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Majesco Ltd (MJCO)
Q1Â 2020 Earnings Call
Aug 8, 2019, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Welcome to the Majesco Fiscal 2020 First Quarter Conference Call. [Operator Instructions]
I would now like to turn the conference over to Andrew Berger, Investor Relations. Please go ahead.
Andrew Berger -- Investor Relations Officer
Thank you, Nick, and good morning to everybody. A complete disclosure of our results can be found on our press release that was issued yesterday afternoon. As a reminder, the replay of today's call will be available on our website shortly after the conclusion.
During today's call, we will make statements related to our business that may be considered forward-looking 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 outlook. 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 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 additional detail may be onetime in nature, and we may or may not provide an update in the future.
Also during the course of this 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; and Wayne Locke, the Company's Chief Financial Officer. At this time, I'll turn the call over to Adam. Adam, please go ahead.
Adam Elster -- Chief Executive Officer
Great. Thanks, Andrew, and good morning to everyone on today's call. I'm pleased with the financial results we achieved in FY '20 first quarter and it completely reinforces my excitement about our future. Our cloud-based product operating model is the most critical component of our value proposition and it continues to resonate in the market. Our results reflect the growing acceptance of our solution as first quarter revenue increased 10% over the same period a year ago.
Cloud revenue represents 37.4% of our total revenue and more than 25% of our overall customer base. Majesco's profitability strength continues as adjusted EBITDA increased 35% over the same period for FY'19. I'm very encouraged by the growing acceptance of Majesco's products which are resonating with current and potential customers. We had another strong new sales quarter and our 12-month order backlog remains at almost a $100 million. The North American business was extremely solid with wins across all customer tiers and throughout our product portfolio. We're especially encouraged, because 100% of the new deals in Q1 were cloud solutions. 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 potential customers.
In addition, the foundation of our subscription cloud revenue growth model is to land new customers, go live and drive adoption. We had seven seven wins overall this quarter with four brand new logos, including one of the largest insurance brokers in the world who are deployment Majesco's full P&C Suite in the cloud. We had 13 customers go live, including four greenfield start-up operations and our very first integration with digital first insurance. Two major data migration delivered in record time and three legacy systems replacement.
And really important is we also delivered an 11 week implementation for one of the world's largest reinsurers of Forbes Global 2000 company that launched a new on demand agro product for the retail market with Majesco's digital first and policy on Majesco CloudInsurer. These are all great examples of how Majesco technology can serve as a foundation to quickly launch and test new products and leverage new distribution channels to reach untapped risk pools.
Some other highlights of our very busy first quarter. In April, we launched our new brand, our website and our vision for the future of insurance. We broke attendance records at our annual customer conference Convergence 2019. At Convergence, we announced two product releases, CloudInsurer P&C Core Suite Version 11 and CloudInsurer L&A and Group Suite Version 11. We announced a partnership with Data Robot to bring a AI and machine learning to insurance. We hired our new CFO, Wayne Locke who is joining us on the call today. We hosted our annual investor Analyst Day at the brand new Nasdaq market site in New York. And we highlighted the company's growth strategy, product roadmaps and market opportunity.
And at the same time, Majesco and Capgemini became Alliance Partners. It was a very busy first quarter for Majesco.
With regard to the Majesco limited governance matter, the issue is now formally resolved and I am pleased with the outcome. We have formed a Majesco US Board Finance Committee with authority to approve security or debt related matters in conjunction with the full US board. I continue to see alignment between our strategy and the market. I'm pleased by our momentum and I look forward to continue my active engagement with investors and shareholders and updating you on the company's future.
Now I'll turn the call over to Wayne to discuss the success of our financial drivers for the quarter. Wayne?
Wayne Locke -- Chief Financial Officer
Thank you, Adam, and good morning to everyone. I'm pleased to summarize the first quarter financials of fiscal 2020. This is the eighth consecutive quarter of consistent improvement in revenue and profitability and we are pleased with the positive trends in the key performance metrics of the business. Some of the headlines are, we open the year with total revenue of $37.3 million for first quarter, which represents a 9.8% year-over-year growth. Majesco had significant improvement in profitability with an increase of 35% in the adjusted EBITDA for the first quarter year-over-year.
Revenue from cloud-based customers was up 14.5% year-over-year. Total number of cloud customers is now 58. Total recurring revenue was $12.1 million, which is 32.5% of our total revenue for the quarter ended June 30, 2019, which is up 32% year-over-year. Majesco's 12-month order backlog as of June 30, 2019 was $98.7 million up 21% from the $81.6 million on June 30, 2018. We added four new clients organically for the quarter ended June 30, 2019.
And now to some specifics on the financials for the first quarter fiscal year 2020. First, the revenue detail. Revenue for the first quarter ended June 30, 2019 was $37.3 million up 9.8% year-over-year. The increased revenue was primarily due to the addition of four new logos footprint expansion within our existing accounts, the inclusion of the exact acquisition and the transfer of India business revenues previously managed by a related company.
Total revenue for Q1 fiscal 2020 was $13.9 million, representing 37.4% of total revenue as compared to $12.2 million representing 35.9% of revenue during the same period last year. This reflects the growth of 14.5%. The cloud subscription revenue grew 33.6% from $3.3 million in Q1 of fiscal year 2019 to $4.4 million in Q1 fiscal year 2020. As a percentage of revenue, the cloud description stood at 11.7% in Q1 fiscal 2020, compared to 9.7% in Q1 last year. The total number of cloud customers now stands at 58.
Total recurring revenue was $12.1 million of -- Q1 fiscal year 2020, which increased by 32.4%, representing 32.5% of total revenues as compared to 9.2% representing 27.1% for Q1 of fiscal year '19. From a geographic standpoint, North America, EMEA and APAC represented 88.3%, 6.3% and 5.4% respectively for Q1 2020, and 88.4%, 4.2% and 7.4%, respectively for Q1 2019.
In terms of business split, P&C represented 77.2%, life and annuity represented 22.2% and non insurance was 0.6% of our Q1 2020 total revenue and 71.8%, 27.4% and 0.8%, respectively for Q1 2019.
In terms of client concentration, our top customer, this quarter, represented 7.3% of revenue, while the top five constituted 25.8% and the top 10 constituted 39.6% of the Q1 2020 total revenue and 13.3%, 30.5% and 45.3%, respectively for Q1 2019.
Turning to the profitability and other expenses. During the first quarter ended June 30, 2019, gross margins were 53.3% as compared to 46.9% in the quarter ended June 30, 2018. The year-over-year increase in margin was primarily due to better revenue mix and improved delivery efficiency. The SG&A for first quarter 2020 was higher at $11.8 million compared to $9.3 million first quarter 2019. The $2.5 million increase in SG&A was driven by inclusion of the SX business one time course in the first quarter related to the Convergence conference, Investor Day at Nasdaq, rebranding and other non-recurring professional fees.
Product development expenses for the first quarter 2020 was higher at $5.5 million as compared to $4.8 million for first quarter 2019. However, this is in line as a percentage of revenue year-over-year as we continue to invest in R&D spend to enhance our cloud and digital offerings. Adjusted EBITDA for the first quarter ended June 30, 2019 increase to $4.7 million or 12.7% of revenue as compared to an adjusted EBITDA of $3.5 million or 10.3% during the first quarter ended June 30, 2019. Sequentially Q4, but fiscal year 2019, the adjusted EBITDA was higher by 70 basis points.
Net income for Q1 fiscal year '20 continued a return to profitability increasing to $1.3 million or $0.03 per diluted share as compared to net income of $1 million or $0.03 per diluted share.
Turning to the balance sheet. The balance sheet as of June 30, 2019 continues to reflect a debt free company. The company continues to generate cash sufficient to fund operations with a total cash, cash equivalents and short term investments at $33 million as of June 30, 2019 compared to a total cash, cash equivalents and short term investments of $11.7 million at June 30, 2018. The June 30, 2019 cash balances after the fiscal year 2019 incentive compensation payments and this favorite position will allow us to move quickly on opportunities for growth.
VSOE is at 92 days -- was at 92 days at June 30, 2019, due to some large receivables that were subsequently collected in early July of 2019. Strong bookings in the first quarter ended June 30, 2019 reflected the continued momentum in the business. The 12-month excusable -- executable order backlog increased to $98.7 million, up 21% compared to $81.6 million at June 30, 2018.
Overall, the quarter ended showing strong results across all key metrics, including revenue growth, customer acquisitions, cloud-based metrics, margin expansion, order backlog growth and positive operating cash flow.
This concludes our prepared remarks. I'll now pass it back to the operator to open the call for -- the questions. Thank you very much and we appreciate your continued interest in Majesco.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from Parag Bharambe [Phonetic], a private investor. Please go ahead, sir.
Parag Bharambe -- Private Investor -- Analyst
Yeah. Hi, I have a question about the IBM relationship. I know you haven't mentioned anything about it, neither in the press release or nor for the sale [Phonetic]. I think a quick update on what's going on with that.
Adam Elster -- Chief Executive Officer
Sure, absolutely. This is Adam. So we're very pleased with the IBM relationship, as you guys know, this is a very important aspect of our growth strategy. During our Investor or Analyst Day in May, we spent a good amount of time talking about that relationship and the overall IBM insurance platform. In addition at our convergence event, IBM was a key speaker in the event talking about their insurance platform and the core foundation of Majesco technology.
In fact, during our Q1, IBM ramped up their marketing efforts around their insurance platform. So if you were in Google, IBM Insurance, you can now see a video on the Majesco IBM platform. There's a white paper. So as we discussed prior, the -- joint marketing efforts has just started to ramp up. And in Q1 you can see some very clear evidence of that. We are still working on the next phases of going live with IBM and MetLife on that project. That is something that IBM and MetLife will do the announcement on. We hope it's imminent, but that is something that we're not able to announce, that's something that they will announce. And at the same time, we're already working on several new projects with IBM moving forward. And we hope to be able to announce some of those projects in the coming quarters as well.
But overall, I'm still very excited about it. And, again, you can look around at all the marketing material and stuff. But as we get closer to the go live, which is a critical element of the overall offering with the first customer, you can see we have already ramped up the marketing efforts to drive pipeline. But the go live is a critical milestone to really drive some of those deals to closure.
Parag Bharambe -- Private Investor -- Analyst
Yeah. Thank you for the detailed explanation. I think we have the investor. We are all keenly awaiting when that event materializes, and I am sure you are too.
Adam Elster -- Chief Executive Officer
Yeah.
Parag Bharambe -- Private Investor -- Analyst
On that --
Adam Elster -- Chief Executive Officer
Here is as interested as you are not, I can assure you, my team, the IBM team, the MetLife team, I can assure you there are even more motivated. So --
Parag Bharambe -- Private Investor -- Analyst
Okay. So is that some -- you said, imminently, and I know you don't want to put a date, because that is not in your hand, that's right. But is it something we are likely to see next to couple of quarters? Or you still don't want to put any number on that yet?
Adam Elster -- Chief Executive Officer
You answered your own question. That's not something I'm delivering to you [Phonetic].
Parag Bharambe -- Private Investor -- Analyst
Okay.
Adam Elster -- Chief Executive Officer
Thank you. I appreciate the question. Have a good evening.
Parag Bharambe -- Private Investor -- Analyst
Yeah. Another question. That Exaxe acquisition, LMA, you did that acquisition I think almost six, seven months now. Can you just elaborate on where that lead you in next few years?
Adam Elster -- Chief Executive Officer
Sure. We are very -- yeah we're very excited about the Exaxe acquisition, in fact, as you might have seen we enrolled the overall European business under Norman and Exaxe team to run our overall European operations. We're excited because we see expanding that business from not only the -- the market in Ireland, but into the UK and actually Northern Europe. So we're excited about that opportunity. It gives us a really good foothold into the individual side of the L&A business for us. We're excited about the leadership and we see that as an ever growing opportunity for us with the LifePlus Solutions. Great. So thank you very much, I appreciate the question.
Operator
The next question comes from Abhas Gupta [Phonetic] with Windy Investment.
Abhas Gupta -- Windy Investment -- Analyst
Hi, Adam. Thanks for taking our question.
Adam Elster -- Chief Executive Officer
Sure.
Abhas Gupta -- Windy Investment -- Analyst
So first question is really on your number, so on the most cloud revenue, we've seen a sequential decline to Q4 was $16.3 million, Q1 is $13.9 million. Can you with this throw some more light on the reason for this decline ?
Wayne Locke -- Chief Financial Officer
Yeah, that is mainly -- the quarter decline is mainly due to one particular large customer, which is getting ready to potentially go live. We can't say when exactly, but so as the implementation and costs have declined on it in the near term, that we would expect as goes live. That to the reverse. But if it is attributable to the ramp down of the implementation on a particular -- one large particular client.
Adam Elster -- Chief Executive Officer
So it's really just a timing issue. As we've finished, it's just a timing issue. We've finished the implementation. They're set to go live as soon as they go live the revenue meter kicks in. So it's more of a timing issue. It's just a timing issue.
Abhas Gupta -- Windy Investment -- Analyst
Right. If he remove that particular client, so X the client, it has there been sequential growth?
Adam Elster -- Chief Executive Officer
Yes. In fact. -- and in fact, all of the sequential growth of the other customers. Frankly, that foundations of the building up at the same time. So not for all the growth of all the other new customers. As you know, we signed 15 new customers last year and only one wasn't on the cloud. All of those projects are in the cloud -- and some component of the implementation to go live. And it's that work underneath that is actually driving the longer term sustainable growth. And if not for all those other projects, that decline from the one large customer would have been even greater. So we feel good about it.
Abhas Gupta -- Windy Investment -- Analyst
My next question is on your recurring revenue. So if I again, sequentially If I see your recurring revenue also seems to have gone down, right? So from $12.9 million last quarter to about $12.1 million. Just more color on that?
Adam Elster -- Chief Executive Officer
Right. That is due to one particular contract that we had which last year. You'd actually look need to restate last year's number to say -- last year's recurring number to do a year-of-year, because that is due to ASC 606. That is a license where the revenue is recognized as non recurring in this quarter -- of first quarter, where as a piece of that was looked at as recurring in the fourth quarter. So if you were to actually readjust the fourth quarter, you would actually see an increase in our recurring revenue numbers.
Abhas Gupta -- Windy Investment -- Analyst
And how much is that account in, also if you can just give some more details as to why it was on nonrecurring last quarter and it is, sorry [Speech Overlap].
Adam Elster -- Chief Executive Officer
So again as -- as you guys are aware with the accounting rules with 605 and 606, the accounting treatment of some contracts changes. Right? The deals that we are doing now. The cloud subscription is the core model. We sell all our products and we had one contract that the way the customer decided to license, resulted in the upfront, which is -- why you would see that adjustment?
Abhas Gupta -- Windy Investment -- Analyst
Right. Okay. [Speech Overlap]
Adam Elster -- Chief Executive Officer
Nothing. This is a one customer, one contract -- this in no way. As any we don't think this has a fundamental bearing on the business model.
Abhas Gupta -- Windy Investment -- Analyst
Okay. Understood. And just this one last question for my side.
Adam Elster -- Chief Executive Officer
Sure.
Abhas Gupta -- Windy Investment -- Analyst
So again, look at it from a medium term perspective, say, two to three years, not long-term, right?
Adam Elster -- Chief Executive Officer
Yes.
Abhas Gupta -- Windy Investment -- Analyst
Medium term. Given the broader global environment, especially in the US as well -- it's been talks of a slowdown, possible recession, etc. You see in your conversations with your potential or current clients, that they seem to be delaying or delaying projects or any has -- any of that triggered down the potential business opportunities for the next one or two years?
Adam Elster -- Chief Executive Officer
Yes. It's interesting, because from a macroeconomic perspective, obviously, there are a lot of interesting things going on in the market, particularly in the last few weeks. So at a macro level, what's interesting to me is when you look at the insurance market, right, the insurance market in general, no surprise to any of you. Is not a fast moving market. It's not a high growth market. The market itself grows at a lower percentage and it's a slower moving market. It's slow to make decisions on systems. Core system deals can run 18 months to 24 months. So it's not a fast moving business model in general. So from our perspective, while there may be macroeconomic issues that are happening at the moment, we're not seeing a substantial hit in the insurance market, because the growth rates aren't that high to begin with. So we're not seeing that. We are seeing, which we find again, the most interesting related to our strategy is we are seeing that culturally, and in general within the insurance companies, they realize from a technology standpoint that they need to play catch up from a technology standpoint.
So their decisions haven't been fast in the past. The growth hasn't been high in the past. So while there are macroeconomic forces, when we look at our business, we don't see that the insurance market, which we're dependent on growing is changing radically. And we do see that they know they need to ramp up their technology. So while there's macroeconomic issues, we don't think it's a substantial risk to our business model at the moment.
Abhas Gupta -- Windy Investment -- Analyst
Okay. Great. Thank you very much.
Adam Elster -- Chief Executive Officer
Great. Thank you.
Operator
The next question comes from your Shyamal Dhruve with PhillipCapital India. Please go ahead.
Shyamal Dhruve -- PhillipCapital India. -- Analyst
Yeah. Hi. Thanks for taking my question. So my question is on the Capgemini Alliance partnership, which we did in last quarter. So any update on this partnership like how the progress is going on, how we are going to the clients and what is the initial response? And if you could also give any indicative timeline, like when we could have our first deal on the partnership?
Adam Elster -- Chief Executive Officer
Yeah, absolutely, appreciate the question. Look, we're really excited about the Capgemini relationship. While we feel very good about the IBM platform, what we're doing with them, look, Capgemini is a very clear leader in the insurance technology marketplace. They have a $1.6 billion business. And while they have a very large business around the P&C market, which we participate in with certain competitors, one of the areas of growth for them is moving into the L&A side of the business, which is a key focus for us. And I think, at our Investor Analyst Day, their leader said it best where he said, if you think, the P&C market from a technology perspective is five years behind the world. He said the L&A is 10 years behind. So we think it's a great opportunity in the L&A is space with Capgemini. We've already done the planning meetings. The launch was in May, so the paint still not dry on the relationship. We've already done planning sessions, account go-to-market, building marketing plans. And we already have a handful of customers where we're actively engaged.
But again, the life cycle of these deals are not quick. These are not 90 day sales cycles. We're exciting, because we were already working in a few areas with them. We're hoping that will accelerate some of the opportunity. But I would tell you, we're very bullish about it. But I wouldn't expect from when we release through the press release on the relationship that we're going to closed deals in the next 30 days, 60 days. We hope in the coming quarters, I'd love to be able to announce the deal in Q2. Hopefully, one by Q3, but the sales cycles on the deals are a little longer. But I can tell you in general, I am very excited about the Capgemini relationship. Their expertise in the market and how they can be an accelerator for us.
Shyamal Dhruve -- PhillipCapital India. -- Analyst
Yeah. That was quite helpful. My another question is on the employee expense in this quarter. So it has declined in absolute terms as well. So any particular reason for a sharp decline in employee expenses this quarter?
Wayne Locke -- Chief Financial Officer
Employee expenses [Speech Overlap].
Adam Elster -- Chief Executive Officer
When you're referring, yes.
Shyamal Dhruve -- PhillipCapital India. -- Analyst
Yeah, the cost of revenue. So the cost of revenue which 17.5 [Phonetic] So improvement in gross margin --
Adam Elster -- Chief Executive Officer
Yeah, we -- this is what we Wayne talked about earlier, we had a few onetime charges in our first quarter related to the marketing launch. Our convergence expense is a large onetime expense in the quarter. So it's a few onetime charges there. If you go back through the script, Wayne highlighted in the script as far as some of the onetime Q1 expenses. But nothing that's a fundamental to the business.
Shyamal Dhruve -- PhillipCapital India. -- Analyst
No, actually, my question on the increase in gross margin. So if I compare on year-on-year basis, our gross margin in this quarter was 53.3% compared to 46.9% in Q1. So sharp increase is in the gross margin. So any particular reason for that? I'm not asking for the adjusted EBITDA or EBIT margin, but on the gross margin front.
Wayne Locke -- Chief Financial Officer
Sure. As I mentioned earlier, it's attributable to the changes in the mix of business to the higher profit -- higher margin business on the cloud subscriptions, as well as increased efficiencies in the delivery of our business.
Shyamal Dhruve -- PhillipCapital India. -- Analyst
Okay. And just one clarification. If you can just give me the top client revenue contribution in this quarter. Is it 7.3% [Phonetic] what you mentioned.
Wayne Locke -- Chief Financial Officer
Yeah. Almost --
Adam Elster -- Chief Executive Officer
The top customer.
Shyamal Dhruve -- PhillipCapital India. -- Analyst
Yeah, top customer.
Wayne Locke -- Chief Financial Officer
[Speech Overlap] did mentioned what that number was in terms of the top clients front. Client constrains, yeah, this is the top customer represents 7.3% of our revenue, exactly.
Adam Elster -- Chief Executive Officer
Great. Appreciate the question.
Shyamal Dhruve -- PhillipCapital India. -- Analyst
Thank you.
Operator
The next question comes from Amit Chandra with HDFC, Mumbai.
Amit Chandra -- HDFC -- Analyst
Hello?
Adam Elster -- Chief Executive Officer
Hello?
Amit Chandra -- HDFC -- Analyst
Yeah. Hi, Adam. And, thanks for the opportunity. As you have mentioned, the fall that we have seen in the cloud revenue, 14.7% sequential decline it was largely led by the drop in the revenue implementation -- revenue from the large client. But that fall -- what I see is being covered by the sharp increase in the non-cloud revenue, which increase or not, the non-cloud revenue was actually struggling in FY '19. But if I seen 1Q it is up 13.8%. So as you mentioned, it is due to the accelerated license booking. So can you please quantify what is the license component here booked, which is not going to come -- in the next quarter. And if I adjust that this year -- fallen revenue for this quarter. Can you please explain that?
Wayne Locke -- Chief Financial Officer
I'm sorry I didn't --
Adam Elster -- Chief Executive Officer
I didn't follow your question.
Wayne Locke -- Chief Financial Officer
Yeah.
Adam Elster -- Chief Executive Officer
You asked for -- you wanted us to quantify as a single deal, which -- is that what you're asking for?
Amit Chandra -- HDFC -- Analyst
No, no. I'm asking now the shop increase that we have seen in the non-cloud revenue, which is ex of cloud. So, what one time revenue is -- licensing revenues we have booked.
Adam Elster -- Chief Executive Officer
Yeah, we had a single deal that was -- as we said earlier, which is -- which was fell under the ASC 606 which had us recognize the revenue upfront. It's a onetime deal or we don't provide that information, right? And we don't give guidance into Q2. So we don't. So it was a once back to our exact what Wayne said earlier, so one time deal -- again, it's the accounting treatment.
Amit Chandra -- HDFC -- Analyst
Okay, sir. And the fall that we have seen in the cloud implementation revenue. So by when we can see the cloud implementation revenues to increase. Because our deal with MetLife, so we're not the first phase of the positive [Phonetic] over. So are we looking forward to expand the relationship to other markets to other -- to other region?
Adam Elster -- Chief Executive Officer
Yeah. Again --
Amit Chandra -- HDFC -- Analyst
Is there in the process or?
Adam Elster -- Chief Executive Officer
Yes, there is -- in progress again, I'm not at liberty to talk about all that stuff. But again, much like my answer earlier, you can assume my team, the IBM team and the MetLife team are very focused on that, but can't elaborate on it. And I appreciate the question. Thanks a lot.
Operator
The next question comes from Avishai Kantor with Census Management.
Avishai Kantor -- Census Management -- Analyst
Yes. Hi, and thank you so much for taking my question.
Adam Elster -- Chief Executive Officer
How are you Avishai.
Avishai Kantor -- Census Management -- Analyst
I'm good. I'm good. Thank you so much again for taking my question. Again, good morning, Adam and Wayne. Impressive growth margin performance, obviously driven by management's actions in the last six to nine months. Do you have -- I don't know if you can talk about it, but any internal long-term goals for growth margin that you can share with us today.
Adam Elster -- Chief Executive Officer
Yes. I'm not going to give you, again, do we have goals? We certainly have goals. I think, not something I'm going to quantify over the call today, again, but we do believe is what Wayne talked about as far as how we feel about our margins. We know and you guys know that the margin mix of services to product to the extent that mix of the business increases, it will enable us to expand margins. Right? So while we're satisfied with the margins, what will really drive it more than anything? And it's not going to be necessarily cost cutting and things like that. We believe we'll just be the mix of the business to the extent we get the product revenue going from being 32% of our business getting closer to the 40% and 50%, we think as that weighted average of margin increases. We think that's where the margin expansion. Now I'd love to give -- I'm sure you guys want a number. I get it. Right. I'd love to give you guys a number. But again, it's a dependency that I can give you a target. But it's going to really -- the target is really going to be dependent on the mix of the revenue. So I know it's a non satisfying answer to you. Right? I get it, but I'm not going to give you an exact number. But it's the factor that we watch the closest. It's just that mix of the business from product and services.
Avishai Kantor -- Census Management -- Analyst
Okay. So basically, as the business continues to scale up, we should see that number continues to move. Is that a fair?
Adam Elster -- Chief Executive Officer
Yep. As you see [Speech Overlap] statement.
Avishai Kantor -- Census Management -- Analyst
Is that a fair statement?
Adam Elster -- Chief Executive Officer
Yes. As you see the cloud business and the product business increase, you should expect that we would have margin increases in line with that.
Avishai Kantor -- Census Management -- Analyst
Okay. And my next question, if you can talk a little bit about employee readiness in both P&C versus life and annuity for digital transformation or digital services. How well do you think your employees are? Yes.
Adam Elster -- Chief Executive Officer
Our employees are customer employees. So I would tell you it's an interesting question, right? Because in general, in the insurance industry, it's a challenge that they're having in general. Right. The percentage that money that insurance companies are spending on technology or employees is very high still. They still have many legacy systems and manual processes. And it's a challenge from a talent perspective and many of the insurance companies and how they can transition.
From our standpoint, it's a little easier, right? It's easier because, if we have employees who have historically been doing on premise implementation of our product to train them on the cloud version of our product is easier for us to do. Right? And what we are doing is we've spent a lot of time internally and we've talked about this in prior quarters really understanding how we reallocate and develop our own resources meaning as you guys have seen our on premise services have been less of the focus of the company. One of the reasons we're doing partnerships, because of the pivot to the cloud. As we look at those resources, we're looking at people rolling off of on premise projects and saying, OK, is this an individual we should invest in because they can do a cloud implementation? Is this someone who could move into the development area or the organization? Or candidly, is this someone who we don't feel necessarily we'll transition internally moving forward? So I can tell you we're going through a fairly rigorous process internally of assessing the talent as projects and as new projects are signing up. So we feel good that we have a process, but we're early in it.
So far, we have some good results and a few patches where -- we're not happy, but we'll take action and move forward. But overall, I think because they're already working on our technology, it gives us the advantage to be able to train them ourselves, which is a big advantage for us, for insurance companies, much harder. I mean, if you're an insurance company and you're competing with Google and Facebook to get a Java or cloud developer or competing with Amazon, it's a little harder. So I think it's a challenge of the market in general, but we feel like we have a good strategy and now to be down to our execution against it.
Operator
The next question comes from Sam Shah with AUM Advisors.
Sam Shah -- AUM Advisors -- Analyst
Hi, Adam. [Indecipherable] which I have numbers. I have a few questions about the revenues. First, given your current order backlog, where do you see cloud revenues being the end of this year, you have a 12 month, I guess, backlog which you're already having orders -- you see 40% changing meaningfully? Or do you think it should be around the same?
Adam Elster -- Chief Executive Officer
We don't give full year guide. I'm not. We don't give guidance, so we're not going to give guidance on the call.
Sam Shah -- AUM Advisors -- Analyst
This [Indecipherable] to the question is, have you seen more cloud-related orders? Are you seeing a mix of the -- business composition meaningfully?
Adam Elster -- Chief Executive Officer
No, we don't. The good news is, again, last year we only had one of the key deals last fiscal year and the 15 new customers only one of them was non-cloud, a customer who wanted to do it in premise in their environment. In the first quarter, all of the deals, new deals we did with all of the new customers were all cloud deals. So on from a go-to-market perspective, that is what we sell. That's how we sell and that's how we license. Will there be situations where a customer will request to purchase a different way or implement it certainly? Yes. We'll look at them. But it's not the way we've designed the business model. So as you -- we see our growth and we see our expansion, we're focused on the cloud. That's not to say we won't have one or two customers who aren't ready for the cloud in the insurance market or who want to do things on premise that could happen. But it's are -- from a go-to-market, a messaging, a development, a resource perspective. That is our entire focus.
Operator
The next question comes from Abhas Gupta with Windy Investment. Please go ahead.
Abhas Gupta -- Windy Investment -- Analyst
Hi, I have a quick question on your cloud subscription revenue. I really do -- we were just computing with the past 12 to 16 quarters, your total cloud implementation revenue has been more than a $100 million. Cloud subscription current revenues around $4.5 million [Phonetic]. I just want to understand how should we look at the cloud subscription revenue building up over time? Because --
Adam Elster -- Chief Executive Officer
Again, it's probably helpful again for those of you who may not have been able to attend our analyst and Investor Day back in May, we did publish the material online. So it's probably helpful for some of you might be useful to take a look at some of the slides that Wayne presented. The cloud implementation revenue is a forward leading indicator, right. So the way you need to think about it, is the way that we do our projects is, if you license our cloud products there is an initial bump in revenue associated with cloud implementation services. So the way it works is if you sign a multi-year contract for our cloud product, the revenue for services of the cloud implementation will burn very hot and very fast within the first year because the resources to configure the environment to get you up and running. During that timeframe, the cloud product revenue is very low. It's a small percentage, because they're not active, they're not up and running yet. And there's only a little bit of that revenue generated. Once they go live, what you see is the cloud services revenue to get them up and running drops down. So it's a drop in revenue and the subscription product revenue starts developing. And what you can see in the slides that we present in the Investor Day, we show how that builds over time. And after you have the services burn hot and fast and then it drops down and then you have underneath it a whole series of customers who are starting the subscription revenue to build over time. So the model as it works, the way you're seeing the revenue is a direct reflection on how the model is actually designed.
Great. Thanks. And I think we have -- operator, we have a time operator for one last question.
Operator
Certainly, sir. The next question comes from Sam Shah with AUM Advisors. Please go ahead.
Sam Shah -- AUM Advisors -- Analyst
Yeah. Thanks again. One question was what percent of the revenues came from the acquisition of last year from Exaxe? [Speech Overlap]
Adam Elster -- Chief Executive Officer
Yeah. I think it's probably 1% of the growth, something like around 1% of the growth can be tied to the acquisition. Around 1%, it's not -- the apples to apples on the 10. I think you get add on that, something like maybe 1%. It's not, it's roughly 1% or so, it's not a large part of the number.
Sam Shah -- AUM Advisors -- Analyst
Okay. And on the margins was -- on access to much higher-margin business? Or is it broadly similar?
Adam Elster -- Chief Executive Officer
It's similar. yes, similar. And again, good news there is that -- they were profitable when we acquired. So that was good news. And the same thing I said earlier to Avishai's question. The good news is their percentage of product revenue is increasing, which we believe hopefully will be accretive to their margin over time as well.
Sam Shah -- AUM Advisors -- Analyst
Okay. Thank you.
Adam Elster -- Chief Executive Officer
Great. Well, thanks everyone, and operator, I think that wraps it up. So for everyone on the call look, I really appreciate the time. And we're going to be spending as much time as we can focused on the cloud. All the things we've talked about in our strategies coming down to execution and we feel really good about it. At the end of the day, our first quarter financial results. I think they reflect the momentum in our product focus and our cloud strategy. And we also think that our ability to rapidly deliver time to value to our customers, I think is a key differentiator. Customers going from projects last four, five, six years to projects that can last 90 days or 180 days is a new paradigm for the insurance industry. And we're excited about the opportunity. So I appreciate the interest in Majesco. Appreciate your time and hope you have a good day and a good evening. Thanks, everybody.
Operator
[Operator Closing Remarks]
Duration: 45 minutes
Call participants:
Andrew Berger -- Investor Relations Officer
Adam Elster -- Chief Executive Officer
Wayne Locke -- Chief Financial Officer
Parag Bharambe -- Private Investor -- Analyst
Abhas Gupta -- Windy Investment -- Analyst
Shyamal Dhruve -- PhillipCapital India. -- Analyst
Amit Chandra -- HDFC -- Analyst
Avishai Kantor -- Census Management -- Analyst
Sam Shah -- AUM Advisors -- Analyst
