The order book stood at over ₹600 crores, encompassing both product and services, providing visibility for future revenue. Revenue contribution from the top five clients for the quarter was 27.8%. Management indicated that milestone-based revenues, which constituted 14% of Q4 revenue, are a continuous flow from long-term projects rather than one-time events.

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

More Information Technology earnings calls