Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for Q1 was INR825 million, up 32% year on year and 11% quarter on quarter.
- Net other income for the quarter was INR155 million, with a significant contribution from treasury income.
- PAT increased to INR78 million from INR22 million in the same period last year.
- The company has successfully pivoted to Tier 2 GSIs and increased penetration in GCCs and BFSI sectors.
- New advanced technology programs and initiatives in Generative AI have opened new market opportunities.
Negative Points
- EBITDA is near breakeven at negative INR2 million, indicating ongoing financial challenges.
- The company remains in an investment cycle, which will continue to impact margins in the near term.
- DSO increased to 54 days from 41 days last year, indicating slower collections.
- Headcount reduced by 154 year on year, which may impact operational capacity.
- Operating expenses are expected to exceed revenues by 200 to 300 basis points in the short term due to ongoing investments.
Q & A Highlights
Q: Can you explain how you plan to achieve the projected 30% growth in revenue for the year?
A: Vijay Thadani, Executive Vice Chairman of the Board, Managing Director: We achieved 32% growth in Q1 and have a reasonable order book and commitments. We are seeing increased banking training requirements and have added new clients. Our consumer go-to-market, especially in banking, has grown rapidly. We also expect IT services hiring to increase in the second half of the year.
Q: Can we expect operating margins to reach around 10% in the second half of the year?
A: Vijay Thadani, Executive Vice Chairman of the Board, Managing Director: No, we are currently in an investment cycle. Stable parts of our business generate margins north of 15%, but we are reinvesting profits into marketing and growth initiatives.
Q: How will the Union Budget impact your strategy and entry into new sectors like supply chain management and manufacturing?
A: Vijay Thadani, Executive Vice Chairman of the Board, Managing Director: The Union Budget focuses on increasing employability and providing incentives for first-time job seekers. We are studying these initiatives to align our capabilities and expertise with government directions, which may present opportunities for us.
Q: What is your acquisition strategy, and how do you plan to increase revenues and profitability through acquisitions?
A: Vijay Thadani, Executive Vice Chairman of the Board, Managing Director: We are looking for companies that add new segments, capabilities, or address different stages of professional life. We are cautious with our investments and seek to insulate ourselves from risks. We have an active funnel and are in discussions with potential targets.
Q: Can you provide more details on the cost rationalization measures implemented and their impact on margins and operational efficiency?
A: Vijay Thadani, Executive Vice Chairman of the Board, Managing Director: We are variabilizing direct people costs, consolidating capacity, and using AI to personalize training at lower costs. Automation is also a key focus for improving productivity and agility.
Q: Is the 30% top-line growth guidance organic, or do you have plans for acquisitions this year?
A: Vijay Thadani, Executive Vice Chairman of the Board, Managing Director: The guidance is organic. While we have plans for inorganic growth, we do not include them in our projections until they are finalized.
Q: What kind of margins do you expect from Generative AI and other new products in the long term?
A: Vijay Thadani, Executive Vice Chairman of the Board, Managing Director: We expect these products to yield margins at the upper end of our premium programs, typically around 15% to 20%.
Q: Are you exploring similar opportunities to the recent engagement with TVS Motor for training their management trainees?
A: Vijay Thadani, Executive Vice Chairman of the Board, Managing Director: Yes, we offer sales and service excellence training to manufacturing companies with large distribution networks. We are engaged with several large auto companies for similar training programs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
