Release Date: October 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 healthy revenue growth of 18.4% year on year and 5.3% quarter on quarter, reaching $345.5 million in Q2 FY25.
- The company achieved an EBIT margin of 14%, translating to a 22.8% year on year increase in rupee terms.
- The total contract value for the quarter was $529 million, with new bookings contributing $389.8 million.
- Persistent Systems Ltd (BOM:533179) launched the T100 Program to enhance customer value and deepen client relationships, focusing on AI-driven innovation and ecosystem leadership.
- The company achieved carbon neutrality for Scope 1 and Scope 2 emissions ahead of schedule, reflecting its commitment to sustainability.
Negative Points
- Europe's revenue declined by 1.3% year on year, although it grew by 6.6% quarter on quarter.
- The EBIT margin was impacted by wage hikes, policy rationalization, and ESOP issuance, resulting in headwinds of 210, 130, and 60 basis points respectively.
- The software, hi-tech, and emerging verticals saw a marginal decrease of 0.5% year on year.
- The company experienced a decline in headcount by 282 quarter over quarter, although utilization improved.
- Persistent Systems Ltd (BOM:533179) faces potential seasonal headwinds in the second half of the fiscal year, similar to previous years.
Q & A Highlights
Q: How should we think about the growth trajectory from a sequential perspective over the next couple of quarters, considering the seasonally slow period?
A: Sandeep Kalra, CEO, mentioned that while the second half is typically slower due to seasonality, Persistent Systems has a healthy order book and pipeline. They are confident in maintaining growth, despite potential fluctuations, by adapting to market demands.
Q: What levers do we have to drive margin expansion over the next couple of quarters?
A: Vinit Teredesai, CFO, highlighted maintaining utilization rates, optimizing SG&A investments, and leveraging right shoring and pricing strategies as key levers for margin expansion. The company expects to benefit from past investments in SG&A.
Q: Is the technology vertical bottoming out, and do you still expect margin expansion over the next two years?
A: Sandeep Kalra, CEO, believes the technology vertical is bottoming out and expects growth across all verticals, including tech. The company remains confident in expanding margins over the next two to three years through platform-driven services and higher profitability.
Q: How does Persistent Systems plan to unlock value from AI-driven initiatives like SASVA and iAURA?
A: Sandeep Kalra, CEO, explained that AI will be infused into all services, with SASVA and iAURA driving higher profitability. The company aims to increase revenue and profit per employee by delivering differentiated value through AI platforms.
Q: With the recent interest rate cuts in the US, is there any change in conversations with BFSI clients regarding tech spends?
A: Sandeep Kalra, CEO, noted that while it's too early to determine the impact of interest rate cuts, Persistent Systems remains focused on identifying revenue and profit pools. The company aims to perform well regardless of market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
