BLS International Services: Q2-25 Earnings Call Highlights
Growth driven by visa & consular business. Margin expansion through operational efficiency & synergies. Acquisitions to drive future growth. Digital business hasn't shown growth.
blsinternational.com | NSE: BLS
1. Key Takeaways
1.1 TLDR
The Q2 and H1 FY25 earnings call showcased BLS International's impressive performance and future growth potential.
The company's strategic initiatives, successful acquisitions, and focus on operational efficiency have delivered exceptional results.
The company's robust financial position and prudent capital allocation strategy are expected to support its ambitious growth plans in the coming years.
Management's confident outlook, ambitious acquisition plans, and commitment to shareholder value signal a promising trajectory for BLS International in the coming quarters and years.
1.2 Operational Highlights:
Record-breaking performance: BLS International achieved its highest ever financial performance in Q2 and H1 FY25.
Strong revenue growth: Consolidated revenue increased by 21% YoY in Q2 FY25 to ₹419.5 crores and 25% YoY in H1 FY25 to ₹988 crores.
Robust EBITDA growth: EBITDA surged by 89% YoY in Q2 FY25 to ₹164 crores and 78% YoY in H1 FY25 to ₹297 crores.
Significant PAT growth: Profit after tax grew by 78% YoY in Q2 FY25 to ₹146 crores and 74% YoY in H1 FY25 to ₹267 crores.
Strong visa application growth: Visa applications processed increased by 41% YoY in Q2 FY25 to 10.1 lakhs.
Successful acquisition of IDATA: IDATA contributed significantly to financial strength, reporting revenues of ₹60 crores and EBITDA of ₹23 crores in Q2 FY25.
Expansion of digital and retail services: The company expanded its digital services network and retail service touchpoints, furthering its commitment to financial inclusion.
Strategic acquisitions: Acquisition of Citizenship Invest completed in October 2024, strengthening BLS's long-term visa solutions and targeting high net-worth individuals. Acquisition of Aadifidelis Solutions (loan processing business) expected to close soon, unlocking synergies with BLS's existing network.
1.3 Key Themes:
Robust Growth Driven by Visa and Consular Business:
The surge in visa applications, fueled by the global travel and tourism industry recovery, is the primary driver of BLS's growth.
Strategic expansion into key markets and securing lucrative contracts as key growth contributors.
The management expects to maintain a 25-30% growth rate in the current fiscal year.
Quote: "Our remarkable growth is primarily attributed to the surge in visa applications, a direct result of our strategic expansion in key markets and our targeted approach to securing lucrative contracts alongside bolstering our existing ones over the last 18 to 24 months."
Margin Expansion through Operational Efficiency and Synergies:
Transitioning from partner-run centers to self-run models, along with cost optimization efforts and the IDATA acquisition, has significantly expanded the company's EBITDA margin.
The management aims to maintain the current EBITDA margin level (33.1% in Q2 FY25).
"Synergies from the acquisitions of IDATA and ongoing transition in our business model from partner run centers to self-run models has resulted in enhanced margin profile for the company during the period."
Strategic Acquisitions Fueling Future Growth:
The management articulated a dual-faceted growth strategy focusing on organic growth and actively pursuing inorganic expansion opportunities.
The recent acquisitions of IDATA and Citizenship Invest enhance BLS's capabilities and expand its reach into new markets and segments.
The acquisition of Aadifidelis Solutions is expected to generate significant synergies with BLS's existing network of over 30,000 CSPs and 1 lakh touchpoints.
"Our strategy is dual faceted. We aim to cultivate organic growth within our visa and services and retail service business while also actively seeking out opportunities for inorganic expansion both domestically and nationally."
Focus on Digital Business Growth and Addressing Challenges:
While the visa and consular business is performing exceptionally well, the digital business has faced challenges and hasn't shown year-on-year growth.
The management acknowledged the competitive nature of the digital business and stated that there are no plans to sell or separate the business from BLS International.
The completion of a contract in Punjab impacted the digital business revenue in FY24. However, the management believes growth opportunities remain and is committed to finding them.
The acquisition of Aadifidelis Solutions is expected to contribute significantly to the digital business growth in FY25 and FY26.
Strong Financial Position and Prudent Capital Allocation:
The company boasts a healthy balance sheet with net cash and cash equivalents totalling ₹92 crores as of September 30, 2024.
BLS International has a consistent dividend payout policy and is exploring various options for utilizing its cash, including acquisitions, dividends, technology investments, and business development.
The management is open to considering a share buyback program, though it has not been explored yet.
BLS International Q2 & H1 FY25 Earnings Call FAQ
Q1. BLS International has shown tremendous growth in its visa and consular business, but the digital business hasn't kept pace. What are the challenges in the digital business?
A1. The visa and consular business enjoys higher margins due to less competition. The digital business is more competitive, leading to comparatively slower growth. The completion of a contract in Punjab also contributed to the appearance of stagnation despite underlying growth. However, there are no plans to sell or separate the digital business, and BLS International remains committed to exploring growth opportunities in this sector.
Q2. BLS International has completed several acquisitions, including IDATA. What is the outlook for these acquisitions, and how will they impact future financials?
A2. The consolidation of IDATA, which has an annual revenue of around ₹200-250 crores, is reflected in the current quarter's strong growth trajectory of 20-30%. This trend is expected to continue with contributions from existing business growth, new contracts, acquisition synergies, and the transition of certain partner-run centers to self-run models. BLS International aims to maintain the achieved growth and margin levels in the coming year.
Q3. The revenue per visa/passport has decreased compared to previous years. What is the reason for this decline?
A3. While specific data for earlier years needs to be verified, the general trend since the COVID-19 pandemic has been an increase in revenue per application on a quarter-to-quarter basis. This suggests that any apparent decrease might be due to specific circumstances rather than an overall downward trend.
Q4. The EBITDA margin for the visa and consular business has seen significant improvement. What factors contributed to this, and is this trend expected to continue?
A4. The improved EBITDA margin is attributed to several factors, including the transition from a partnership model to a self-owned model, winning new contracts with higher application prices, and the acquisition of IDATA, which operates at a 40-45% EBITDA margin. The company expects this upward trend to persist as synergies from acquisitions and operational efficiency improvements continue to materialize.
Q5. What is the impact of the geopolitical environment on BLS International’s business, and how does the company plan to mitigate potential risks?
A5. While geopolitical events in specific regions may occasionally impact business, BLS International's global presence across 70+ countries helps to mitigate overall risk. For example, outbound traffic from Russia has been affected, but increased volumes from other parts of the world have offset this. The company continues to monitor global events and adapt its strategies accordingly.
Q6. How is BLS International leveraging its strong financial position for future growth, and what is the company's dividend policy?
A6. BLS International uses its robust financial position for organic growth in its visa and retail service businesses and inorganic expansion through strategic acquisitions, both domestically and internationally. The company’s recent acquisition of Citizen Invest for $31 million exemplifies this strategy. BLS International maintains a consistent dividend policy, balancing surplus distribution with reinvestment for future growth opportunities.
Q7. How significant is the Spain contract to BLS International's overall business, and are there any plans to reduce this reliance?
A7. The Spain contract represents approximately 25-30% of BLS International's overall revenue. While it is a significant contract, the company's diverse portfolio and ongoing expansion into new markets help to mitigate the risks associated with dependence on any single contract. BLS International continues to pursue a strategy of diversification to ensure long-term sustainable growth.
Q8. What is the outlook for revenue growth in the second half of FY25 and FY26, and what factors will drive this growth?
A8. BLS International anticipates exceeding the 24% revenue growth achieved in the first half of FY25, driven by new acquisitions, expansion into new geographies, and the rollout of recently won contracts. The company aims to maintain a 25% revenue growth rate in FY26, fueled by a combination of organic growth in existing businesses, contributions from acquisitions, and securing new contracts.
Source: Link to Earning Call Recording
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