Persistent systems hosted conference call on July 21,2023.
In the conference call the company was represented by Dr Anand Deshpande-CMD,
Mr Sandeep Kalra-CEO and Mr Sunil Sapre-CFO.
Key takeaways of the
call
Revenue stood at US$
282.9 million up 2.9% QoQ. Growth was led by
IP business which was up 8.0% QoQ, while Service business grew by 2.7% QoQ.
EBITDA
margin stood at 18.2% in Q1FY2024 down 30bps QoQ.
EBIT margin came in at 14.9%,
down 50 bps QoQ. In Q1, there were headwinds from H1B visa costs to the tune of
40bps, work from office related food and travel cost to the tune of 20 bps and
higher depreciation and amortization cost of 10 bps. Software and licenses cost
increased as the company invested in strengthening its own cyber security and
defense. It also had one time expenses related to celebration of milestone
(crossing US$ 1 billion revenues) of RS 48.2 crore.
The company
expects FY2024 EBITDA margin to remain stable when compared to FY2023 and
reiterated its aspiration of 200-300 bps EBITDA margin improvement over next
few years.
The focus
is on driving healthy and profitable growth with continued investments in
S&M, AI, Cloud and Security.
Human Resource:
The company
added 241 employees in Q1FY2024.
Attrition
moderated sharply to 15.5% down 430 bps QoQ.
The company
rolled out wage hike in Q1FY2024with 7.5% hike in India and 3.5% hike outside
India. The company has also rolled out regular performance bonus. Inpact of
wage hike on margin is expected to be seen in Q2FY2024.
Utilization
stood at 78% and aims to increase it to 83% going forward on back of fresher
pool being retrained and redeployed to the billable projects.
The company
has penetrated into the tier-2 and tier-3 cities in order to have better
pyramid rationalization benefits, which would again be the incremental margin
levers apart from deploying fresher talent pool.
The company
plans to onboard 800 additional freshers in Q3 and Q4FY2024.
Deals: TCV stood
at US$ 380 million in 1QFY24, down 10%
QoQ and up 4% YoY. Net new TCV stood at to US$ 237 million vs a record high of
US$ 250 million in Q4FY2023. ACV was at US$ 272 million vs US $ 310 million in
Q4QFY2023.
Within
healthcare vertical, the company won a five-year large deal of US$ 50 million.
Deal TCV
was muted in Q1 as few deal conversations got pushed from Q1 to Q2FY2024.
Generative AI
investments:
The company has announced partnerships with leading hyper scalars to
help them in their gen AI strategy. The company also won a deal for developing generative
AI proofs of concept and building database connectors for server less data
integration for a multinational technology company.
The company is using tools like Amazon code whisperer and
Microsoft Gen AI tools for training its own employees and improving
productivity in software development.
The company plans to train 1,600 employees in gen AI in coming
quarters.
Outlook:
The company
is witnessing a stressed environment resulting in few instances of deal
pushouts and deferrals in Q1FY2024 on account of enterprise clients maintaining
a cautious approach in the near-term.
Clients are slowing down
discretionary spends and focusing on conserving costs as they are concerned
about uncertain macros.
The company
expects to deliver top quartile growth on the face of macro uncertainties. The
company remains watchful of a slowdown in the key economies, while maintaining
a close proximity to the customers, who are cost focused and to drive
efficiency.
BFSI is
expected to remain soft despite the healthy growth reported in Q1, while
healthcare and Hi-Tech are likely to continue their growth momentum. On BFS
vertical, the company has witnessed some deal pushbacks as the decision making
has been delayed and projects are not seeing timely ramp ups.
The company
expects the near-term slowdown to continue for 2-3 quarters more before the
deal signing activities revert to the earlier level
Management
commentary:
Commenting
on the performance Mr Sandeep Kalra , CEO said: “We commenced the year by
celebrating a significant milestone of surpassing $1 billion in annual revenue
with our clients, partners, and team members. As we enter our new fiscal year, I’m
pleased to share that we have sustained our growth momentum despite the challenging
macroeconomic conditions. Our Digital Engineering leadership, extensive experience
across key industries, curated partner ecosystem, and the ability to stay ahead
of disruptive technology trends has led to our ongoing success.
We also
want to extend our warm welcome to Dr. Ajit Ranade, a renowned academician,
corporate executive, economist, and thought leader, as an Independent Director
to our Board. He will bring his impressive experience of 32+ years to help
guide our strategy and accelerate our growth journey.
|