Release Date: April 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Persistent Systems Ltd (BOM:533179, Financial) reported a revenue of USD 310.9 million for Q4 FY24, reflecting a 3.4% quarter-on-quarter growth and 13.2% year-on-year growth.
- The company achieved an annual revenue run rate exceeding INR 10,000 crores for the first time.
- The EBIT margin for Q4 FY24 was maintained at 14.5%, despite challenging conditions.
- The total contract value (TCV) for Q4 FY24 was USD 447.7 million, with new bookings contributing USD 302 million.
- Persistent Systems Ltd (BOM:533179) saw significant growth in its healthcare and life sciences vertical, which grew by 15% quarter-on-quarter.
Negative Points
- The top customer revenue declined by $3.2 million quarter-on-quarter due to a planned ramp-down of a large five-year deal.
- The company's blended utilization rate decreased to 80% in Q4 FY24 from 81.5% in Q3.
- There was an increase in contractor costs to 14.1% of revenues due to initial ramp-ups in large deals.
- The EBIT margin was impacted by one-time transition costs, lower utilization, and higher travel costs.
- The revenue growth in the hi-tech and emerging vertical declined by 0.9% quarter-on-quarter due to planned ramp-downs in a large multi-year program.
Q & A Highlights
Q: On the BFSI vertical, can we expect good growth going forward?
A: Sandeep Kalra, CEO: Growth in BFSI is broad-based, and while there have been planned ramp-downs, the trajectory is positive. The focus is on maintaining industry-leading growth rates despite a challenging market.
Q: What is the outlook for the top client, given the recent declines?
A: Sandeep Kalra, CEO: The declines are due to planned ramp-downs and not unexpected. The trajectory is well understood, and there are no surprises or concerns.
Q: How do you plan to achieve margin expansion in the future?
A: Sandeep Kalra, CEO: The focus is on growth while maintaining margins. Investments in sales, marketing, and generative AI initiatives are crucial. As market conditions improve, these investments will help in margin expansion.
Q: What is driving the strong growth in the healthcare vertical?
A: Sandeep Kalra, CEO: Growth in healthcare is not just from one large deal but multiple wins. The team has been built over the last couple of years, and there is a strong pipeline for future growth.
Q: Can you explain the increase in software license revenue in Q4?
A: Sunil Sapre, CFO: The increase is due to managed services deals and setting up infrastructure labs requiring licenses. Additionally, some enterprise customers are converting CapEx to OpEx, contributing to higher software license costs.
Q: What are the plans for M&A in FY25?
A: Sandeep Kalra, CEO: The focus is on healthcare life sciences, BFSI, and data/AI. Geographically, Western Europe for business and Eastern Europe for delivery are key areas. The aim is to acquire capabilities rather than just revenue aggregation.
Q: Why has Europe been soft in the last few quarters?
A: Sandeep Kalra, CEO: There is a focus on reinforcing the team and M&A in Europe. Senior hires have been made to lead the region, and efforts are ongoing to turn the corner on growth in Europe.
Q: How do you see the growth pattern across verticals in FY25?
A: Sandeep Kalra, CEO: Healthcare will lead growth, followed by BFSI and tech. The focus is on maintaining growth across all verticals despite the challenging market environment.
Q: What are the company-specific challenges as Persistent scales?
A: Sandeep Kalra, CEO: The challenge is to bring in new thinking and capabilities to win larger deals. The focus is on execution and maintaining the growth trajectory while managing the increased scale and complexity.
Q: How is the managed services segment evolving?
A: Sandeep Kalra, CEO: Managed services have grown significantly, especially with private equity carve-outs and large deals. The focus is on continuing to build this segment and leveraging it for future growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
