Anand Deshpande, Chairman & Managing Director addressed the call.

Highlights of the call

Quarter Revenue at US$ 116.95 Million, fell 4.6% QoQ and grew 7.3% yoy.

In Rupee terms, quarter revenue fell 5% to RS 752.55 crore qoq but grew 3.5% on YoY basis.

The Q-o-q decline was largely led by a larger-than-expected drop in its high-margin IP revenue (US$ 6.8mn qoq; decline in IP revenues), as was highlighted in the profit warning issued by the company on 27 March 2018.

The overall performance for the quarter ended March 2018, has been impacted by the de-growth in IP-led revenue as compared to the earlier quarter. This arose due to the fact that the IP led business is affected by the seasonality of typical robust performance in the last quarter of the calendar year followed by a relatively lower performance in the immediate following quarter.

This in turn has impacted EBITDA margin and performance of Alliance segment. The overall annual performance of IP-led business was however in line with the expectations.

As a result, EBITDA margins were also impacted, as these have higher than company level gross margins.

Quarter EBITDA margins were at 14.8%.

Quarter EBITDA fell 19.2% qoq to Rs 111.06 crore and 6.5% YoY.

Quarter PAT margins stood at 9.8%.

Quarter PAT fell 19.6% qoq to Rs 73.71 crore but grew 1.3% on yoy basis.

Revenues by Business offerings - Services revenue grew by 1.3% qoq, while IP-led declined by 20.6% qoq.

Revenue decline was contained by Service revenues, which contribute 77.7% to overall top-line (up from 73.2% in Q3 of FY 2018). Services business was mainly driven by the Enterprise or non-ISV business, which grew by 2% qoq.

As for segmental revenues, Service and Digital grew strongly at 3.6% qoq and 4.1% qoq respectively, while Alliance and Accelerite declined by 21.6% qoq and 9% qoq respectively. The decline in Alliance business is partially attributed to seasonality impact as Q3 is seasonally stronger quarter.

Geographically, North America declined by 8.5% qoq, while Europe, India and RoW posted strong growth of 7.2%, 30% and 14.5% respectively on qoq basis.

For FY 2018 dollar revenue at US$ 470.55 million, grew 9.7%.

In Rupee terms revenue grew 5.4% to Rs 3033.70 crore.

EBITDA grew 3.3% to Rs 468.72 crore. EBITDA Margins stood at 15.5%. PAT grew 7.2% to Rs 323.09 crore . PAT margins stood at 10.6%.

Despite a weak Q4, the management believes that it is on track to deliver better-than-industry growth rate in FY19, as the drop in performance was more due to seasonality factors.

In the last two years, focus on digital has helped build capabilities in key technology areas and experience in helping customers as they transform to being software driven businesses.

Looking ahead, the company is doubling down on three industry markets – Financial Services, Healthcare & Life Sciences and Industrial IoT in addition to its strong presence in Software and Technology.

The company also expects profitability to improve, as it would see superior growth and optimization in the Alliance business which has started offshoring in the team that it acquired.

The management plans to increase investment in sales relative to investments in R&D to increase traction of its existing product sales (IBM and PSL IP).

The management also indicated that PSL's inclusion in the IBM reseller list and expansion of its sales team will help it to reach out to IBM clients in Europe, directly boosting the company's revenue growth prospects.

Digital revenue grew by 43% in FY18.

The company will give wage hikes in the second quarter of 2018. .However, it did not quantify the impact of this on Q2 margins.

In FY18 wage hikes were spread over Oct-Jan months.

Headcount fell to 8329 against 8460 in Q3.

IP-led clients decreased from 268 in Q3 to 177 in Q4. This reduction of clients was led by the sale of its R-Cloud IP. These clients were small in size (US$500-$2,000) and contributed merely around US $0.5 mn to its overall annual revenue.

Total client count declined during the quarter. However, adjusted for R-Cloud data, the new logo addition for the quarter stood at 48.

It has added 10 more sales people from IBM to expand its reach and grow its revenue in Europe.

The expanded sales team will help to grow revenue across all service lines. This effort would also help it reduce its dependence on the external sales team and give the company better control on seasonality.

The management believes that it has enough products to see so it is investing more in sales team.

Blended utilisation grew to 81.2% against 79.9% qoq.

The management is delighted by the grand success of the Software Edition of Smart India Hackathon 2018 and look forward to innovative solutions at the Hardware Edition in June this year.