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Majesco Limited (MJCO)
Q4 2019 Earnings Call
May. 8, 2019, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day everyone and welcome to the Majesco Fiscal 2019 Fourth Quarter and Full Year Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Andrew Berger, Investor Relations. Please go ahead.
Andrew Berger -- Investor Relations
Thank you, Kem and good morning everyone. A complete disclosure of our results can be found on our press release that was issued yesterday after the market closed. As a reminder, today's call is being recorded and a replay will be available on our website shortly after the conclusion of this call.
During today's call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws.
These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date.
We disclaim any obligation to update any forward-looking statements or outcome (ph). These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
At times in our prepared remarks or prepared comments or responses to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or quarterly results.
Please be advised that this -- that this additional detail may be one time in nature and we may or may not provide an update in the future. Also during the course of today's call, we will refer to certain non-GAAP financial measures.
A reconciliation schedule showing GAAP versus non-GAAP results has been provided in our press release that was issued yesterday after the market closed. Hosting the call today are Adam Elster, Majesco's CEO, Farid Kazani, Energy Director and Wayne Locke, Majesco's new Chief Financial Officer.
Farid will cover the Q4 and fiscal '19 financials. At this time, I will turn the call over to Adam. Adam, please go ahead.
Adam Elster -- Chief Executive Officer
Thanks Andrew and good morning to everyone on today's call. I am thrilled about the financial results we achieved in fiscal 2019 fourth quarter and the full year. It completely reinforces my excitement about our future. Our cloud based operating model is the most critical component of our value proposition and it is resonating.
Our results reflect a growing acceptance of our solutions, as fourth quarter revenue increased 11.9% over the same period a year ago at 13.7% for the full fiscal year over last year.
Cloud revenues increased by 55% compared to the fiscal 2018 fourth quarter and 53% for the full year of last year. Cloud revenue now represents more than 40% of our total revenue and 25% of our customer base.
Majesco's profitability has strengthened as well, which is being driven by a higher margin mix of our revenue. I'm very encouraged by the growing acceptance of Majesco's products which are resonating with our current and potential customers.
We had record breaking new sales this quarter and a year which saw our 12 month order backlog increase to almost $100 million. The North American business was extremely strong, with winds across all customer tiers and throughout our product portfolio. We were especially encouraged because the 100% of the new deals in Q4 were cloud solution, and the same was true for our Q4 business across EMEA.
We are extremely focused on customer success and for us, each successful implementation continues to amplify our credibility in the market with both our customers and with potential customers. As closely as we track new sales, we also track customer go lives. Our ability to reduce project timelines is a critical benefit to customers and our overall cloud business model.
During the fourth quarter, we had six customers go live, including two who had purchased the technology in the third quarter. This validates our ability to drive speed to market and time to value. Now customers continue to partner with us and we are extremely focused on where they are today and where they want to be in the future.
Their strategy is concentrated on optimizing technology investments and establishing a new platform for an overall digital experience. We knew as a Company that we had to make our image in the market match our voice and our execution about the future of insurance.
Last month, we launched our new brand messaging, web site, and corporate video. If you have not had a chance to see it, please check it out. Our interactions with customers, partners, investors and analysts, all show incredible alignment to our strategy and this vision.
In April, we had our Annual Customer Conference, Convergence and we crushed previous attendance records growing nearly 50%. The rise in attendance underscores Majesco's market leadership and the rapid growth in adoption of our cloud, API and micro services based platforms for P&C and L&A.
In fact, many of the presenters at Convergence are not actually delivered by Majesco, but by -- rather by a wide range of partners, customers and industry influencers.
This further demonstrates how innovative companies are leveraging our solutions to redefine the future of insurance.
Our people are the most important asset, and we are focused on empowering our associates and expanding our leadership team and I am pleased with the progress we made within our fourth quarter. During the quarter, Manish Shah was promoted to President and Chief Product Officer. His presentation at Convergence was one of the many highlights that was focused on the rapidly changing market and technology shifts that have become mandatory to compete today.
We announced version 11 of our CloudInsurer, P&C and L&A products. He then introduced our LifePlus solutions, rebranded from the Q3 Exaxe acquisition. Finally, Manish demonstrated many of the innovative insurance initiatives that are leveraging our digital first platform.
It enables companies to rapidly adapt to their technology needs and leverage the vast and (inaudible) ecosystems. Jim Miller joined the Company in March as our Chief Revenue Officer. He'll be responsible for driving Majesco's overall go to market methodology and execution for the Company's growth strategy. Jim has over 20 years experience earning a reputation for delivering top performance across partnered and direct sales channels.
Jim had worked directly for me for over 12 years and he delivers results. Wayne Locke joined Majesco as CFO last month bringing with him 20 years of finance and operations experience. Before Majesco, he was senior director at Capgemini providing financial and operational consulting services to insurance organizations.
He's joining us on this call this morning and will be available during the Q&A. Wayne will assume responsibility for the earnings calls moving forward. This afternoon, we were hosting an investor analyst day at Nasdaq's brand new headquarters in Times Square.
We will showcase Majesco's growth strategy and articulate the market opportunity for our brand. We'll highlight Majesco's vision for the future of insurance, emphasizing our next generation capabilities, unparalleled domain expertise, industry leadership and strategic partnerships; all focused on helping insurers meet the demands of tomorrow right now.
We will also host a customer and partner panel and there will be demo stations showcasing our three (ph) products. I am very excited by our momentum and I look forward to continuing my active engagements with investors and shareholders and updating you on the Company's future.
Now, I'll turn the call over to Farid to discuss the success of our financial drivers for the quarter. Farid?
Farid Kazani -- Managing Director
Thank you, Adam, and good morning to everyone. I'm pleased to summarize the fourth quarter and full year financials for fiscal 2019. This is the seventh consecutive quarter of consistent financial improvement in the performance of the Company, and we are pleased with the positive trends in the key performance metrics of the business.
Just the headlines; we closed the year with a strong growth in revenues at 13.7% and a significant improvement in the profitability with an increase of 769 basis point in the adjusted EBITDA margins. The revenue from cloud based customers was at $56.8 million almost 41% of total revenue for the year ended March 31, 2019, up 52.6% as compared to $37.2 million which was 30.3% of the total revenue during the year ended March 31st, 2018.
The total number of cloud customers now stand at 54. The total recurring revenue was at $45.8 million which is 32.8% of our total revenue for the year ended 31st March, 2019, up 39% as compared to $33.0 million which was 26.8% of the total revenue for the year ended 31st March, 2018.
The 12-month order backlog as of 31st March, 2019 was $96.9 million, up 13.5% from the $85.4 million as on December 31st, 2018.
We added 19 new clients organically for the year ended 31st, March 2019 across various geographies. And now to some specifics on the financials for Q4 and for the full year 2019. First, the revenue details. Revenue for the fourth quarter ended March 31st, 2019 was $36.9 million, up 11.9% year over year and 4.2% sequentially.
For the full year 2019, the revenue was $139.9 million as compared to $143 million, reflecting a strong growth of 13.7%. The increased revenue was primarily due to the high cloud revenue, the higher cloud revenue, the addition of 19 new logos, these footprint expansion across existing accounts and the acquisitions revenues from the Exaxe acquisition.
The total cloud revenue for the Q4 fiscal year 2019 was $16.3 million representing 44.2% of the total revenue in this quarter as compared to $10.5 million spending 32% of revenue during the same period last year reflecting a growth of 54.9%.
The Cloud subscription revenue grew 49.7% from $3 million in Q4 of fiscal 2018 to $4.5 million in this Q4 of fiscal 2019.
As a percentage of revenue, the Cloud subscription now stands at 12.2% in Q4 at fiscal 2019, compared to 9.1% in the same quarter last year. For the full year ending 31st, March 2019, the total Cloud revenue was $56.8 million reflecting a growth of 52.6% over the same period last year.
The growth has significantly offset the drop in the on premise implementation revenues which declined 21.9% from $37 million in FY 2018 to $28.9 million in FY 2019.
The total recurring revenue was $12.9 million in the Q4 of fiscal 2019 and it increased 42.3% representing 34.9% of the total revenues as compared to $9 million representing 27.4% of Q4 in fiscal 2018. For the full year, total recurring revenue was $45.8 million, representing 32.8% of the total revenue and reflecting a growth of 38.9%.
From a geographic standpoint, the North America, EU (ph) and APAC represented 87.4%, 7% and 5.6% respectively for the fiscal year 2019's revenue, as compared to 89.2%, 5.4% and 5.4% respectively for the full year fiscal 2018.
In terms of business split, the P&C represented 70.1%, Life & Annuity represented 29.2% and the (inaudible) insurance was aiming at 0.6% of the fiscal 2019 total revenue, as compared to 76.3%, 22.5% and 1.2% respectively for the fiscal year 2018.
In terms of client concentration, the top customer this quarter represented 12.4% for the -- of the revenue while the top-five constituted 28.6% and the top-ten constituted 42.2% for the full year fiscal 2019's total revenue and 9%, 28.4% and 43.1% respectively for the full year 2018.
Turning on to the profitability and other expenses, during the fourth quarter ended March 31st, 2019, the gross margins were at 48.5% as compared to 46.9% in the same quarter ended 31st March, 2018. The year on year increase on margins was primarily due to the higher revenue mix from cloud business and the improved delivery efficiencies.
For the full year 2019, the gross margins were higher at 49.4% -- 49% as compared to 45.4% (ph) for the full year 2018.
The SG&A expenses for FY 2019 was lower at $39.1 million, compared to $40.1 million for the full year of 2018. The 536 basis point improvement in the SG&A as compared as a percentage of revenue reflected strong operating leverage and improved management of G&A expenses.
On the other hand the product expenses for the year, the full year fiscal 2019 was higher at $19.3 million, as compared to $17.3 million for the fiscal 2018.
The same was 23 basis point lower as a percentage of revenue in fiscal 2019 as compared to the fiscal 2018. The additional R&D spends has been focused on enhancing our cloud and digital offering. The adjusted EBITDA for the fourth quarter ended 31st March, 2019 was $4.4 million or 12% of the revenue as compared to the adjusted EBITDA of $2.9 million or 8.8% for the fourth quarter ended 31st March, 2018.
Sequentially, the adjusted EBITDA was marginally lower at 187 basis points. The adjusted EBITDA for the full year stood at significantly higher at $17.2 million or 12.3% of revenue as compared to $5.7 million or 4.6% of the revenue for the full year fiscal 2018, reflecting an improvement of 769 basis point year-over-year.
Net income for the full year 2019 reflected a great turn around ending $6.9 million or $0.18 per diluted share, as compared to a net loss of $5.0 million or a loss of $0.14 (ph) per share for the fiscal year 2018.
Turning on to the balance sheet. The balance sheet as of 31st March, 2019 reflects a tax-free company with the internal cash flow generation during the year and the capital raise through the price issued of $43.5 million in February 2019, the total cash and cash equivalents stood at $38.9 million as of 31st March, 2019 compared to a net debt level of $4.4 million at the end of last fiscal March 31st, 2018.
Our favorable cash position allows us to move quickly on opportunities for growth. The DSOs were marginally higher at 85 days at the end of March 31st, 2019 as compared to 82 days at the end of 31st December, 2018. Strong bookings in the fourth quarter, March 31st, 2019 reflected growing momentum in our business.
The 12-months executable order increased to $96.9 million, up 13.5% compared to $85.4 million at the end of the 31st December, 2018. Overall, the year ended with a strong growth, showing improvement across all key metrics in the revenue, customer acquisition, cloud based metrics, the margin expansion, order backlog and positive cash flows.
This concludes our prepared remarks. I'll now pass on to the operator to open the call for questions. Thank you very much and appreciate your continued interest in Majesco.
Questions and Answers:
Operator
Thank you. (Operator Instructions). And I do have a question that comes from Shyamal Dhruve, from PhillipCapital India.
Shyamal Dhruve -- PhillipCapital (India) Pvt Ltd -- Analyst
Yeah, hi. Thanks for the opportunity and congrats on a good set of numbers. Sir, my first question is on the Exaxe acquisition. So, excluding that, what would be the organic revenue growth for this quarter?
Adam Elster -- Chief Executive Officer
The Exaxe contribution inorganically to our numbers for the year were less than 2% of the revenue growth of the full year numbers. It's less than 2% of that 13.7% for the full year.
Shyamal Dhruve -- PhillipCapital (India) Pvt Ltd -- Analyst
13.7%?
Adam Elster -- Chief Executive Officer
13% was our full year revenue growth percentage for the (multiple speakers) full year, Exaxe represented less than 2% of that number.
Shyamal Dhruve -- PhillipCapital (India) Pvt Ltd -- Analyst
Okay. And my second question is on the Capgemini partnership, which we announced recently. So if you can share the details about the partnership like whether that would be a joint product development or it would be just the joint sales, say for our ten product -- products would be our own, any details on that partnership?
Adam Elster -- Chief Executive Officer
Sure. So, we're very excited on Monday to announce the Capgemini partnership. In fact, Capgemini will be on our panel today as part of our investor analyst day that we're having today at the Nasdaq. So we're very excited. Obviously, Capgemini is a leader in consulting around the insurance industry and technology.
And one of the focus areas they have is for their L&A business and they have chosen to partner with us to focus on the L&A business. So we're focused on L&A. We're focused on joint go to market. They will leverage our technology and you'll see more coming out over the course of the next year on some of the initiatives that we'll be focusing.
Shyamal Dhruve -- PhillipCapital (India) Pvt Ltd -- Analyst
So does that mean that we will jointly develop product -- our new products with Capgemini and it would be marketed by Capgemini? Or it would be the earlier products also would be marketed by Capgemini?
Adam Elster -- Chief Executive Officer
So, we're not co-developing a product. We have a product, Majesco's CloudInsurer, Version 10 L&A product. We just announced we're releasing the version 11 product in October as part of the merger (ph). They're focused on that product. So we're not co-developing a product. We already have a product. We're going to customers in the marketplace where they're working on their strategic transformation and utilizing our technology to deliver those results.
Shyamal Dhruve -- PhillipCapital (India) Pvt Ltd -- Analyst
Okay. And any upfront commission paid to the -- to Capgemini or it would be the -- like, the revenue would be shared once they sign any deal with us?
Adam Elster -- Chief Executive Officer
We don't pay Capgemini a commission. They get paid their commission on the services and the consulting work they do and we -- they don't get paid on our product deals. That's the same structure every single technology company follows and we are in line with that.
Shyamal Dhruve -- PhillipCapital (India) Pvt Ltd -- Analyst
Yeah.
Adam Elster -- Chief Executive Officer
Thanks for the question.
Shyamal Dhruve -- PhillipCapital (India) Pvt Ltd -- Analyst
Yeah. All the best for the coming quarters.
Adam Elster -- Chief Executive Officer
Thank you.
Operator
(Operator Instructions).
Adam Elster -- Chief Executive Officer
All right. Well, I appreciate everyone joining the call today. Look, I understand that many of you -- we'll see you in a few hours, so we're doing the call -- we're doing the call from the Nasdaq posting the event at 1 o'clock today. So much more material to come for those of you who aren't attending, but we will be posting the material after the event on the website which has more detail on the strategy, the financials.
Thank you all very much for your time. We think it was a great quarter, great year. We're happy about the progress and we'll see many of you this afternoon. Have a good day everybody.
Operator
And that does conclude our conference today. Thank you for your participation. You may now disconnect.
Duration: 28 minutes
Call participants:
Andrew Berger -- Investor Relations
Adam Elster -- Chief Executive Officer
Farid Kazani -- Managing Director
Shyamal Dhruve -- PhillipCapital (India) Pvt Ltd -- Analyst
