Analyzing...
Sameer Shashikant Chavan
2025.08.06 19:43:11 +05'30'
“IKS Health Q1 FY-26 Earnings Conference Call” MANAGEMENT: MR. SACHINGUPTA– FOUNDER& GLOBALCEO MS. NITHYABALASUBRAMANIAN– WHOLE-TIMEDIRECTOR& CHIEFFINANCIALOFFICER MR. SARANSHMUNDRA– VP, INVESTORRELATIONS MODERATORS: MS. RUCHIMUKHIJA– ICICI SECURITIES Page1of19
Ladiesandgentlemen,gooddayandwelcometoIKSHealthQ1FY26EarningsConference Call hosted by ICICI Securities. As a reminder, all participants’ lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistanceduringtheconferencecall,pleasesignalanoperatorbypressing‘*’then‘0’onyour touchtone phone. Please note that this conference is being recorded. InowhandtheconferenceovertoMs.RuchiMukhijafromICICISecurities.Thankyouand over to you, ma'am. RuchiMakhija: Good morning, ladiesandgentlemen.ThankyouforjoiningustodayonQ1FY26Earnings Call of IKS Health. OnbehalfofICICISecurities,IwouldliketothankManagementofIKSHealthforgivingus the opportunity to host this Earnings Call. Today, we have with us Mr. Sachin Gupta – Founder and Global CEO, Ms. Nithya Balasubramanian – Whole Time Director & CFO and Mr. Saransh Mundra – VP, Investor Relations. I turn it overtoSaranshforthesafeharbourstatementandtotaketheproceedingsforward. Thank you and over to you, Saransh. SaranshMundra: Thankyou,Ruchi.Welcome,everyone.Thanksforjoiningthecallearlyinthemorning.We will start with a disclaimer and then I will hand it over toSachin.Aspartofourprepared remarks, we may make certain statements that are forward-looking and may involve uncertainty.Wedon'ttakeanyresponsibilitytoupdatethosestatements,andyourdiscretionis warranted while making any investment decisions. Over to you, Sachin. Great. Thank you, Saransh. Thank you, Ruchi. Just a minor correction, it's Nithya Balasubramanian, not Subramanian. Anyway, good morning, everyone and welcome toour earnings call for the 1st Quarter of Fiscal ‘26. This is our third earnings callsinceitwent public in December last year. So excited to talk to everybody again. On the call today, I will do probably three things: One,justbecausethereisalwayssomeparticipantsthatarerelativelynew,Iwillstartoffwith givingaveryquickhigh-leveloverviewofthebusiness,talkspecificallyaboutourexecution thispastquarterasitrelatestothosefivestrategicvectorsalongwhichwewanttomeasureour progressandalongwhichIthinkourdiscourseismostrelevantbecauseIthinkthosevectors drivethefinancialoutcomesthatallofusareinterestedin.Andthen,ofcourse,wewilldive intoourpointsofhigh-levelcommentaryonourfinancialperformanceforthefiscalQ1,after Page2of19
whichIwillturnitovertoNithyatotalkthroughsomeofthedetails,andthenwewillopenit up for questions. But before I dive into the high-level overview, let me kick the call off: Obviously, all of you have seen the release that came out last night. Hopefully, you have studiedthenumbers.OneofthethingsthatIthinksomeofyousawinthereleasethatperhaps might have caused some confusion, and Iwanttojustclarifyitupfront,wasthechangein directorstatusintheIndian listedentity.AndIjustwanttoclarify;there'snothingreallythat's changingfundamentally.ThisisbarelyatechnicalchangeassociatedwiththefactthatIlivein the US and hence my employmentprettymuchneedstoreflectwiththeUSentityandasa resultofwhichIcan'treallybeemployedbytheIndianmothership.Andso,asaresultofthat, I am no longer a full-time director andbecausethecompanyobviouslyneedsawhole-time director,Nithyaisbeingmadethewhole-timedirector.IcontinuetobethegroupglobalCEO and continue to be at the helm andatyourserviceforaslongasyouguysdesire.SoIjust wantedtoclarifythatupfront,becauseitfeltlikeitwascausingconcernsorripples.Wecan certainly take any other questions around this when we get to the questions. Now to just jump into the business: Obviously,youhaveseenthenumbers,asolidquarterofperformance.ButbeforeIgointothe quarter, just a quick high-level recap of the business model. So, we are perhaps the most comprehensive care enablement platform that delegates chore tasks from large physician groupsintheUSsothattheycanfocusontheircoreofpatientcareandpatientexperience.We dosoinamannerwherewehavebuiltproprietarytechnologytoeliminateasmuchofthese tasks as possible. And because technology often doesn't entirely eliminate the task, our technologyiscoupledwithourglobalhumancapital,whichbecomesaveryimportanthuman intheloop,alsofromasafetyperspective,todeliverthesetasks.Wedosoinamannerwhere notonlyisitquicklytransformativeforthepatientexperienceandthequalityofcare,butalso, it's financially transformative for the practice, which as you know, US healthcare is under tremendousfinancialstress.Andso,throughthese16-oddtasksoractionsthatwedelegatefor these physician groups in the US, we are oftenableto,atthefullmanifestoftheplatform, deliver between800to1,000bpsofadditionaleconomicvalueforthemafterpayingforthe platform.So,it'sfinanciallytransformativeinadditiontobeingclinicallyaccretiveforthemas well.Wehaveoverthelast18yearsgrownourbusinesstoabout150,000physiciansacrossthe US.Remember,there'sabout900,000oddintotal.So,150,000physiciansintheUSusesome manifest of our platform or the other. And those 150,000 are spreadacrossnowabout650 organizations that these physicians are a part of. So 150,000physicians,650organizations. Remember,thisnumberwascloseto800inOctoberof2023whenwecompletedtheAQuity acquisition. We have then said that our strategic business model is always to have the consolidatorsasourclients,whicharethelargegroupsthatarebuyingtheothergroups.And so, with AQuity, we got alotofgoodstuff.Butoneofthethingswegotwasalongtailof small physician groups. And strategically,intentionally,wearecontinuingtoprunethattail. Page3of19
Wearenowdownfromacombinedcustomerbaseof(+800)inOctober‘23toabout650.And asIhavestatedinthepast,asortofsteadystatewillprobablyendupcloserto500.Sothat's just one thing to keep in mind, (+650) customers, 150,000 providers. Our business model, becauseofitsuniquenaturebywhichweactuallydelegateallofthese tasksthatarechoresbutareveryimportantforthesustenanceoftheirpractice.Bythatvery nature,businessmodelbecomesannuityalso.So,95%ofourrevenueisrepeatrevenuefrom the same customers. And in addition to that, it becomes really,reallysticky.So,it'savery sticky annuity businessmodel.Andthehumanelementofwhatwedonowcomprisesabout 12,368 FTEs across the US and India. Again, remember this number in Q1 of FY25 was actually13,277.So,onayear-on-yearbasis,ourglobalheadcountisdownabout7%,whichis againsomethingthatwewilltalkalittlebitmoreaboutwhenwediscussourstrategicvectors of execution. Obviously, because we are very intentionalaboutworkingwithconsolidators, our top 10 and top 5 clients drive a large partofourrevenueandourgrowth.Thatisvery intentional. The good news is that our top 10 and top 5 clients have greatvintageandare actually growing. So that always is a good sign of the progress in the business. Also,asyouprobablyalreadyknow,weoperateinaverylargeTAM.OurTAMtraditionally was about $225 billion just in the physician market in the US. Starting about a couple of quartersago,asIhavementioned,wehavealsopivotedourbusinessmodelbasedonthepool that we saw inthemarketintotheacuteorhospitalRCMspace.Andthathasexpandedthe TAMtomorethan$260billion,ofwhichreallyonlyabout$34-$35billionhasbeendelegated. So,it'sstilllargely,automatically,aninsourcedmarket.Andyet,Ithinkwiththepressuresthat the US healthcare system is facing, cost-quality access, it's becoming imminent that this outsourcedTAMof$34-$35billion,isactuallygoingtogrowfasterthantheoverallmarket. So, the market's growing at 8%, but the outsourced market is growingat12%.Andthisis important, again, because I keep saying, if we are growing faster than 12% on a constant currencybasis,wearegainingmarketshare.Ifwearegrowingslowerthan12%,wearelosing marketshare.Sothat'sanimportantindicatorandsomethingtoalwayswatchoutfor.Now,if that12%furtheracceleratesbecauseofthepressureinUShealthcare,wewillcertainlykeep you updated and that should also reflectinourgrowth.Andouridea,obviously,istogrow significantly faster than the outsourced TAM over a period of time. Oneoftheotherdynamicsthatitcreates,becausethere'ssuchalargeTAM,whichalsothen leadstoourcompetitivepositioning,isthatbecausethese16-oddtaskshaveaTAMofabout $260billion,therealityisthattheTAMsofseveralofthesetasksindividuallyisquitelarge. Forexample,clinicaldocumentation,whichisreflectedinourscribbleproduct,couldbea$30 billionTAM.ThefourorfivefeaturesthatcompriseRCMisa$100+billionTAM.Andso,as a result, there are several genres of competition that we have todealwith.Oneofthoseis actually whatIcallthesepointsolutioncompaniesthatarefocusedononeortwoorfiveof these16tasksbecausetherelativeTAMsofeachofthesetasksitselfissolargethatyoucan build a very large company just focused on them. Now, our thesis always was that as the market matures and buying behavior matures, buyers will realize that they can't be in the Page4of19
business of buying many point solutions and integrating them, carrying the burden of managing tens of vendors across these point solutions. And so, overaperiodoftime,they realize thatthevalueofthewholeismuchgreaterthanthesumoftheindividualparts.And that is a better strategy.Andweseethatthebuyingbehaviorwillslowlybutsurelymigrate towards the platform buying behavior. And so, what that means is, and we have set our strategic competitor advantage to that, which is we are the only company that has thefull breadthoftheplatformforthosebuyersthatarewillingtobuytheplatformthesistoday.But because there are several buyers, especially in the large health systemmarket,thatarestill interestedinapointsolutionbestofbreedapproach,therealityisforthosewhostillneedtobe oneofthetoptwoorthreevendorpartnersineachofthesepointsolutions.Andthatcreatesa very important strategic predicament for me where we have to execute as a leading point solution vendor across 16 point solutions, even as there are perhaps one of the very few companies that are building out the entire platform. But that really continues to be a competitive position. So,withthat,let'sjustquicklytouchuponthefivestrategicvectorsofexecutionthatweare consistentlyfocusedon,Ithinkshouldshapethediscoursethatweshouldhaveonacontinued basis,unlesssomethingchanges,inwhichcaseIwillletyou.So,thefirstofthefiveisthefact that we are moving rapidly to this AI-native, agentic platform manifest for doing allthese tasks.AndIamhappytoreportthatthere'sbeenalotofprogressonthisstrategicvectorover thislastcoupleofquarters,butspecificallylastquarter.WelaunchedScribbleNow,whichis our fully ambient, autonomous clinical documentation solution. And with that, I thinkIKS nowhasthemostcomprehensivesetofvariantsthatmeetphysicianswherevertheyareintheir journeyofchoosingtherightclinicaldocumentationsolutionfortheirneeds.Wearealsointhe process of actually launching a very unique multi-variant Scribbleoption,whichwillallow each physician user to choose different variants of Scribble for different type ofvisits.So, there will be someeasypatientvisitswherethefullyautonomousambientlisteningsolution without supervision from the human produced instantly on a synchronous basis is best for them. And then there willbeothersituationswheretherewillbemorecomplexencounters, wherethereisaneedformorecomprehensivedocumentation,wherethehumanintheloopor thephysicianintheloopbecomesveryrelevant.Andtheabilitytopickandchoosedifferent variantsofclinicaldocumentationsolutionsforvariouspartsoftheirpatientpanels,wesuspect couldbeaveryexcitingdifferentiatoroveraperiodoftime.Justbasedontheutilizationtrends that we have seen across the country from ambient, autonomous-only AI-driven solutions where a lot of doctors perhaps have bought them,buttheutilizationofthosesolutionsasa percentage of their overall visits is still in the 50s and 60% odd out there.So,Ithinkthat should be very exciting. Also, happy to report that we have actuallybeenabletobuildoutourautonomousmedical coding technology, Gen AI-led for two medical specialties, which we now continue to optimize. And now,ofcourse,weareexpandingtoseveralothermedicalspecialties.Again, remember, just like clinical documentation, therearecompaniesouttherethatalltheydois medicalcoding.So,thisistomypointofwantingtobenumberoneortwoorthreeineachof Page5of19
thepointsolutions,evenaswearetryingtobuildthefullplatformout.Andthen,ofcourse,we have done significant progress in the denial prediction and prevention space using our AI technologiesthatwehavebuilt.AndwehavealsolaunchedanAI-ledpatientengagementhub that actually drives behavioural economic inputs-driven patient engagement to help shape various aspectsofpatientbehavior,includingreducingno-showsforvisitsthathelpimprove access to care, includingnudgingpatientsdifferentiallyaroundadoptionofouradherenceto variousclinicalprotocols,etc.Sosignificantprogressindramaticallymovingfromsortofthat human-ledtechinthelooptonotonlytech-ledhuman-in-the-loop,butwithAInowmoving towardsafullyautonomoussetoffeatureswhichdon'tneedahuman-in-the-loopatallovera period of time. That's the first vector of our execution this quarter. ThesecondoneisobviouslythebigAQuityacquisitionthatwedidinOctober2023.Within that vector, there were three dimensions of execution that we had to accomplish to be successful with theacquisition.Thefirstwasactuallythepeople-processtechnologyandthe culturalintegration.AndIamhappytoreportthataboutnearly18monthsout,wefeellikethat effortfeelscomplete.Wefeellikeonecompany.Andalotofsynergiesassociatedwiththatare now evident in our performance. The second big piece was the margin expansion. As you know,whenweacquiredAQuity,theproformablendedmarginsofIKSthatweretraditionally inthehigh30sEBITDAhaddroppedtoabout24%proforma.Andwehadsaidatthetimethat as we transform AQuity's delivery model from a sort of human-led model to an IKS technology-led global human-in-the-loop model, we will bring our EBITDA numbers back towardssortoftheearlytomid-30s.IwouldliketosaythatIthinkalargepartofthatworkis movingfasterthanwehadanticipated,whichisobviouslybeingreflectedinthenumbersthat we talk about for Q1. So I wouldsaythatthatsortofpartoftheworkismaybetwo-thirds done. And last but not the least, and perhaps the most exciting part of thepieces,reallywasthe cross-sellmotionofourplatformintoAQuity'slargecustomerbase.AndhappytonotethatI thinkwehavenowfiguredouthowthatmotionisgoingtowork.Wearestartingtoseesome winsinthatspace.Now,obviously,thosewinsandtherevenueimpactofthosewinsisslightly offset by the intentionality by which we are cutting the tail of AQuity's small customers, numberone.Andsecond,therevenueintermsofsortofrevenueperunitofphysiciancoming downbecausenowwearereplacingthesortofAQuityhumanexecutionmodelwithanIKS technology-ledmodel.Soimportanttonotethatevenaswearestartingtofeelearlytailwinds ofthecross-sellmotion,someofthemareoffsetbytheintentionalityofthepruningofthetail, aswellastherevenueperunitcomingdownevenasmarginsimproveintheAQuitycustomer base. So overall, I think a solid quarter of execution on the AQuity vector. Third, this predicament of establishing leadershipineachofthepointsolutions,evenaswe continuetobuildtheplatform,Ithinkit'sgreattoreceivesomerecognitionfromBlackBook as thenumberonepartnerinAI-drivenRCMandinmedicalcodingandthenasitrelatesto clinical documentation, both by KLAS and Black Book. So, continued progress in that dimensionandofcourse,thebiggestvalidationofprogressthereiscustomerwins,customer Page6of19
expansions,whichwecontinuetotalkabouteveryquarterandthatwecontinuetomakesome excitingprogressin.Wehavenowfiguredoutourgo-to-marketstrategyandhaveestablished ourgo-to-marketteamsinlinewiththatgo-to-marketstrategy.So,wehavefoursegmentsof themarket-largesinglespecialtygroup,largeprimarycareandmulti-specialtygroups,large and medium-sizedhealthsystems,andthenlastbutnottheleast,absolutely,awholemarket segment is UnitedHealth care, which is the largest employer of physicians in the world, (+50,000) physicians. And happy to note that I think we have now dedicated teams across all of these market segments that are really starting to hum and drive some energy. Andalongthelinesofthe buyingtrend,Iwanttoclarify,wecontinuetoseemoreplatform-basedbuyingbehavioracross thelargesinglespecialtyandthelargemulti-specialtygroupmarketsegment.Thelargehealth systemmarketsegmentisstillmorepointsolutionoriented,sowehavetodrivethelandand expandmotionthere.Andthenthemid-sizedhealthsystemsactuallyarestartingtoshowmore and more proclivity towardstheplatformpieces.So,wecontinuetodrivealongthoselines. Andthenlastbutnottheleast,hereisaveryimportantvectorforourfuture,especiallythose ofyouthatarenotonlyinterestedinournext1-2-3years,butournext5-7-10years.Wefeel likeweareintheprocessofbuildingaveryimportantlong-termmoatbybecomingmoreand more of an outcome-orientedcompany.So,whatdoImeanbythat?Ourpricingmodelwas always percentage of customers, revenue based. ItwasneverFTE-basedpricing,whichhas obviously been an advantage for us. But when I talkaboutbeingoutcome-oriented,weare now actually talking about these constructs that fundamentally align us upstream with our customers in a manner where weachievethreethingsbydoingthisalignmentofoutcomes. First,weactually,whilealigningourselveswiththeoutcomes,weareonlyinthoseconstructs likewedidinPalomar.WewilltalkaboutWesternWashingtonMedicalGroupagain.Weare actuallyonlybringingthefullmanifestoftheplatformtothosecustomers.So,asabyproduct, we are creating more and more examplesoftheplatformpiecesandthevalueofthewhole being greater than much of some of the individual parts. Second, these deals are typically muchlonger-termdeals.So,forexample,Palomarwasa15-yeardeal,WesternWashingtonis a 30-year deal, for all practical purposes perpetually. So, they bring a different level of long-termstickinesstoourcorebusinessmodeloftheplatform.Andthird,theyactuallycreate asecondsetofeconomicsifwecandothemright.Becausenow,notonlyarewegettingour economicsforthedeploymentoftheplatform,butwealsogettoparticipateintheoutcomes thatwegeneratethroughtheplatformontheclient'sP&L.So,thosethreekeycriteriaarethe ones that we will continue to use to drive this outcome-oriented company thesis. And the biggest execution challenge that it presents is that now,notonlyareweresponsibleforthe deploymentoftheplatform,butwearealsoresponsiblefordrivingchangeinthecustomer's organizationsothattheyactuallyproducetheoutcomesrelativetowhattheplatformcando. This has beenabigchallengeforcustomers,sowearesolvingforthatchallenge,butitisa uniquecapabilitythatwehavetobuildoveraperiodoftime.AndIamhappytonoteagain that inthesedimensions,wehavemadesomereallygoodprogress.Youareallawareofthe Western Washingtondeal,whichwewilljustrecaphereinasecond.Also,thePalomardeal seemstobeprogressingtremendouslyaheadofplan.Andthentheoneconcernthatsomeof Page7of19
you had aboutPalomarintermsoftheirfinancialhealth,whichImentionedatthetimethat likelythatoneofthethreebigsystemsintheareaeventuallybuysPalomar,itlookslikethey aregettingcloserandclosertoanalignmentwithUCSanDiego,whichcouldalsohaveother positive effects for us if we actually end up delivering the value prop that we have for Palomar. So,acrosseachofthefivestrategicvectors,solidexecution,happytonote.Andallofthat,I think,hasresultedintoafairlystrongquarterforthefiscalQ1offiscalyear‘26.Happytonote thatwehavebeenabletodrive16%year-on-yeargrowthforthequarter,comingtoarevenue of about 740 crores. On a constant currency basis, that's 13%. So, asIwassaying,weare gainingmarketshare,notlosingmarketshare.Alsoimportanttonotethatthisisinspiteofthe continued headwind ofpruningthesortofAQuitytail,ifyouwould,andthetransformation thatwecontinuetodowiththeAQuityinstallbaseasitrelatestothataffectstheirunitprice realizationaswegettothephysician,butimprovesourmarginsignificantly.Andthatmargin improvement is actually reflected in our very strong EBITDA performance for thequarter, coming in at 32% or 238 crores, whichreallyisayear-on-yeargrowthof36%inEBITDA margins, which then translatedtoanevenstrongerPATgrowthofnearly59%withourPAT coming in at 151 crores for the quarter. Obviously, the PAT growth is evenfasterthanthe EBITDAgrowth,primarilybecauseourinterestcostsarecomingdownaswearecontinuingto pay down the debts, which is something I am sure that Nithya will drive into. And then very important to note that all of this has been achieved,likeIwassaying,with 12,368employeescomparedtothe13,277thatwehadinQ1oflastfiscal.Andthat's,asIsaid, really important because this is the true reflection that for 16% growth or 13% constant currencygrowth,wehaveactuallyreducedtheworkforcenetby7%.So,thegrossreduction, as you can imagine, is pretty significant. And that showsthecontinuednon-linearityinthe business and a true demonstration of moving from human-led to tech-led while driving industry-leading growth. So that's been a high-level summary of how we have doneinthe quarter. And I am going toinviteNithyashortlytotalkalittlebitaboutmoredetailsaboutthis,but alsojustwantedtohighlightafewkeycustomerwins.LikeIwassaying,lastquarter,wehad announced a very significant customer win in Sky Lakes Health System in the Pacific Northwest, where they had signed up for the full adoption of ourplatform,notonlyinthe ambulatoryside,butalsohadtakenonouracuteRCMsolutionend-to-end.Happytonotethat we now have our second end-to-end—we have other acute RCM customers that are also ramping that are not end-to-end, but Mission Community is our second end-to-end—acute RCMcustomer.Soobviously,thatsegment,thatmid-sizehealthsystemsegmentofthemarket is continuing to show promise. Behavioral health is one of the most important and fastest-growing specialties in healthcare today, given the ramifications it has on chronic disease. And so happy to note that we have announced a relationshipwithBicycleHealth, whichisaprivateequity-ownedleadingplatform,alreadyemergingasaleadingplatformfor behaviouralhealth.AndthenwehaveexpandedourrelationshipwithOrthoNYtonowinclude our virtual clinical assistant program, which then moves that relationship toafull-platform Page8of19
thesis. And then, we have seen some continuedgrowthinourtophealthsystemcustomers. Thisoneisanexampleofourtophealthsystemwherewehavebeenabletodrivetremendous cross-sell and are now expanding the coding relationship. So, remember, like I said, large healthsystemmarket,it'sstillasortoflandandexpandmotion,whereasintheothersegments of the market, we are seeing more and more proclivity to the platform. So, an exciting quarter of client success and then last but not the least, actually twoother points.WesternWashington,wehadaspecificcalldedicatedtoit,butjusttorecap,thisisa monumentalopportunityforusforseveralreasons.One,hereweactuallygettogoalltheway upstream and participate in the value creation with a significant sized primary care and multi-specialtygroup.Asyouknow,invested$17milliontogeta48%stakeintheMSOthat hasaperpetualcontracttomanageallofthenon-clinicaloperations.Exceptinfact,allofthe operationsotherthantheactualdeliveryofcarebythedoctorsismanagedbytheMSO.And wehavea48%stakeintheMSOforourinvestment.AndthatMSOisnowcontractedwith IKSback-to-backtoleverageourentirecareenablementplatformtohelpdoctorsindelivering better, safer, more efficient care. And so, this also becomes, if you would, our live lab to demonstratethefullvalueofourplatformindeepintegrationwiththeEPICsystem,whichis, asyouknow,oneofthemostsignificanthealthrecordsystemsorsystemsofrecordpervading intheprovidercommunityintheUS.Andagain,Ithinkforus,itchecksallthethreeboxesof long-termstickiness,fullplatformadoptioninintegrationwithEPIC,andthenthesecondset of economics where our 48% stake in the MSO would actually create that second set of economics in additiontothetraditionaleconomicsthattheplatformcreatesonourP&L.So super excited about this deal and its success will be defined by, we anticipate at the deploymentofourplatform,likelyupsideof(+15%)inrevenueforthesamepatientmixand thesamepayermix.Now,thatcouldbesotransformativeintermsofvaluecreation,bothfor themedicalgroupandthenourstakeintheMSO,butiftheyareabletodothis,itcreatesa wholedifferentmodelforthesustainabilityofphysician-ledtransformationofhealthcareinthe USandcreatesafundamentallydifferentsetofgrowthvectorsforus.So,wewillcontinueto drive such opportunities thoughtfully and inadisciplinedmanneroveraperiodoftimeand continue to report against them. Andthenagain,lastbutnottheleast,Iwanttoreportoutsomerecognitionfromtheindustry. Happy to note that our CFO Nithya, has been awarded the best woman CFO by Business World and also, we were recognized for significant success in the emerging acquisitions organizational category for our AQuity deal. And then this one is a very important vector wherewehavebeenworkingveryhardonmakingouremployeeexperienceuniqueandhappy tonotethatnotonlydowehaverecognition,butweareactuallyatapointwhereIthinkour employeeturnoverisatanall-timelowinthehistoryofIKS.So,withthat,allinall,astrong quarter,continuedprogressalongthedimensionsthatwehadset,andIwillnowturnitoverto Nithyatotalkusthroughsomefinancialdetailsofthequarterafterwhichwewillopenupfor questions. Page9of19
NithyaBalasubramanian: Thankyou,Sachin.Goodmorning,everyone.Wehavealreadycoveredthehighlightsonthis slide,sowhydon'twedivestraightintoourcashflowmetrics,Saranshifwecangotothenext slide. Intermsofoperatingcashflow,weendedthequarteratRs.165croresandfreecash flowcameinatRs.137crores.Thesenumbersarenetofanupfrontperformanceguaranteewe haveextendedtothetuneof$5milliontoamulti-specialtyprimarycareorganization,oneof themarketsegmentsthatSachinhadhighlightedearlierinthecalltoday.Withourcontinued strongcashgeneration,ournetdebtpositioncontinuestoimprove.Asyoucanseebytheend ofthequarter,ournetdebtpositionstoodatRs.448croresandthecontinuedcashgeneration in the future quarters is where you will continue to see this number improve. If you can go back to the previous slide. Our EPS for the quarter stood at Rs. 9 which represents a 58% growth year-on-year and a 2% growth quarter-on-quarter. Our returnon equitymetricsagainremainsveryhealthyandverystrong.Forthequarter,ourreturnonequity metricsstoodat31%.So,Icalloutafewhighlightsonthisslide.IntermsofFOREXimpact, it was quite insignificant and minimal in the quarter. Our employee benefit expense inthe quarterstoodat52.3%ofrevenuescomparedto51.8%inthepreviousquarter.Thisincreaseis despitethenetreductioninemployeecountbecausewedocontinuetoinvestintechnologyas wellasincrements.Anddespitethisemployeebenefitexpenseincrease,ourEBITDAforthe quarter came in at 32% which is a meaningful 90 bps improvement from Q4 where we reported31.2%.LookingatPAT;PATcameinat20.5%orRs.152crores.Again,thegrowth inPATisinfactevenfasterthanEBITDAgrowthlargelybecausethefinancecostcontinuesto comedown.YouwillnotethatthenumberwasactuallyRs.26croresinQ1oflastyearversus Rs.18croresinthecurrentquarter.Andthatisreflectiveofourdebtrepaymentaswellasthe lowerinterestrate.OurETRforthequarterstoodat22%.Wehavelosttaxbreaksinoneofthe SEZunitsthatweoperateoutof.Forthefullyear,it'slikelytoremaininthesamerange.Our adjusted profit for the period adjusting out amortization of intangible assets stood at 22.7%. Saransh,ifwecangoandlookatthenextslidewherewetalkaboutourimportantKPIs.Our adjustedEBITDA numberforemployeeannualizedcontinuestoimprovequarter-on-quarter. Asyoucannote,itwasINR0.8millioninthequarter.Ourrevenuefromtop10aswellastop 5 customers continue to improve withourcontinuedwinningofclientdealsthatyouwould have noted both in Q4 as well asQ1now.Agingoftop10andtop5customers,again,the vintageremainsvery-verystrongatmorethan5yearsinboththesecategories.Comparedto Q4,theslightdipisinfactduetothefactthatsomeofournewercustomershaverampedup muchfasterthanwhatwehavehistorically.Thankyou,Sachin.Overtoyou.Andwecontinue to expect to report healthy numbers in the future quarters as well. Great.Thankyou,Nithya.Again,excitedaboutourperformancethislastquarterandwhatit means for the future. Also,inlinewithcontinuingtobuildbothbest-in-classgovernanceas wellassurroundourselveswithsomeofthewisestandmostcontextualmindsinhealthcare, happy to note that we are adding Dr. Garheng Kong to our board. Garheng is quite an exceptional professional and leader with undergrad degrees from Stanford and MD, PhD, MBAsfromDuke.Butequallyimportantly,afteraflourishingcareerinconsulting,including Page10of19
at McKinsey, he started his own fund, HealthQuest Capital, which now invests across the entirespectrumofdealsfromstartupstopubliclytradedcompanies.Heisaleadindependent directoronlargepubliclytradedcompanieslikeLabCorpandalsohappenstobeontheboard of the Duke University Health System. So tremendous context and leadership and we will continuetoseethatwewilldowhateverwecan,whatever makessensetosurroundourselves withthoughtfulleadersthatcankeepusbothgroundedbutcontinuetoexpandouraspirations in the marketplace. Excited to have Garheng.Withthat,Ithinkthatconcludesourprepared remarks for the quarter. Again, very excited about our performance lastquarter.Theteams have worked really hard and happy to take questions from you. Over to you, operator. Thank you very much, sir. We will now begin the question-and-answer session. The first question is from the line of Sagar Dhawan from Valuequest. Please go ahead. Thankyouandcongratulationsonagoodsetofnumbers.Myfirstquestionisonthegrowth thatweareseeinginthetop5clientbucket.Ijustwantedtounderstandbetterwhatisdriving this.Isthisjustsortofoneclientscalinguporisitmorebroad-based?IsitotherideaswhichI thought Iwasassumingwasitduetocross-sellingofAQuityintothecross-sellingtoanew AQuityclientorisitmoreoutsourcingbysomeoftheclients?Justwantedtounderstandwhat isdrivingthisandhowsustainableisthisinthenearterm?Shouldweassumethatsuchkindof growth will continue in the near term as well? Great,thankyouforthequestion,Sagarandthankyouforjoiningthismorning.Yes,look,I thinkourtop5customertrendishealthyandIthinktheanswerliesinalloftheaboveinthe pointsthatyounoted.Thereismomentumbeingseenonthecross-sellofAQuityinoneofthe customers. There aretheselargeplatformdealsthatwehavesignedthathavekickedininto thattop5andtherealityis,Sagar,ifyouthinkaboutit,whenIlookatthewalletofourtop5 customers,thewalletpotentialforourplatform,wearenowherenear100%.So,Ithinkone, it'sagreatsignthatthetop5customersaregrowingandsure,ifwecontinuetoexecutelike this, there is no reasontobelievethatthetop5customergrowthshouldbethere.Now,you might not seeitlinearlylikethisineveryquarter,butwhenyoulookatitoverasignificant time horizon, given the wallet opportunity of our top 5 customers and the strength of our platform, there is absolutely reason to believe that that growth should sustain. Understood, sir. And just on the Palomar deal, if youcouldprovideanupdateonhowitis scaling up because it's been like 8-9 months now. Are youseeingtheupsidesthatyouhad thought about? Sagar,thankyouforaskingagain.Yes,Ithinkweareaheadofplanactually.Ican'tgointothe specifics here, but I would like to say that so far,wehavebeendelighted.Ourteamshave executed tremendously on the deal, even as we are not even fully implemented on all the featuresoftheplatform.Ourfinancialproforma6monthsinisbetterthanwhatwethoughtit was going to be, even though we are not fully implemented. So, we continue to be really optimistic about what the Palomar deal will produce for us and atwhatpace.Also,asyou Page11of19
know now, the oneconcernthatsomeofyouhadaboutthefinancialfutureofPalomar,that continues to be looking a little bit more constructive and that creates its own additional opportunities,dependingonwhichsystemeventuallyendsupwiththem.Soyes,verypositive on the Palomar deal. Gotit.Understood.Andonelastquestionfrommysideisonthetailcuttingthatwearedoing ontheAQuityside.Justwantedtounderstandhowmeaningfulofadragthathasbeenonthe growth in this quarter and what could have been the growth if the tail cutting was not happening? Sagar,IthinkIwillrefrainfromprovidingthosespecifics,butIwillsaythatit'smaterial.Iam comfortable sayingthatthedragismaterialandthatiswhyevenaswearecontinuingtobe intentional, we are trying to managethedraginamannerthatthecuttingofthetailisreal, becausetherealityisthatcuttingofthetailisalsohelpingwithmargingrowth.Butatthesame time,it'snotsodramaticthatitoffsetsourorganicgrowth,whichIthinkisreturningbackvery strongly. So, material drag, but managed to the best of our abilities. Gotit.Andtillwhenisthisprocessgoingtocontinue?Yousaidyouwanttoreachabout500 clients, but just a rough timeline as to when this process could be completed? You know, that's a tough one, Sagar. Look, it could be as much as another two to three quarters,becauselikeIsaid,there'stwofactorshere.One,evenasyouwanttocutthetail,we don'twanttoletthecustomersdown.Theyhavebeenrelyingonusforperformance,sowecan justsortofknee-jerkoutofit.Andsecond,therealityiswedon'twantittohaveadramatic drag injustoneortwoquarters.Andso,Ithinkperhapsanothertwotothreequartersisthe way to think about it. And we will let you know if that changes. Sagar Dhawan: Understood. Because the question is about 150 oddcustomers. Sagar Dhawan: Got it. Thank you for taking my questionsand all the best. Thank you. Thank you, Sagar. Thank you. The next question is from theline of Srinath V from Bellwether. Please go ahead. Hi,Sachin.TakingonthesamekindofPalomardiscussion,Iwanttounderstandwhatisthe path ofthefullimplementationofthecareenablementplatform?Howdoesthiswholething work?AndIwanttounderstand,ifweassumetheyhave100physicians,roughlyhowmanyof their physicians have like partially taken one of the main suites ofproductsofours?What percentage of the physicians have actually taken the full platform? And woulditbefairto assume that somewhere in this financial year, we would reach peak revenue potential in Palomar? Just want a qualitative understanding. Page12of19
Yes.Great.Thankyou,Srinath.Greatquestion.Sofirstofall,thecommitmentasapartofthe deal is for 100% of the physicians to take the full manifest of the platform. So thatisthe definition of the full implementation. And the way we are rolling it out is there are some featuresthatarealreadycentralizedinthewaytheyoperate.Thosewerethefeaturesthatwe implemented first, because what is already centralized is easier to drive as a part of the platform. And so those have been clearly implemented already. And theothersarewellon theirway.Itistotallyfairtoassumethatperhapsbytheendofthisfiscal,whichisfiscalQ2, wewouldbefullyimplementedacrossallthefeatures,acrossnearly100%ofthephysiciansat Palomar. And so, yes, wewouldhavereachedourpeakrevenuepotentialatPalomaratthat point.Now,again,ourpeakrevenuepotentialis,asyouknow,drivenbytwoaspects.Oneis the platform fee, but then really the kicker comes in the upside.Andsothoseupsideswill obviously be evident in our accounting numbers attheendoftheyear,becausethat'swhen they are calibrated. But yes,ontheplatformfee,thepeakwouldhavebeenachievedbythe end of fiscal Q2. You were asking about how long does it typically take? It's a work in progress.Itdependsonthechangemanagementsophisticationintheorganization.Itdepends on how much is already centralized versus not centralized. How good are the physician championsintheorganizationthatareabletodrivethechange?Howlongdoesittakeusifit's anEHRwhenwealreadyhaveintegrationversusanEHRwhereasapartofthedeal,wehave tobuildtheintegration.So,therearethreeorfourfactorsthatgointodefininghowlongthe full platformimplementationmighttake.Butofcourse,ourobjectiveis,onanoverallbasis, eventuallytogettoapointonceit'smoremature,whereovera120to150dayperiod,wecan havethefullplatformimplementedacrosstheentirephysicianbaseofthecustomerthatweare committed to. Perfect.Iwantedtounderstand,givenifPalomardoesgetacquiredbyoneoftheotherplayers, this is a very IT question, bear with me on this. There's normally some sort of vendor consolidationthattakesplace.Howhaveyouassessedrisk?Woulditbefairtoassumesince wearesowellintegratedintoPalomarthatwearesomewhatsafefromvendorconsolidation? Any broad views that you have on this, that would be great. Sogiventhatwewerepotentiallyanticipatingachangeofcontrol,evenwhenwedidthedeal, Srinath,wehadalreadybuiltanooutintheeventofchangeofcontrol.Sofirstofall,there'sa very penalcontractualprotectionthatwillprobablybeahugedeterrent.Butwedon'tliketo rely on just the contractual protection. So, the real value is the excitement that we are experiencingfromthePalomarphysicians.Andwhatwearemostexcitedaboutintalkingto theCEOisthefactthatifweareabletodemonstratethetypeofROIthatwearetalkingabout, Srinath,Ithinkitwillbelike,impossibletoimaginethatwhoevertheacquireris,whetherit's UCSanDiegooroneoftheothertwosystems,theywouldnotwanttoadoptsomemanifestof suchanapproachintheiremployedphysicianbase,whichare,theiremployedphysicianbase is10XthesizeofPalomar'semployedphysicianbase.So,youneverknowwhatexactlywill happen. But one, I think we arecontractuallytotallyprotected.Andsecond,Ithinkthereis more opportunity than risk in Palomar integrating with one of the large systems in the area. Page13of19
Perfect.JustthelastquestiononAQuity,Iwanttounderstandwhatpercentageoranythingyou canshareonAQuitycustomermigrationtotheAmbientAIIKSproduct,giventhatitdelivers significantlymorevalueatasignificantlowerprice,onewouldassumethatwithinoneyear, which would be a standard contracting cycle, then a large part of customers would have migrated,butIdon'tthinkthatthatisthecase.So,Iwanttounderstand,whereareweonthe migration?Isit30%-40%-50%ofthecustomers?Andifthere'sabottleneck,whatwouldbe the bottleneck? And thanks a lot for answering all my questions in great detail. Sure, Srinath. No, I think, look, the bottleneck is really organizational inertia more than anythingelse.Andso,thesearelargehealthsystemsthathaverelativelylongdecisioncycles. And so I would say that we are not near the completion of this transition. And likeIwas sayingearlier,Ithinkjustlikethecuttingofthetail,perhapshasanothertwotothreequarters ofrunway.Ithinktheremainderofthisfiscalyearisprobablyagoodwaytothinkaboutwhen that transition might get completed. Different customers are in different stages of that transition.Andremember,thetransitionisintwofeatures,notjustalittledocumentation,but wearealsodrivingthattransitioninmedicalcoding.Butagain,theywereinmedicalcodingin a very heavy human-led, statesidehuman-ledmodel.Andnowwithourautonomouscoding acrosstwospecialtiesandoursuperiorglobalexecutioncoupledwiththatautonomouscoding, wearealsodrivingtransitionthere.SoIwouldsayperhapsafairwaytothinkaboutitisover the rest of the fiscal, we should have largely completed that transition. Srinath V: Thanks a lot, Sachin. Whichiswhybythattime,wewouldhavegottenouroperatingmarginsorEBITDAtoaplace that could perhaps be called, sort of steady state. Srinath V: Perfect. Thanks a lot. I will get backin the question queue. Thank you. Thankyou.ThenextquestionisfromthelineofRuchiMukhijafromICICISecurities.Please Thank you for the opportunity and congratulations, Sachin and team, for a great set of numbers. First question, we are now in 18-monthjourneyoftransitioningAQuitybusiness. Also,thelossoflargeclientandthestartoflastfiscalisinthebase.So,isitfairtoassumethat as we transition to different quarters of current fiscal, we should see the YOY growth momentum of our business accelerateandmovemoreclosertowhatweusedtodopriorto AQuity, more like a 20% growth mark? Hi,Ruchi.Thankyouforthequestion.Asyouknow,wedon'tgiveguidanceonfuturegrowth, butIthinkthecueslieintheanswersthatIsortoftriedtogiveearlier,whichis,Ithinkwestill havetwotothreemorequartersofAQuitycustomertailreductionaswellasAQuitymargin optimization. And so perhaps fair to assume that the headwinds inrevenueassociatedwith Page14of19
thosetwoendeavorsshouldbecompletedbytowardstheendofthisfiscal,let'ssayfiscalQ4. So, I think that probably is the timing to think aboutthereturntopuregrowthversuspure organicgrowthbeingoffsetbysomeofthisintentionalheadwindthatwearedrivingtotrythat sort of balance between revenue growth and margin growth, so end of this fiscal. Secondly, in our top 5 clients, looks like the Palomar dealhasscaledupandnowwehave differentsetoftop5clients.Also,itwouldbegreatifyoucouldtalkaboutthetransitiontime forPalomaranddoweexpecttransitiontimefortheWesternWashingtonMedicalGroupwith two to three quarter transition? Should that also lead to change in our top 5 customers? Good question. Palomar, like I wassayinginmyearlierquestion,Ithinkbytheendofthis quarter,thecurrentquarterthatwearein,weshouldhavecompletedthefullimplementation. On Western Washington, yes, I think it'safairassumptionthatinabout120-odddaysfrom now,weshouldbefullyimplemented.It'ssubjecttousgettingthefullepicintegrationgoing, whichweareworkingon.That'stheonlysortofbottleneckthereandweareworkingthrough thatprocess.Soperhapsanother120-oddday,whetherornotWesternWashingtonentersour top 5, I can't tell you, Ruchi, right now because it's alsoafunctionofwhathappenstothe current top 5 and how quicklytheygrowoverthenext120-150days.Butobviously,itwill become a substantial customer and certainly in the top 10, perhaps in 120-150 days from now. Gotit.Andlastly,couldyouhighlighttoushowthecross-salebusinessorcross-saleactivities are planned out during the quarter, selling IKS solution to AQuity customers? LikeIwassayingearlier,Ithinkwearestillintheearlyinningsofthatjourney.Butthegood newsisthatIthinkwehavefiguredouthowtoorchestrateit,moreorless,howtoworkinthat motionthatisactivatedbythelegacyAQuitysalespeopleandthenhowtheypartnerwiththe sortofoverlaypartnersalesenginethatwebuiltthatcanelevatetheconversation.So,Ithink plenty of greenshoots.One,weactuallyannouncedpubliclyourtop5healthsystemsinthe country where we have driven a cross-sell motion very successfully. And there areseveral othersinthehopper.Anotheroneofthemisatop5healthsysteminthecountry.So,Iwould say still early,butIfeellikeafterawholebunchoftrialexperimentation,whatworks,what doesn'twork,howtoincentivizeboththesalesenginesappropriately,firsttryingtodoitwitha platform approach,butthenlearningthatlargehealthsystemsdon'tyethavetheappetitefor the platform approach, but have much greater proclivity forpointsolution.Ithinkwehave figuredoutthemotion.Andso,hopefullywewillseethefruitsofthat.AndIcandoasecond tick mark on that cross-sell motion in the next quarter. RuchiMakhija: Gotit.ThisoneisforNithya.Youdidmentionthatthisquarterwepaid$5millionaspartof one of the deals. Do we expect such payout during the current quarter besides Western Washington Medical Group in any of other deals? NithyaBalasubramanian: Ruchi,Iwillobviouslynotbeabletotalkaboutwhatmightormightnotpanoutinthecurrent quarter,butIthinkfromamorephilosophicalperspective,SachinandIhadmentionedearlier Page15of19
that in each ofthemarketsegmentsthatweoperatein,wemightdoonedealortwo.These almostalwaystendtobefullplatformdealsandthesetendtobevery,verylong-termdealsas well. This helps us establish the benchmark intermsofwhataplatformdealcandeliverin each of these market segments. Ruchi Mukhija: Got it. Thank you and all the best. ThenextquestionisfromthelineofNileshJainfromAstuteInvestmentManagement.Please Thankyoufortheopportunityandcongratulations,Sachin,foragreatsetofnumbers.Myfirst questionisonyourrevenuegrowth.Obviously,top5hasgrownverywelltothenorthof70%. But when I lookatyourothertop5clients,apartfromtop10,ithasbeenflatmoreorless. Howshouldwelookatthetop10growthapartfromyourtop5?Maybeyoucantalkaboutthe organicsideofthegrowth.Wecanunderstandthatovertime,onceyoucutdownthetail,we can expect that at least you grow faster thantheoutsourcingindustry,whichisexpectedto grow at 12%. Ithink,again,Iwilljustsortofattheriskofbeingrepetitive,Iwillsaythat,firstofall,ona quarter-on-quarterbasis,it'snoteasyto…Iwouldn'tcallonequarteratrendwherethetop5 aregrowingandthetop10,thenext5,whicharethetop10,arenotgrowingsomuchthatnow that'satrend.Iwouldn'tgosofarastosaythat.Let'splayitout.Rightnow,Icantellyouthat weareseeingfairlyseculargrowthacrossexistingcustomersandthenewpipeline.Andasyou canimagine,giventhatthecuttingofthetailandthetransformationoftheAQuitybookhasa dragontherevenuegrowth,andIsaidit'sabitofamaterialdrag,youcanestimatewhatthe organicgrowthreallylookslike.Andthat'swhatIwouldsay.It'sveryhardforme.AndIam deliberatelynottryingtonotansweryourquestion,butIdon'twanttogiveguidance,number one. Andnumbertwo,Icontinuetobelievepassionatelythatifwecontinueexecutingitthe way we are, we will continue to grow significantly faster than the 12% TAM growth. Probably,maybeyoucanjusthelpmewiththeorganicgrowth,justaroughrange,thatwillbe helpful. What do you mean by organic growth?All growth is organic only. So lastyearbasewouldhaveanAQuitynumberaswellwhichwemightnothavegrownas compared to, I guess, legacy clients. By the same quarter last year,theintegrationwascomplete.So,allgrowthcomparedtoQ1 FY25isallabsolutelyorganicgrowth.So,becausethereisgrowthinsomeAQuitycustomers as well. If you are asking me to tell you what is the reduction of revenue in AQuity and increaseinIKS,thatunfortunatelyIcan'tdobecausewearereallyoperatinglikeonecompany. Nowthere'snolongeranAQuityaccountoranIKSaccount.Therearesomanyaccountsthat where we have already activated a cross-sell motion. And so those accounts are joint Page16of19
customers.So,Idon'tknowwhethertoaccounttheirrevenueinlegacyAQuityorlegacyIKS. I don't know how to strip those out together. But again, I think if you just dobroadmath around, we have 16% growth in spite of a material headwind associated withwhatweare deliberatelydoingoncustomertailandrevenueoptimization,itshouldgiveyouafairlydecent idea of what the growth net of that or prior to that would look like, right? Okay.Noproblem.Thankyou.Mysecondquestionison;youtalkedaboutradiologypartners. Sojustwantedtounderstandhowisthatprogressgoingonthatsideandarewelookingatany JV sort of transaction there? So that relationship is interesting in that ithasnotyetconvertedtoaJV.Thewaywehave structured that relationship was that it has to grow to a certain threshold, atwhichpointit makessensetoJV.Therelationshiphasnotyetgrowntothatthreshold.So,Idon'tseeaJV conversion happening in thenextcoupleofquarters.Butwewillcontinuetotrackhowthat goes.ThekeythereismywholeconceptonaJVhereNileshonanyoftheseJVsisfirstthe customershouldhavefullymanifestedtheplatformintheirinstallbase.Nowthereare3,000 radiologists, there's still along-longwaytogobeforealargepartoftheir3,000radiologists haveadoptedthisprogram.Also,wehavealreadystartedtofigureoutawholebunchoftech interventions that are changing that virtual radiology system model, even as we were implementing them. So, I think more to come, not close to JV yet. MylastquestionistoNithya.Iwantedtounderstandontheemployeeside,obviouslywehave beenreducingtheemployeecountsincelastfewquarters.So,Iwantedtounderstandhowdo weseethegeneraltrendintermsof,arewedoneonmoreorlessontherationalizationofthe employee side? How do we see there's further scope there? NithyaBalasubramanian: So, you will obviously see a balance in terms of our continued optimization of thelegacy equityworkforce.IthinklikeSachinpointedout,thereisatleastanothertwotothreequarters where we will continue to optimize and we deploy our technology and achieve the right balancebetweenon-shoringandoff-shoring.However,weareofcoursegrowing,evenasIsay that at the same time, we are also growing significantlyinotherpartsofthebusiness.And therefore, we do need to support that growth with additional employees, both in terms of technologiesaswellasotheradministrativeemployees.So,Ithinkoverall,youwillprobably see thatnumberinchupintherestoftheyearaswecontinuetosupportthegrowththatwe have been facing. Sure. Just on the EBITDA margin, you know, oncewereachmid-30s,doweexpecttosee further scope of expansion there of margins over time 2 to 3 three years timeframe? Look, I think we have said continuously that we expect to get somewhere in the early to mid-30s.Asyoucansee,wearealreadypasttheearly30s,almostwellaheadofwhatwehad said. And so I just still maintain that, Nilesh, that we will seeourselvesgettingtoearlyto mid-30sandwethinkmarginsshouldstabilizeatthatrate.Totryandsaythatmarginscould Page17of19
improve beyond the early tomid-30s,Idon'tfeelcomfortablesayingthat.Ithinkourtarget stillcontinuestobeearlytomid-30s.Andasyoucanseefromourperformance,wefeelvery confident about achieving that. Nilesh Jain: Thank you and I wish you all the best. Thankyou.ThenextquestionisfromthelineofSeemaNayakfromICICISecurities.Please SeemaNayak: Hi, congratulationsonagoodquarter.Withtheheadcountdownabout300Q-on-Q,howfar are we pushing this lever? And with new deals announced, is there going to be a hiring expected goingforward?AndwhatisyouridealannualizedEBITDAperemployeethatyou are targeting? So, look, Ithinkontheheadcount,yes,therewillbequarter-on-quarterfluctuationbasedon deal ramps. But I think, which is why I constantly point everyone to please look at year-on-year trends versus quarter-on-quarter trends. The trend that you are seeing year-on-yearisarealtrend.Thetrendthatyouareseeinginconsecutivequarterisloadedwith all sorts of noise around one customer ramprelatedtothingshappeninginthatcustomer,a new customer start. So, I would suggest, if you really want to trend that, please lookatit year-on-year. And that year-on-year trend is probably the most telling factor. OntheEBITDAperemployee,look,thewaytotrackthisisreally,likewehavesaid,earlyto makeEBITDAatthecorporatelevel.Becausealsoremember,weweretraditionally1.5%-2% R&Dexpenses.Today,wearecloseto5%R&Dexpense.AndwearesettingupanAIcentre of excellence. We are just about to announce a chief AI officer under which the centre of excellencewillbebuilt.There'sawholebunchofthingshappeningthatarefactoredintoour sortofgeneralthinkingofearlytomid-30s.Andatleastmyhumblebeliefisthatwiththetype of growth that we are driving organically, with these types of early to mid-30 margins sustainedandthetypeofROE,Ithinkthisisprobablyagoodplacetobe.Andthat'ssortof how I would suggest we play it out. But if there is anything else specifically that youare lookingforintheEBITDAperemployee,wecantakeitoffline.ButIthinkingeneral,Iwould say, I will point you back to early to mid-30s operating EBITDA in spite of continued investment in sales and marketing, and significant continued investment in R&D. Seema Nayak: That's helpful. Thanks. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Saransh Mundra for closing comments. Thank you and over to you, sir. SaranshMundra: Thank you, everyone, for joining the call. Please reachoutincaseyouhaveanyadditional questions. We will be very happy to answer. Thank you. Thank you, everyone. Appreciate it. Page18of19
Thankyouverymuch,sir.Thankyou,membersoftheManagement.Ladiesandgentlemen,on behalfofICICISecuritiesthatconcludesthisconference.Wethankyouforjoiningusandyou may now disconnect your lines. Thank you. Please note that this transcript has been edited for readability. Page19of19