Phantom Digital Effects Limited

During the conference call, backlog clearance and next-quarter revenue guidance were discussed extensively, leading to repeated questions from analysts. Here’s a breakdown of the company’s guidance and why certain aspects were clarified multiple times:

Backlog Clearance and Next Quarter Revenue Guidance

1. Backlog Clearance:

   • ₹44 crore of work completed in H1 is currently classified as work in progress and will be billed in the second half (H2) of FY25.
   • Management emphasized that this revenue, once billed, will help achieve a large part of H2 targets and address cash flow pressures.

2. Revenue Guidance for H2 FY25:

   • The company expects H2 revenue to be between ₹64-74 crore.
   • This includes:
     • ₹44 crore from the backlog billing.
     • An additional ₹30 crore expected from a significant new project for Tiket.
   • They also hope to convert around ₹15-20 crore from the pipeline of new project proposals worth ₹100 crore, where they have an estimated 20% success rate.

3. Full-Year FY25 Revenue Guidance:

   • Management targets ₹100-110 crore in revenue for FY25, which requires H2 performance to drive a substantial portion of annual revenue.

Reasons for Repeated Questions

Several analysts asked repeated questions on backlog and revenue projections due to:

1. Receivables and Collection Concerns:

   • The high outstanding receivables of ₹66 crore raised concerns about cash flow and revenue recognition, as collections have faced delays due to extended credit terms.
   • Analysts sought clarity on the timeline for collections to understand how quickly receivables would convert to cash and alleviate cash flow issues.

2. Uncertainty Around Project Completion and Billing:

   • Given the delays in project completion in H1, analysts questioned management on the certainty of converting the backlog into billed revenue within H2.
   • The industry-wide issues, such as the writers’ strike and market slowdown, made analysts cautious about potential new delays in the billing process.

3. Guidance Consistency and Achievability:

   • Some analysts noted that previous guidance hadn’t been met, leading to skepticism about achieving the new guidance targets.
   • Repeated questions aimed to confirm if management’s guidance for H2 and the full year was conservative and realistic, especially given the competitive environment and past delays.

4. Competitive Environment Impact on Credit Terms:

   • Management’s admission that they extended credit terms due to competitive pressures led analysts to probe further, as such practices could potentially increase receivables.
   • They wanted to understand if the company would continue this practice or tighten terms to avoid further receivables build-up.

In summary, the repeated questions reflected analysts’ concerns over the feasibility of clearing the backlog, collecting outstanding receivables, and meeting ambitious H2 revenue targets given past delays and competitive challenges.