Cambridge Tech up 1800% in 1 year: What's making it tick?

Shares in Cambridge Technology Enterprises have risen 1800 percent over the past one year. This co-incided with a robust increase in the firm's revenues (in the six months ending June, its revenues rose 103 percent year-on-year).In an interview with CNBC-TV18, Chairman Aashish Kalra discussed the company's state of business and its outlook going forward."Our two year plan is to get to a minimum revenue of USD 2 million a month...gross margins will be between 60-80 percent," he said.Cambridge Technology Enterprise (CTE) is a global business and technology services company. Its recent parternship with Fortune 500 companies like Oracle, Schneider and Amazon to capitalize on convergence of Cloud and Big Data has been fruitful for the company.Below is the verbatim transcript of Aashish Kalra’s interview with Mangalam Maloo & Reema Tendulkar on CNBC-TV18.Reema:  I was reading your annual report and there you have indicated that the company is putting in a business plan and it will take two years to realise the potential. So, what constitutes your business plan where do you see the company head say in the next two years in terms of revenues as well as in terms of margins and size?      A: Since we took over the company on the January 1st we have really focused on as you said the convergence of cloud and big data. We think that transform the way the world does business and it is really about looking profit and loss (P&L) of our clients and helping them realise new potential from that P&L be it in cost savings or revenue growth. The clients tend to be very large corporations mostly in the United States (US). The company Cambridge Technology is very small is very subscale and what we said was, we wanted to put a platform together and a plan together that involved three stages. Stage one was to take a business plan and put in the right partnerships. So over the first quarter we actually entered into partnerships with people like Oracle, Amazon etc there is a dozen odd partnerships. With them we built unique solutions and those unique solutions then we started looking at six different verticals. In each verticals we have taken on a client that we are trying to build the solution for example in utilities we are working Schneider Electric. So, all the way from consumption of electricity to how it is produced and how do you optimise that entire supply chain is something we are working on. We are working with a firm called which is part of , to figure out the next genomics work stations on how you build new drugs how do you built new nutrition for pets. We believe 80 percent of next generation of genomics will be on plants and animals. So, that stage two and then we move on to stage three which is get to into an optimal scale which we believe is at least two million a month in revenue. Mangalam: Recently you extended your relationship with Schneider Electric so can you tell us what exactly is the nature of work that you do for Schneider Electric and what is the quantity of revenue or what is the quantum of business that this particular client generates? At the same time can you tell us what quantity of your total business is been generated by the top five clients for the company? A: We have some strict confidentiality on what we discuss about clients. However, in broad strokes what we do for our client like Schneider is we work all the way from figuring out what are their big data needs. How do we optimise the data?  What is the visualisation and what are the applications we build around it. The broad framework tend to be fairly large and they could run in the millions of dollars but then each things gets broken into what is called the statement of work and typically those run into a few hundred thousand dollar each. You do it incrementally with each client and it gets to be different with each client. However, they tend to be very long-term relationships, they tend to be three-five-seven years relationships because you are taking on fairly substantial amounts of work.  Reema: Give us some sense of what could be the potential revenues or the revenue size of the company in the next three years and what will be the margin range that you believe you can sustain in your two year – five year plan. Some numbers to work with?A: What we have already given as guidance is we believe our two year plan is to get to minimum revenue of a two million a month. We believe gross margins will be somewhere between 60-80 percent. On that we are sub optimal today so we are at the lower end of that. However, if you see the last two quarters revenues have increased roughly a 100 percent quarter-on-quarter from 2014-2015. Margins increase 500 percent what I call Q1 I think it is Q4 of last year. Q1 of this year was 800 percent so it should be inline.    Reema: What about the EBITDA level? Gross margin 60-80 percent but at the EBITDA level?A: At the EBITDA level the increase has been even larger. Reema: Your guidance?A: I think we should be somewhere in excess of 30 percent at least if not 40 percent. The big challenge right now we are facing is not clients, is actually finding the right talent and working with the right people. We are fortunate attrition rates are less than 0.3 percent. However, we are growing roughly 250 people. We are growing the company, we hope to be somewhere between 500 and 750 next year. To find the right talent to train them to get them to the next level, we are spending a lot of money on the competence centers in the United States. As a group we have taken another company public in the US and we have done fairly well there.