Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Expleo Solutions Ltd (BOM:533121, Financial) reported a 3% growth in operating revenue and a 7% overall growth despite challenging macroeconomic and geopolitical conditions.
- The company has successfully added 10 new clients in the last quarter, indicating strong business development efforts.
- Expleo Solutions Ltd (BOM:533121) has implemented a three-pronged strategy focusing on existing key accounts, regional growth in the UAE, USA, and Saudi Arabia, and increasing business from the group.
- The company has improved its operating margin through optimization exercises, including maintaining a leaner bench and focusing on niche skills.
- Profit after tax increased by 50.5% compared to the previous quarter, reflecting strong financial performance.
Negative Points
- Employee expenses have increased by 10% year-on-year, despite a reduction in employee strength, raising concerns about cost management.
- Receivables have increased to 119 days, significantly higher than the industry average, indicating potential cash flow issues.
- Operating margins are lower than the industry average, with concerns about the company's ability to improve them despite revenue growth.
- The company's growth in revenue has been inconsistent, with previous quarters showing anemic growth compared to peers.
- There is uncertainty regarding the company's ability to achieve previously stated workforce targets, with management indicating a shift in focus away from headcount growth.
Q & A Highlights
Q: Why has the employee expense increased by 10% year-on-year despite a 10% reduction in employee strength?
A: Fani Kraa, Managing Director and CEO, explained that the increase in payroll costs is due to several factors: the transition of Dubai-based resources to the company's payroll, the nature of business in the Middle East requiring on-site presence, and the demand for niche skills in emerging technologies, which are more expensive.
Q: The receivables have increased to 119 days, which is higher than the industry average. Why is this the case, and what is being done about it?
A: Peria Karan Kalani, CFO, stated that the increase in receivables was due to delays in collections from key accounts, which have since been resolved. Payments have been received in October, and the company expects the DSO levels to return to previous quarter levels by the end of December.
Q: What is the outlook for revenue growth and margins in the coming quarters?
A: Fani Kraa, Managing Director and CEO, expressed optimism about future growth due to a healthy pipeline and a three-pronged strategy focusing on existing business, regional growth, and increasing business from the group. He also mentioned that if macroeconomic conditions improve, it would further enhance growth prospects.
Q: What is the company's strategy regarding cash reserves and potential acquisitions?
A: Rod Gli, Chairman, emphasized that the company is focused on mergers and acquisitions to complement its services with technology and AI initiatives. The company is actively monitoring the market for suitable opportunities to enhance its capabilities and growth.
Q: Can you provide more clarity on the company's relationship with the parent company and the strategy for independent growth?
A: Rod Gli, Chairman, explained that the company has direct access to markets in the US, Asia Pacific, and the Middle East, while benefiting from strong collaboration with the parent company in Europe. The strategy involves leveraging the parent's presence in Europe while maintaining independent growth in other regions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
