Latent View Analytics Limited analyst Q&A

Thank you. We will now begin the question -and-answer session. The first question comes from the line of Vimal Jamnadas Gohil with Alchemy Capital Management.

Congratulations on a good quarter. Sir, my first question would be for Raj, if you could just give me some color on the cost front. If I were to look at the opex of INR 33.5 crores this quarter, and even if I were to reduce or take out the INR 1.9 crores transaction cost, the number is still about 25%, 27% higher quarter-on-quarter and almost 50% higher Y-o-Y basis. If you can give me some breakup, how much of that is related to core marketing or growth -related costs? How much is that related to visa? That will help.

Yes. So thanks for the question, Vimal. I do understand and appreciate the concern around the higher opex. But I would like to highlight that almost all of this increase, is, one, attributable to higher marketing costs. So just to give you some perspective, our marketing costs are generally very seasonal in nature, where we do a lot of our marketing events ty pically in Q2 and maybe early Q3, before November essentially because November onwards, people tend to go on leave till the end of the year. So a lot of the marketing spends that we do are concentrated between the months of August through October. In particular, this year, we've done close to about 5 small format events in the US as well as in Latin America and London. So this meant that there was a significant uptick as far as marketing costs are concerned as well as travel associated with these marketing events is concerned. And that's one of the big drivers for the higher opex spend. Two, so you would all note that all the costs in relation to the H1B applications for us are booked in Q4, most of the big spends are booked in Q4. And, therefore, Q1 tends to be a little lower in terms of the visa cost. So, on a quarter-on-quarter basis, the visa costs were higher by close to about $220,000. So that was again a significant cost that we had for this particular quarter in comparison to Q1. So Q2 compared to Q1, those costs were higher by about $220,000. The third one, if I can highlight is in relation to some of the bandwidth or the leadership that we are adding. Rajan spoke about the couple of people on the Databricks front, on the sales and business development side that we've added. We've also added a few people on the Adobe Solution practice. So actually for us to source some of this talent, we've had to engage external consulting firms to bring on some of this talent, And there were recruiting-related costs that were associated with bringing on this talent. So that would be another close to about $150,000 to $180,000 that we have spent. So all of this meant the higher marketing cost plus the higher visa cost plus the higher sort of recruitment costs in bringing in new talent meant that the opex for this quarter was higher than the last quarter. A lot of this will taper down in the following quarter. You will see lower levels of opex, specifically at least as far as marketing is concerned. But visa would be steady state going forward. So you will not have this level of expenses again. I hope that answers your question.

Yes. So, would it be fair to say that we'll be operating in between INR 30 crores to INR 33 crores a quarter going forward, given the growth rate requirements that we have?

Yes. That would be the range.

Fair enough. Fair enough. So Rajan, my next question with you, if I were to look at our revenue by offerings, and if I were to sort of join the dots between what has happened in the technology vertical for the last couple of quarters, my question was on yo ur diagnostic offering. So that service line or offering has also seen flattish trends of about $16 million to $16.5 million a quarter for the last 1 year. However, if I were to look at 3 of your high -quality or high -intensity offerin gs, which is RGM, consulting and predictive analytics, that has seen a lot of growth. Is this a conscious pivot? Or the pain in the diagnostic vertical is also related to the tech vertical that we have?

Yes, it's a bit more related to the technology vertical because that is where the clients also have better appreciation of what can be done using the emerging tooling and technology. So, therefore, there will be greater pressure on how some of the diagnost ic descriptive work can quickly get converted or at least be done in a more efficient manner, using generative and agentic approaches. Not that the floodgates have opened there, but we see quite a bit of that kind of ask coming our way, e ven in the consolidation and the price conversations that we are having. The traditional sectors, I think, they still are at a certain level of maturity, where they may not want to completely switch over, to new models of getting diagnostic descriptive work done. So in general, this pressure will continue, not just in the tech sector, but also in the other sectors as well. What we are looking to do though is whether much of this can be delivered using a more cost-effective framework, leveraging generative and agentic technologies. One of the things that we are building, for example, it's a solution called Wiz.ai. This is specifically focused on dramatically accelerating and automating the entire dashboard decision board creation work. So clients can directly interact with Wiz.ai in a natural language conversational format. And the tool has enough domain knowledge and semantic understanding built that for specific sectors and use cases, it can quickly come up with the first version of the dashboard within a matter of minutes rather than weeks of effort that it would have taken, to do the wireframing and the work. So there is work that we are doing. The expectation or rather the intent with all this is that we will be able to take a more efficient, powerful mechanism for getting this work done. And, therefore, not only will we retain the quantum of work, but we'll g row the quantum of work as well by demonstrating a superior approach to doing that work. But taking all of this into account, the future, of course, is more in the predictive, prescriptive, GenAI, agentic architectures, and that is where a lot of the actio n will be as more organizations mature and adopt some of these mean.

Next question comes from the line of Rushabh Shah with BugleRock PMS.

Sir, as you mentioned a lot on AI, my question was one of our competitor, Tiger Analytics, they are targeting 1 billion revenue by 2030 as AI will become their core business. So what is our thought process on it? Where are we seeing ourselves like 5 to 6 years down the road?

Six years down the road? I don't know, okay, honestly. I mean, we are trying to figure out where will we be 3 years down the road. See, secular momentum and path will be , that there will be increased adoption, of all of the emerging technologies. But I'm sure that you're hearing enough commentary also around how much these emerging technologies will result in new work versus work that is currently being done, completely getting automated and done in an agentic fashion. Our thought process at this time is that we be a disruptor, right, that we build those AI value propositions and the agentic frameworks that can help do that work. But it is very hard, to put down what is going to happen 6 years down the line? In 6 years, I mean, you could have artificial general intelligence, right? So I don't know. I mean, at this point in time, this is the best answer I'm able to give to this.

Next question comes from the line of Sucrit D. Patil with Eyesight Fintrade Private Limited.

My question to Mr. Rajan, Mr. CEO is, as analytics becomes more commoditized across industries, what unique positioning or strategic shifts do you see helping LatentView stand out over the next few years?

So I called out the growth drivers when I did the preamble. So , our efforts will be focused on those growth drivers. Plus, the question that I just answered, the big shift that is happening in the world towards AI and generative and agentic. That is where the action will be. The one thing that I can see and I can call out confidently is that domain understanding will continue to be a very important aspect of how all of these new tooling and technology are brought together. We recently did an event in Latin America and Mexico, and the external speaker that we had, talked about the advances, in the agentic and the generative AI spaces and how there are several companies, right, that are already doing very interesting work, with all of those technologies. But she did call out that the organizations that are lower down on the maturity curve and who are yet to get started, the best advice that she could give them was think about your top 3, 4 problems, and the context of the problems and what are the major KP Is you're looking to impact in those problems and then how can you bring the power of data analytics, AI and everything, to addressing and solving those problems. So that domain knowledge is something, I think, that will continue to be a very important aspect of how these technologies play out. That plus the entire area of enterprise scale, privacy, confidentiality, transparency, governance, hallucination-related concerns, these are the things that will be a major talk, in terms of how you can apply the power of these technologies. I mean, the technology capabilities are getting demonstrated through POCs and pilots. But to apply it to enterprise scale, you will have to marry it with the domain understanding and the enterprise scale thought process, on privacy and governance and transparency matters. And that is where we would like to really build our capabilities as well. That's how we are looking to address this.

Next question comes from the line of Sameer Dosani with ICICI Prudential AMC.

First question is hi-tech vertical when I look at, right, last 3 quarters have been soft for us. And this, I think, is reflected in our top 5 accounts that is also growing slower than the industry than the company average. Can you explain what to think about this piece? And we have renewals coming up in Q3, so can you give me some early indications? Because what's happening is that hi-tech as a vertical, some of the clients that we may have may also be looking to cut costs. So any views on these 2 points, is my first question.

Yes. I mean, it's not very different from what I have already mentioned. The tech space have the best understanding of the evolving technologies because in many instances, the clients that we are working with are building the next new, when it comes to tho se tools and technologies. Therefore, there is an expectation that the cost benefits and the efficiency productivity gains from these technologies are applied internally to running their business as well. So there is an increasing demand from them that their partners and service providers are able to make use of all of these things, right, in the most optimal manner possible. That apart, I guess, some of the cost pressure is coming from the inordinate amount of capital investment and expenditure that is being directed at infrastructure. So if you see $500 billion investments being made into data centers and building even more p owerful language models and the energy supply, that goes and all that, then the companies are going to squeeze whatever they can, in the rest of the business in terms of running it in as operationally efficient manner as possible. There are already a lot of questions and talk about how all of this investment is circular in nature, is it really pushing the boundary for the LLMs, whether an LLM-based approach to AGI, because that seems to be the quest is the approach that will yield the result because at the end of the day, LLMs, they use only language-based reasoning and modeling. There are many different classes of intelligence, like spatial intelligence or visual intelligence or physical dynamic intelligence and so on. I mean, these are other approaches that other organizations and researchers are working on at this time. My point is that the LLM -based frenzy that is happening right now, directing a huge amount of investment into those areas, will mean that the cost pressures in the rest of the businesses will continue. Therefore, this is something that we can continue to expect in the next few quarters.

Next question comes from the line of Pritesh Thakkar with PL Capital.

Good set of numbers. I just had a question on top account that we added in the band of $500 million plus. Which vertical does it belong to? And how is the potential to scale it further in the account, if you can color or highlight on this one?

Yes. We added accounts in multiple verticals over the last quarter and a couple of quarters. I mean, there's an account that we added in the consumer goods space, for example, where there are follow - on conversations with the affiliates. The initial piece of work was in the range of about $500,000. 2 projects that we have won recently, both in the industrial auto component manufacturing space, both of them are in that range as well. And in one of them, there is a significant Databricks -driven transformational program that they are looking at, which could lead to a multimillion-dollar, multiyear engagement. And the second one is related to a lot more work in the supply chain analytics space that we can do for them. So we are seeing traction in industrial, in consumer goods, in financial services as well at this point in time. One other account that we also added in the B2B technology space, that is showing some good traction as well. I mean, the initial work that we did was again of the $0.5 million range, but we are seeing more opportunities in the remainder of this year as well.

The last question comes from the line of Srinivasu K with TIA.

Sir, you said you are targeting $19 million Databricks revenue this year while building the SAP on Databricks competency, right? So how do you see revenue acceleration from this channel? And also, is the margin profile on Databricks above the company average?

I'll answer the second question. The margin profile is not contingent on whether it is Databricks' work or not. It is contingent more on the complexity of the problem and the extent of usage of advanced analytics of generative and agentic architecture. So that is where the margin profile. Otherwise, Databricks work is similar to work that we might be doing with any of the other cloud platforms, whether it is AWS or GCP or Snowflake for that matter. The first question in terms of how is the SAP competency going to help, we will have to come back to you on the objective impact of that because it is very early days. We are just starting to build the competency. This was a big partnership announcement that happened from Databricks very recently. I mean, when I say very recently, it's almost 6 months old now, but it is only now that they are starting to see the traction on that. And therefore, they are encouraging many of their partners to bring that kind of SAP capability and competency, where the combination of SAP and Databricks, will deliver the goods for the client. I'm expecting that this will continue to push us in the right direction. I mean, already, even without doing any SAP related work on Datab ricks, we are seeing good growth rates with the Databricks practice. I'm expecting that the SAP competency will add further fuel, to us moving in that direction.

Ladies and gentlemen, we have reached the end of question -and-answer session. I would now like to hand the conference over to the management for closing comments.

Yes. Thank you, and thanks all for your questions and for joining us today. I mean, feel free to reach out to our Investor Relations team for any additional follow -up and stuff, we'll try and address them. Subsequently, today, we do have some other media interactions that are lined up at 10 .30, and that's the reason that we had to cut this short right at this time. At this point in time, I would say that in general, there is a good amount of momentum in many parts of the business, which we have called out. The tech sector is one where we see some tentativeness, not that we are not growing there. I mean, we are growing at a certain pace there, and we want to pick up the pace even more. And that is the reason we are making those investments, in those areas that I talked about. I talked about the sell with capability that we are building with one of our account s. I talked about the cybersecurity analytics practice that we are incubating, even the work that we are, otherwise, doing with the AI Center of Excellence. And all the new value props that we are building using the agentic architecture, this is all aimed at demonstrating and showcasing to the tech sector that we can also be ahead of the curve, in terms of how we can bring more productive, efficient approaches to the problems that they have, even in the diagnostic descriptive space. So the intent is to drive these hard and capitalize on them in the remainder of this year and set up good momentum for the next fiscal as well. Overall, we are pleased in general with the progress that we are making on several fronts. We continue to add bandwidth in the front end as appropriate, churning out and making sure that the team is really delivering the goods for us. And we continue to ma ke investments and capability building as well in all the horizontals and the areas that I talked about. And there are new areas that we have identified and that we'll be investing in as well. With all that, we are expecting that the second half of the year will be a fairly strong second half as well and that we will be able to provide even better guidance, as we wrap up the next quarter. But, otherwise, thank you all for joining the call. Raj, did you have any final comments? Otherwise, we can close it.

I know there are 5 or more people who have questions. We have Aditi, Pareek, Vimal, Pritesh, Karan, who I think still have some outstanding queries. So please feel free to reach out to the Ernst & Young team, to the extent some of your questions have not been answered, and we'll be happy to answer them to the best of our knowledg e. Rajan, you pretty much summed it up well, and there is nothing additional that I need to add at this point in time.

All right. Thank you. Thank you all for joining today. Take care.

Thank you.

Thank you. On behalf of LatentView Analytics Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

This transcript has been edited for readability and does not purport to be a verbatim record of the proceedings.