Analyzing...
Sameer S Chavan
2026.02.11 18:16:49 +05'30'
“Inventurus Knowledge Solutions Limited Q3 FY '26 Earnings Conference Call” February 05, 2026 MANAGEMENT: MR.SACHINGUPTA– FOUNDERANDGLOBALCHIEF EXECUTIVEOFFICER MS. NITHYABALASUBRAMANIAN– WHOLE-TIMEDIRECTOR& CHIEFFINANCIALOFFICER MR. SARANSHMUNDRA– VP, INVESTORRELATIONS MODERATOR: MS. SEEMANAIR– ICICI SECURITIES
Ladies and gentlemen, good morning, and welcome to the IKS Health Q3 FY26 Earnings Conference Call,hostedbyICICISecuritiesLimited.Asareminder,allparticipantlineswill remaininthelisten-onlymode,andtherewillbeanopportunityforyoutoaskquestionsafter thepresentationconcludes.Shouldyouneedassistanceduringtheconferencecall,pleasesignal the operator by pressing star then zero on your touchtone telephone. Please note, that this conference is being recorded. I will now hand the conference over to Ms.SeemaNairfromICICISecuritiesLimitedfor opening remarks. Thank you, and over to you Seema. SeemaNair: Good morning, ladies andgentlemen.ThankyouforjoiningustodayonQ3FY26earnings call of IKS Health.OnbehalfofICICISecurities,Iwouldliketothankthemanagementof IKSHealthforgivingustheopportunitytohostthiscall.Today,wehavewithusMr.Sachin Gupta,FounderandCEO,Ms.NithyaBalasubramanian,CFO,andMr.SaranshMundra,Head of Investor Relations. I turn it over to Mr. Saransh for his brief statement and to takethe proceedings forward. Thank you and over to you Saransh. SaranshMundra: Hi, good morning everyone. Just a disclaimer before we start, that as part of theprepared remarkswemaymakecertainstatementswhichareforward-lookinginnature.Wedon'ttake anyresponsibilitytoupdatesuchforward-lookingstatements,andyourdiscretioniswarranted while making any investment decisions. Over to you Sachin. Thank you Saransh and good morning and good evening everyone. Welcome to our fifth earningscallsincewewentpublicinDecember2024.Ouragendaobviouslyistotalkthrough our performance for the quarter endingDecember31st,2025,theQ3fiscal26.BeforeIgo intotalkingaboutourfifthconsecutivequarterofindustry-leadingperformancesincewewent public,I'dliketotakeafewminutestogiveeverybodyanupdateaboutthebusinessandhow weareprogressingonthestrategicpillarsofexecutionthatwehavehighlightedoverthelast several conversations. Andtokickitoff,youknow,oneofthethingsthatIhavebeenaccusedofbymanyonthiscall andotherwiseisthatIresorttousingtoomuchhealthcarejargoninmyopeningremarks,and soIwillcontinuetotryanddomybesttonotresorttothattendency.Andwiththatbackdrop, solook,forthosethatarenewtoourbusiness,whatisourbusiness?Essentially,we'reinthe businessoftakingawaychoretasksfromhealthcareprovidersintheUSsothattheyarenot distractedbythosechoresandfocusontheircoretaskofpatientcare.That'sthefundamental business. And believeitornot,thosechoretasksthatdistracthealthcareprovidersintheUSfromthe coretaskofpatientcarecosttheUShealthcareindustrysomewhereintherangeof$260-odd billion, which is the TAM that we are targeting. And it's a highly under-penetrated TAM becausemostofthesetaskstodayaredonebythelargehealthcareenterprisesin-housewithin their own organizations. However,thereisarisingtrendtodelegateoroutsourcethesetaskstocompanieslikeus,and thatoutsourcedmarketnowisabout$35billionandisgrowingatabout12%ayear.Webuilt this business with the idea simply that we will outsource these tasks through the right
combination of people and technology. When we started out, we were much more people-centric,whichiswhy,asyou'veseen,wehave13,000,nearly13,350peopleacrossthe world, most of which are in India, north of 10,000-odd in India. Westartedinapeople-centricmodel,butwealwaysknewthatthesolutiontoscalewouldbe through technology. And so westartedwithahuman-ledandtech-in-the-loop,andoverthe last 10years,andveryspecificallyoverthelastfiveyears,wehavemovedtoamuchmore tech-led and really AI-first, especially over the last couple of three years asgenerativeAI came into play. We've moved to a much more tech-led AI-first orchestration. Whichiswhy,justasanexamplepoint,withoutgoingintodetailsofnumbers,whenyoulook atourgrowthforthequarterendingDecember31st,2025,whichis24%year-on-yeargrowth, whenyoulookatourheadcountgrowth,it'sbarely1%.Soit'salmostflatheadcountrelativeto 24%year-on-yearrevenuegrowth.Andthat,ifnothingelse,isthetruedemonstrationofhow we are truly leveraging AI and technology to sort of break this linearity between revenue growth and people growth. Orforthatmatter,betweentheimpactthatwearebringingintotheproviderorganizationsand thenumberofpeoplethatwehavetocontinuetodeploytotakeawaythesetasksfromthem. The other hallmark of our business model has always been a much more outcome-based approach. Wejustalignandourcustomerspayusasapercentageoftheirrevenue.Andsointhattypeof structure, it's highly aligned. Our fortunes are highly aligned with their fortunes. And obviously, when we drive more and moretechleverageinourbusiness,thatleadstobetter scalability, better outcomes for our customers, and also it leads to, perhaps, some margin protection for us over a period of time.Soverysimplyput,thatisthefundamentalsofthe business. Nothing too complex about it. Now,movingontosortofthekeysortofmoatofthebusiness.Youknow,inamarketwhere you have a $260 billion TAM and you know, we're talking about 16 differenttasksinthe physiciansetting.Bytheway,westartedourbusinessandwewerepredominantlyfocusedfor thefirst15-oddyearsonthephysicianmarket,whichistheoutpatientclinicsetting,because we believe that healthcare transformation needs to be led by physicians. So,westartedintheoutpatientsetting,andoveraperiodoftime,astheoutpatientsettinggot more and more consolidated and health systems bought a lot of these clinics and started employingthedoctors,we'veslowlygottenpulledintothehealthsystemmarketaswell.So now we are also participating in the hospital part of the TAM. So, we have aplatformthatdelegatesabout16ordifferentchoretasksfromthephysician's workflowintheoutpatientsetting,andwe'reslowlybuildingareplicaofthatplatformforthe hospital setting, which is an endeavor that we started over the last say couple of three years. Eventually,wehopetohaveacomprehensiveplatformthatcutsacrossthecontinuumofcare from ambulatory to acute. Ambulatory again, sorry for the jargon, ambulatory in the US obviously means outpatient settings, clinics, and acute is the actual traditional hospital setting.
Thatissortofahigh-leveloverviewofwhoweareasabusiness.Wehavelaidoutfivecritical pillars of execution to continue to drive our leadership position in this market. And so, I typically tend to report our progress across those five pillars before I get into our financials. And so, happy toreportthatthisquarterwasaquarterofstrongexecutionacrossthosefive pillars.Thefirstpillarreallyistocontinuetotransformvariousfeaturesofourplatformand trulytheentireplatformfromthishuman-ledthatwewereaboutfive-sevenyearsagotonow a true AI-native agentic platform manifest. And in thatregard,we'vemadeprogressonseveralfronts.Oneisthatwe'verolledout,you musthaveseen,aninterconnectedsetofworkflowsthatactuallydelegateoroutsourcethree fundamental tasks that cause a lot of friction in the patient's journey with the healthcare providers. Okay, so I guess just to sort of quickly repeat the portion about the fundamentals of our business,likeIsaid,thebusinessmodelisfocusedontakingawaytheseshorttasks.Andthe TAMoftheseshorttasksisabout260billion,ofwhichtheoutsourcingpenetrationisabout34 billion,growingatabout12%,whichbasicallymeansthatifwearegrowingfasterthan12%, then we are gaining market share in this outsource TAM. If we are growing slower than 12% annually, we're probably losing marketshare.Andthe otherthingthatIwaspointingout,Idon'tknowwhereIgotcutoff,isthatourmodelentails leveraging the right combination of technology and human capital to outsource these tasks. And I was highlighting howoverthelastseveralyears,we'vebrokenthatlinearitybetween people growth and revenue growth, which is also exemplified by our latest quarter performance, where, as you can see, our headcount as of December 31st, 2025, is about 13,350. Same time last year, it was about 13,150. Soyoucanseethere'sonlya1.5%growthinheadcountfora24%growthinrevenueinrupee terms or a 19% growth in revenue in dollar terms. And so that just, if nothing else, truly demonstratesthepowerandtheleverageoftechnologyinthebusinessandthetrueleverage that we are being able to drive lately using our Generative AI solutions. Movingon.So,Iwasstartingtotalkaboutthefivekeypillarsofexecutionthatwetypically tendtofocusonasabusinessandthatwebuildourdiscoursearoundthatalignsourexecution strategy with hopefully your understanding of our business. The first one, like I was saying, is this moving from human-led to tech-led and really an AI-native, agentic platform. We're starting to talk about threetasksamongstthose16tasks from the physician setting that are ones that cause the highest amount of distraction for physicians and cause the greatest amount of friction for patients in their journey with the physician enterprise. Andthosethreetasksareclinicaldocumentation,medicalcoding,andpriorauthorization.And again, happy to notethatwecreatedasetofinterconnectedagenticworkflowsthatactually eliminate the friction associated with these tasks and relieve the provider's burden and distraction from these tasks. That was also something that was actually highlighted and
recognized by Google a few months ago. Inaddition,we'vealsomadeverysignificantprogressindividuallyinthesetasks.Forexample, again, Scribble Now where which is our fully autonomous ambient generative-AI enabled clinical documentation solution. We've also made significant progressinourautonomouscodingsolutionthateliminatesthe burden of medical coding for our providers. And then similarly, we've actuallylauncheda verystate-of-the-artmulti-agentorchestrationmodelwithinourpatientaccessmodel.Andour patientaccessmodelconsistsofschedulingoptimization,patientfinancialclearance,andalso all of this is orchestrated by campaigns generated from our patient engagement hub. Ialsowanttopointoutinthiscontextthere'sbeenalotofnewsaroundthingsthatpeoplelike Palantir and Anthropic are doing as it relates to code generation predominantly. I want to clarify that, look, more and more that these companies roll out tools that can make code generation faster and easier, the better it is for us. For example, we use Anthropic's leading platform Claude to actually do a lot ofourcode generation. And whatitdoesisitcollapsesthedevelopmentoftheengineeringcycleforus dramatically. Also, it allows our product managers, our technical product managers, to themselvesbeabletoactuallygeneratealotofthecodeversusrelyingonheavyengineering talent to do that. SoIthinkthepropagationofthesemodelsfromAnthropicandPalantirisahugetailwindfor us if we leverage those effectively, whichwearecertainlytryingtodoversussomepeople perceiving it as a potential headwind. And this is all predominantlydrivenbythefactthat remember we are a business that wants to leverage technology to eliminate tasks. Wedon'tcarehowthetaskiseliminated.Themorewecaneliminatethroughtechnology,the better it is. And so to the extent that these tools allow us to generate technology faster, cheaper, with a lower set ofsophisticatedtalent,thebetteritisforus.SoIthinkcontinued solid progress on our first vector of our strategy. The second vector is the acquisition that we did of AQuity back in 2023. I think it was Novemberof2023.Nowthatwearewellpastthetwo-yearmark,happytonotethatIthink the integration is more or less complete. I think we're -- asyouhaveprobablyseeninour numbers, we have gotten the margins to the levels that we hadfeltwe'llbeabletogetto, perhapsabitfasterthanwehadoriginallyimaginedthatwe'llbeabletogetto.AndsoIthink that integration is more or less complete. The one vector thatwillcontinuetoneedworkisthewholecross-sellmotionintoAQuity's health systems. And again, I'm very happy to note that as we sort of realigned our go-to-marketenginewithavery,veryspecificfocusonthelargehealthsystemsegmentand understandingwhatisthepropensitytobuyinthatlargehealthsystemsegment,wearefinally starting to see some real traction in that segment and in that cross-sell motion. So good early green shoots that are also obviouslyvisibleinsomeofourgrowthnumbers, giveusconfidencethatweareinthefinalinningsoftheAQuityintegration.Ithinkperhaps
another couple of quarters and we are well on our way. We also over the next couple of quartersperhapswouldhavecompletedsortofthepruningofthelongtailofcustomersthat AQuity had, which is something that we'vebeendoingthoughtfullyoverthelastcoupleof years. So solid execution on that front. Thethirdone,whichisaveryimportantstrategicvectorforourbusiness.Look,Ithinkwhat weallneedtofollowourbigpiecesinthebusiness,ourrighttowinisthatyou'veinvestedin a business that has understood that in the medium to long term,largehealthcareproviders cannot be in thebusinessofbuying16different,whatIcall,featuresorpointsolutionsand having10,12differentvendorsthatoutsourcethese16pointsolutionsforthem.Eventually, everybody will start to realize that the value of the whole is greater than the sum of the individual parts and there will be a migration of buying behavior towards more and more platform vendor partners. Webelievethatweareprobablytodaythemostcomprehensiveplatformplayintheoutpatient clinicsettingandwe'reslowlybuildingasimilarplatformforthehospitalsetting,whichwill takeanothercoupleofyears.Butintheoutpatientsetting,we'reabsolutelythenumberonein termsofthecomprehensivenessoftheplatform.Yet,Ithinkwe'velearnedverycarefullyover the last several years that buying behaviors are different in different parts of the market. When you look at the large health system segment, which is where you're talking about systemsgreaterthanUSD5billion,thosesystemstoday,evenastheyintellectuallyrespondto theideaofthevalueofthefullplatformversusmanypointsolutions,theirbuyingbehavioris stillverypoint-solutionoriented.Sowe'veactuallytotallyreinventedourgo-to-marketforthat segment of the market as it relates to how we go to market. Wewillstillintroducetheideaoftheplatform,butweveryquicklypivottotheconstructof which point solutions can solve some of their immediate pain points. And in these large systems,eventhepointsolutionwalletsaresolargethatthatstrategymakessense.Andsothat has been the strategic pivot that we've done. Havingsaidthat,what'salsobeeninterestingistheothersegmentsofthemarket:midtosmall healthsystemsandstandalonesinglespecialtyandmulti-specialtyphysiciangroups.Inthose, there is a greater and greater proclivity to platform sales andthat'sreallyalsowherewe're seeing some platform-based pickup. Ithinkwe'vehadfourorfiveverysignificantplatform sales since we went public over the last 18-odd months. And,soavery,verycleanlystratifiedgo-to-marketbetweenwhattheproclivityforplatformis inthesmalltomid-sizesegmentofthemarketandwhattheproclivityforpointsolutionsisin thelargehealthsystemssegmentofthemarket.Andthenbecausewehavetoco-existinboth ofthesebuyingbehaviors,itbehoovesustobuildthisplatforminawaywherewearenumber one or twoorthreeineachofthesepointsolutionsorfeaturesasratedbyindustryanalysts even as we are perhaps the only company with the full breadth of the platform. Andthatexecutionisnowstartingtogetdemonstrated.Theequivalentofthemostfollowed analystinourspace,likeitusedtobeGartnerinITservices,isthiscompanycalledKLAS. KLASisanendeavorthatwestartedmaybeabout18-oddmonthsagoandhappytoreportthat
in two of our very, very significant features, clinical documentation and revenue cycle management, we are now starting to get rated as best in class. Sowe'vehadsometremendousprogressintheKLASratings,whichgivesustheconfidence thatourapproachofstrivingtobeleadersineachofthefeaturesevenaswearecontinuingto manifest the full platform is gaining traction. Notaneasystrategytoexecuteon,butwe're steadfast on it. And then last but not the least,anotherveryimportantdifferentiatedexecutionpillaristhis going further upstreamandaligningouroutcomesevenmoretoourcustomers.AsI'vesaid earlier, traditionally our outcome, our model with our customers has anyways been outcome-basedwherewegetpaidasapercentageoftheirrevenue,notbasedonthenumberof people we deploy or the amount of technology we deploy, right? Now,inthisworld,whatwe'vedoneisasyou'veheardfrommeoverthelastseveralquarters, we've gone further upstream and deployed a strategy where in a modelthatwe,aswegot more and more confident that at the full deployment of our platform thetypeofvaluewe createforthesehealthcareenterprisesissomewherebetweensay700to1,000basispointsof EBITDA increase. Remember,thesearebasically6%,7%,8%EBITDAbusinessesinthefirstplace.Ifwecan increasetheirEBITDAby700to1,000basispointsbycuttingtheircostsofthesetasksand freeingupthedoctor'stimesothattheycanseemorepatientsinthattimethatincreasestheir revenueonthesamefixedcost,you'retalkingaboutavaluepropthatcanmorethandouble the current EBITDA of this business. And remember, it's in an industry that is undergoing severe pressures because their reimbursement rates from insurance companies, both government and private insurance companies, are coming down even though inflation is pretty strong in the US. So you have abusinessmodelthatisundertremendouscostpressure,thatisourcustomer's business model, andwehaveabusinessmodelthatisabletofundamentallytransformtheir marginsthataretodayundertremendouspressure.Anditiswiththatbeliefthatwehavenow started aligningfurtherupstreamandactuallycreateamodelwherewehavetwostreamsof economics. Onestreamofeconomicsisobviouslyatthedeploymentofourplatform,thecustomerspayus theusagefeeforbasicallyeliminatingthosechoretasks.Butthesecondpoolofeconomicsis whereoftenweareincentivizingourcustomerstobuythefullplatformthroughwhatwecalla neteconomicvalueaddadvance,whichisnothingbutaguaranteethatwebelievethatwe'll generate at least a certain amount of net economic value add. Andtruthbetold,obviouslysincethismodelisrelativelynewintheindustry,manyofyouall were perhaps a little bit worried about is this approach going to work.AndI'mvery,very happytoreportthatthefirstdealthatwehaddonewithamid-sizehealthsysteminSouthern California called Palomar Health,inwhichwehadadvanced$16.5millionofneteconomic value add benefits to them.
In the first year itself, which by the way took us more than 6 months to implement the platform in the first place, maybeevencloseto8monthsbythetimethefullplatformwas implemented,inthe4monthsoffullgo-live,we'vealreadybeenabletogenerate$3millionof net economic value add. So what was a 15-year contract for the full platform with this system in which wehadto recover$16.5million,we'vealreadycreated$3millionthatwe'vebeenabletoinvoiceforthis lastyear.Sogivesusatremendousamountofconfidencethatthesecondpoolofeconomics beyondthetraditionalpoolwhichisthefeestheypayusfortheplatform,thesecondpoolof economics will actually turn out to be perhaps quite lucrative as well. Andbytheway,allthisishappeninginawaywherewehavefundamentallytransformedtheir patient experience, their physician experience, and their administrative experience and are starting to make them viable again. So I think very, very happy to report the progress in this particular dimension. If we can continuetoexecutethisacrossthe4or5dealsthatwehavedoneinthisconstruct,Ithinkit creates atotallytransformativemodelforourbusinessoveraperiodoftime.Soallinall,a verystrongquarterofexecutionasitrelatestoour5pillarswhichlikeImentionedearlieris also resulted in some recognition from KLAS that we are really happy about. And just to give a quick update, Saransh if wecouldmovetoSlide6.Justtogiveaquick update,Ihadspokentoyouearlieraboutthe16featuresthatwehaveandoneofthethings that we do is we constantly track the automation levels by feature. Now we're tracking actually two things. One, we're tracking theautomationbyfeatureand second we're tracking how many of these features are we starting to interconnect through agentic workflowsbecausewhenyoustarttodothatactuallythevaluecreationstartstoget compounded across those features instead of being some of the parts. Andagain,happytonotelikeIhadsaidearlier,tremendousprogressinthepre-visitsectionof our patient journey of our platform where I was saying we've done these multi-agent orchestrations within optimized scheduling, patient financial clearance and all of that campaign management through the patient engagement hub. ContinuedprogressontakingScribble.Justsothateverybodyfollowsthejourneyofeachof thesefeaturesismostofthemhavestartedinahuman-ledandtech-in-the-loop,thentheygo from tech-led largely AI-led to some human-in-the-loop because you always want some human-in-the-loop supervision. Andthenforsomefeatures,youcantakethemtosuchaccuracythatyoucanalsostarttotake themtofullautonomy.Andthatiswhereforexamplewe'veachievedinScribblenoworfor that matter in autonomous codingwe'removingtofullautonomyinacoupleofspecialties. And so as this journey manifests from human-led tech-in-the-loop to tech-led human-in-the-looptofullautonomy,youcanseehowthenon-linearityinthebusinessmodel plays out between revenue growth and people growth. So continued progress across these features and all this has resulted in like I was saying,
Saransh,youcanmovetheslidetoaverystrongquarteroffinancialperformance.Happyto notethatinthisquarterwewereabletogrowourrevenuetoINR815crores,whichisabouta 24%year-on-yeargrowthinrevenue,19%inconstantcurrencytermsandwewereabletodo thiswhiledeliveringsomeverystrongEBITDAnumbers.EBITDAcameinataboutINR281 crores. SaranshifwecangotoSlide9,thenwe'llcomebacktotheslide.EBITDAcameinatINR281 crores, which on a 24% revenue growth is an EBITDA growth of 40.4%. And on a quarter-on-quarterbasisrevenuegrew4.3%andEBITDAgrew3.6%.Andthat'sobviouslyas youcanimaginetherearesomeone-timeimpactsoftheLabourCodechangesetcetera.,which inourcasearenotthatmaterialforamultitudeofreasons,butallofthosefactorsarealready baked into this EBITDA number of 35% odd and INR281 crores. So there's no adjustments etcetera in this EBITDA, which all results in an overall PAT of INR183 crores, which isactuallya41%year-on-yeargrowthand1.4%Q-o-Qgrowth.And thereareacoupleofnon-cashitemsthatareactuallyaffectingthePAT.Whenyouadjustfor those non-cash items, actually PAT comes to INR215 crores, which is a48%year-on-year growth and an 8.7% quarter-on-quarter growth. I'll let Nithya comment in her remarks about those non-cash adjustments. But overall, no matterhowyoulookatit,avery,verystrongquarteroffinancialperformancewhichbythe wayisreallyabyproductoftheteamsworkingtirelesslytoexecuteacrossourfivepillarsof execution.Sowiththat,I'llturnitovertoNithyatodiveintosomeofthemoredetailsofour financials and we'll take it from there. Nithya Balasubramanian: Thank you Sachin and good morning everyone. Taking off from Sachin'sremarksonthenumbers,I'llstartwiththeone-offitemsthatSachinwasreferringto. Therearetwosuchitemsinthenumbersthisquarter.OneistheLabourcodeimpact,though immaterial it hasbeenbakedintothenumbers.Secondiswehaverefinancedourtermloan duringthisquarter.Investorswillrememberthatwehadassumedatermloanofalmost$146 million at the time of acquiring AQuity. We,ofcourse,continuedtopaythatdownandwehavenowrefinancedthattermloantoa$50 milliontermloan.Ofcourse,therefinancingtriggeredanacceleratedamortizationofthesetup cost of the original loan. The INR12.7 crores number is that one-time non-cash write-off which is also sitting in the PAT numbers. Soadjustedforthesenon-cashitems,thePATactuallygrewatalmost48%andwehadabout INR215 crores of adjusted PAT this quarter. If wecangotothenextslide,I'llcoverafew more items. I think you're missing the EPS slide Saransh. Saransh Mundra: Yes so go to Slide 10. Yes. NithyaBalasubramanian: Yes,soEPSofcoursegrewatafairlyhealthypaceinlinewithourprofitnumbers.EPSgrew toINR11inthequarterandit'sa40%year-on-yeargrowth.Returnonequitycontinuestobe very healthy and was at 30% this quarter. Now again adjusted for the one-offs I had highlighted earlier, this number is actually 33%. If we can go to the next one.
NithyaBalasubramanian: We're getting there. Yes. So, cash generation continues to beverystrongifyoulookatthe adjustedOCFandFCFnumbers,conversionfromEBITDAandPATrespectivelycontinuesto be very healthy and close to 100%. The actual OCF numbers you needtoadjustaINR90 crores or $10 million number. Thisistowardsanupfrontperformanceguaranteethathasbeenprovidedtoalargecustomer. Thiswillbebookedasassetsinourbooks,whichwillberecoveredthroughthesavingsthat wewillbegeneratinginourcustomeraswedeployourplatform.Ifyoulookatthenetdebt numbers, again it continues to come down. We ended the quarter at INR322 crores or approximately $35 million in net debt. Ifwecangotothenextslide.Let'sgotothesummaryfinancialslide.Ithinkwe'vecovered mostofthis.So,Ihavecoveredalotofthehighlightsinmyearlierremarks,soI'lljustcallout afewadditionalcalloutsonthisslide.Youwillnotethatforexgaininthisquarterhasbeen approximatelyINR9crores.Butpleasenotethatwecontinuetomaintainahedgingpolicyand there is a INR9 crores hedge loss that's also sitting in the revenue line item. Sothecurrencyimpacthasbeennetneutralforusthisquarter.Ifyoulookatfinancecosts,this iswheretheINR12.7croresone-offwrite-offthatIhighlightedearlierissitting.Adjustedfor that number, our finance cost obviously continues to come down and of course with refinancing as well we've got better interest rates. Movingdowntotax,ourETRforthequarterwas20%.ForthefullyearETRpleaseexpect ETRtobearoundthesame21%number.Ifwecanmovetothenextslide.Sothesearethe standard set of KPIs that we report every quarter. Our EBITDA per employee number continuestobeatavery,veryhealthylevelandhasgrownsubstantiallyyear-on-year,largely from the margin transformation that we've been able to achieve with the AQuity business model. Looking at the top 10 customers,topfivecustomers,bothofthemhavegrownatahealthy pace, both year-on-year and quarter-on-quarter. And our vintage with both the top five customersandtop10customerscontinuestobenorthofsixyearsandveryhealthy.That'sthe I'll end the prepared remarks here and we're open to take questions now. Saransh Mundra: Thank you, Nithya. Back to you allfor questions. WetakethefirstquestionfromthelineofChiragKachhadiyafromMotilalOswalFinancial Services. CoupleofquestionstoNithyaandSachin.Sosomeofthedealswhichyoumentionedinour earlierinvestorpresentationandthefivedealswhichwetriedtoexecute,whendoweexpect to start translating into revenue? That's question number one. Second, from the cross-sell perspective, in the earlier deals which we announced in our earlier presentations of the earnings, what is the status of execution on those deals? Andwerepeatedlymentionedthatnearabout90%ofrevenueiscomingfromthesamesetof
customers. So what is the incremental growth comingfromthedealssofardisclosed,both post listing? SoChirag,Iapologize,notallaspectsofyourquestionswereclear,soI'lltrytoanswerwhatI didhear.Iguessweweretalkingaboutthenewdealsthathavebeenannouncedthisquarter, which are Femwell, StrideCare, and then a couple of other deals wherewecan'tnamethe customer.Onthose,areyoulookingforthepotentialrevenuecontributionfromthose,because we don't generally give that specific deal-by-deal?SoIwillsaythat.Yes,pleasegoahead, Chirag. Yes, so I'm asking the question when these deals willgetconvertedintorevenuefromlike during which quarter? Yes,sogood,that'sagoodquestion.Twoofthosedealsthatareunnamedareactuallykicking intoQ4itself.Andtheothertwodeals,FemwellandStrideCareareexpectedtostartkicking intorevenueinQ1.StrideCareshouldgoliveentirelybytheendofQ1,perhapsearlyQ2.The Femwelldeal,whichis,youknow,theirbaseof800-plusproviders,islikelytogoliveacross that800-providerbaseoverthesix-to-nine-monthdurationstartinginQ1.Soit'llbasicallygo from Q1 to Q3. Thank you. And are we only the sole service provider to these entities or we are gaining market share from the existing vendors? Yes, so on StrideCare, you know, actually Chirag, 90% of the time we are replacing the incumbent,whichisthein-houseentity.SointhecaseofStrideCare,thatispredominantlythe case. They were using a tech vendor partially, which we are also replacing with our technologyplatform.InthecaseofFemwell,thatisworkthatistypicallybeingdonebytheir doctors and we're unburdening them of the clinical documentation work. Andwewillobviouslybe,youknow,replacingtheirburdensandcreatingawholebunchof neteconomicvalueaddinthatprocess.Intheothertwosystems,wearenotthesoleprovider. Theyareverylargesystems,oneofthemisonthetopfivehealthsystemsinthecountry,and theretheyuseacombinationofin-houseteamsaswellasoutsourcedvendorslikeusandwe are slowly moving to pole position as the outsourced partner for them. And justonebroadquestion.Therevenuesoftheseclient,Imeanthedealswhichyouhave signed, what percentage of their operating expenses or overall revenue currently they are spending on these services which a provider like us can, you know, deliver them? Chirag,it'sveryhardtoanswerthatgenerallybecauseit'sdifferentfordifferentcustomers.So I don't know how to give you an answer that applies across customers, but Iwillsaythat typicallyourparadigmisthatformidtolargecustomers,ontherevenuecycle,wetendtodo end-to-end deals. So, we often become their full wallet right at the get-go. Fortheverylargehealthsystem,whichisnotthe5billion,thosearetheonesthatsortofgrow incrementally over the period of time, nomatterwhatthefeaturemaybe,revenuecycleor clinical documentation or other features within clinical support or value-based care.
So, if the health system or the customer is greater than $5 billion in revenue, you should expect that we will land with one ormorefeaturesandexpandboththosefeaturesandsell otherfeaturesoveraperiodoftime.Andifitisasystemthatislessthana$1billionorinthat range, give or take, we tendtobeinpositionswherewehaveamuchmorecomprehensive commitment from the get-go. But it is very hard to generalise across the customer base. Ifthequestionis,istherestillalargerunwayforsellingintotheexistingcustomerbase,the simpleanswertothatisabsolutelyyes.Andwestillcontinuetomaintainthatinmosthealthy growthyears,somewherebetween85%to90%ofourgrowthisgoingtocomefromexisting customer expansion versus new customer addition. Chirag Kachhadiya: Okay. Thank you Sachin for thedetailed explanation. Thankyou.WetakethenextquestionfromthelineofRuchiMukhijafromICICISecurities Limited. Please go ahead. Thankyou.Manycongratulationsonastrongquarter.Coupleofquestions.First,wesawthe pressregardingtheUSadministration'sproposaltokeeptheMedicareAdvantagerateflatfor nextcalendaryear.SohowwoulditimpactdemandforIKS?Couldyouhelpusunderstand that? Thank you for the question Ruchi. Yes, happy to do it. Solook,Ithinkifyoureallythink aboutwhatthatdoes,right?MedicareAdvantageisavalue-basedcarepaymentprogramthat hasbipartisansupportintheUS.Andwhattheyaredoingistheyarecarefullyrecalibrating reimbursement for that program. Now, as they do that, it's going to put more pressure on the providers and orrisk-bearing entitiesthatareenrolledinthatprogram.Nowasthatpressureincreases,theyaregoingtodo everything they can to optimize both the cost of care provided to the patients within that programwhileoptimizingthequalityofcareandalsodoingwhatevertheycantooptimizethe premiumthattheygetforthoseliveswithin,youknow,withinthosesetoflivesthattheyare registered or insured over. Sothewaytothinkaboutitistherearethreeleversthattheyhave.Theywillwanttooptimize thepremiumthattheygetperlife,theywilltrytoreducethecostofcareassociatedwiththose livessothattheycanmakemoremarginbetweenthepremiumincreaseandthereducedcost ofcare,andbecausethepremiumincludesakickerfordeliveringhigherqualityofcarethey will want to improve the quality of care delivered. Nowwhenyouthinkofourvalue-basedcareofferingsforMedicareAdvantage,theyactually impact all of these threelevers.Howdoyouoptimizepremium?Youoptimizepremiumby appropriately capturing the risk associated with the condition of a patient. So for example we have a large health system that we work with and the Chief Medical Officersaid,youknowwhenIlookathowthesepatientsthatareatriskwithmearecoded,it shows that only 18% of my patients are obese.
ButwhenItalktomydoctors,theysaidatleast80%ofthepatientsthattheyareseeingare obese.Thatmeansthey'renotaccuratelycapturingtheriskconditionsofthosepatients,which thendrivethepremiumtheywillgetfromMedicare.Themoreat-riskthepatientis,thebetter the premium is. Soourservicethereofappropriatelycapturingriskperlifebecomesevenmoreattractivefora systemlikethisbecausethepremiumsarenowunderpressureandthebetteryoucapturerisk associated with the life or acuity associated with the life, thebetteryourreimbursementis going to be. So that is as it relates to optimizing premium. And then we haveservicesthatallowthese customerstonotonlyprovidebetterqualitycare,butalsoreportbetterqualitycare,whichalso improvestheirpremium.Andthenlastbutnottheleastwithinourvalue-basedcareportfolio, wehaveservicesthatallowthemtomanagethetotalcostofcareoftheselivesthattheyare insured under Medicare Advantage better, and those help improve the reduced cost. So when you really think about it, the more the pressure on these risk-bearing entities or providers, the more attractive our value-based care portfolio becomes to them. And so I fundamentally look at it as a macro tailwind for the value-based care business. Having said that, this space is very crowded, there are a lot of vendors, and so it's very important tomyearliercommentthatweemergeasoneofthebestplayers,thebestvendor partnersinvalue-basedcareevenaswehavethefullbreadthoftheplatformsothatasthese risk-bearing entities are choosing who topartnerwithsothattheycanmanagebetterinthe new tighter environment, we emerge as their obvious choice. Thankyouforthatelaborateanswer.Sachin,incaseapatientreceivesacareandthesumis notfullycoveredbyinsurance,doesthatresultinlossofrevenueordoesthepatienthaveto pay out of pocket if the rate revision is lower? So, Ruchi, it's very hard to generalize that answer. Itdependsonwhattypeofpatientitis, right?IfthepatientisMedicaid-eligible,thenMedicaidwouldcoverthatpatientandyou'dget reimbursed from Medicaid. If the patient wants to go out of pocket because, youknow,there'ssuper-elitepatientsthat evendon'twanttocarryinsurance,thenthatisadifferentratethatyougetreimbursedby.And so,Idon'tthinkthere'sagenericanswerforwhathappenstotheuninsuredpopulations.ButI will say that look, in the end we are representing the providers, right? Andifthenumberofuninsuredgoup,thatarenotabletopayfortheircare,whathappensis theproviderswhichareourclients,theirbaddebtwillgoup.Iftheirbaddebtgoesupitputs morepressureonthem.So,Imean,Iamsofarnothearinganymacroregulationthatisnota fundamentaltailwindforourbusiness. Becausethemoreandmorethepressure,themoreand moretheirproclivitytoimprovetheirmarginsandgetprovidersoperatingatthetopoflicense by using platforms like us. Management: Ruchi, just additional clarification that whatever you're hearing about Medicare Advantage
doesn'tmeanthattheuninsuredpopulationisgoingupintheUS.Yesthereisnocorrelation between those two phenomena at all. The Medicare Advantage premiums are going to suffer unless the risk-bearing entitiescan justifybetterpremiumsthroughaccurateriskcapture.Thatwillhappen,butthereisreallyno correlation between the MA premiums and the number of uninsured. Gotit.Movingon,thisquarterwesawverystrong25%sequentialrevenuegrowthinyourtop 6-to-10 client bucket. Is this reflection of Palomar andWWMGmovingtothisbucketand couldyouhelpus--wedidhearyoutalkabouttheneteconomicvaluegeneratedinPalomar deal? How's the progress panning on WWMG deal as well? Yes, so thank you for the question, Ruchi. Look, I think what I don'twanttogetintoisa paradigmofreportingprogressoneachdeal.Havingsaidthat,theWWMGdealisabsolutely on track. Andweexpecttoseebenefitsbeingcreatedoveraperiodoftimeand,again,theresultsofthe Palomardealsofarhavegivenusabigshotinthearmandtheconfidencethatthismodelhas long-term sustainability, but it's still early days and we'll see how it progresses in the future. Please understand one of the factors that drive the speed of the implementationofthefull platformandthenetresultingneteconomicvalue-addisalsotheunderlyingsystemofrecord or electronic health record that the customer has with whom we have to integrate our platform. Now,inthecaseofPalomar,theywereonanelectronichealthrecordplatformcalledNextGen withwhomwe'vehadalong-standingrelationshipandsowewereperhapsabletointegratea bitfastereventhoughinspiteofthatrelationshipittookusthreemonthslongerthanwehad hoped. In the case of Western Washington, they are on Epic and that Epic is delegated to them through a large hospital in the area. So integration with Epic always takes longer than integrationwithothersystems.Andso,youknow,thingslikethosewillalwaysplayintothe deal dynamics, Ruchi, which is why I don'tknowthatthedeal-specificnuancesareofthat much relevance. ButIthinkoveraperiodoftimeIthinkwehaveearlyindicationsthatourfundamentalthesis around this net economic value-add model might turn out to be quite valuable. Ruchi Mukhija: Okay, and as we... Ruchi, I would request you to please joinback the queue for follow-up questions. Ruchi Mukhija: Sure. Thank you. We takethenextquestionfromthelineofProlinNandufromEdelweissPublic Alternatives. Please go ahead. ProlinNandu: Yes.Hi,team.Thankyoufortakingmyquestion.Justtodoubleclickonsomeoftheprevious participant's question on what is going on in US, right? While the Medicaid inflation was
lower-than-expected or price hikes, therearevariouscasesoffraudswhicharealsocoming out in the provider mix, right, in maybe states of Florida and some other states as well? SowhileIappreciateyourcommentthatinthelongertermallthisisgoingtobepositivefora platformlikeus,butinaninterimisthereariskthatsomeofthevolumesatourclientsmight suffer, right, because of whatever is going on? Andinthesamecontexthowdifficultisittoidentifyaconsolidatorclientinsuchascenario, right,whereifIalsothinkaboutyourdealwithPalomar,right,thatalsoacquired--theygot acquired,right,inaway?Soinavery,youknow,dynamicsortofaworlddoyouthinkthat therecouldbesomehiccupsinourrevenuebeforeweprobablyrealizethebenefitofwhatis going on in the US regulatory space? Thank you for the question. I think theanswerisyesandyes.Imean,I'msorry,butYes,I mean,ofcoursethereisa--thisisahighlydynamicenvironment,alsoanenvironmentwhere thereisconstantchangeinregulation,thereisunpredictabilityofregulation,andthenthereis all this need for buyers to discern the signal-to-noise ratio between AI hype and reality. And so in a world like this, if I stood here and said everything is a tailwind for us and everything will result in linear growth consistently quarter-on-quarter, year-on-year, I'd be lying.Andsoyou'reright,Imean,Idon'tknowwhenthenexthiccupiscoming,whichiswhy we don't give guidance. Andthat'swhyIkeepsayingthatingeneralifwe'regrowingfasterthan12%,we'regaining marketshare.Ifwe'regrowingslowerthan12%,we'relosingmarketshare.Andwe'regoing to try to stickwiththatandyouknowwe'llhavesomequarterswhereperhapsthenumbers lookbetterthanotherquarterslikethisquarterthatendedQ3,whichwe'reveryproudof,and there'll be other quarters where numbers will look worse.ButIdon'tthinkthisisamature stable market where you can predict a linear growth curve quarter-on-quarter, year-on-year. So if your question is, does this create unpredictability in the market and could there be hiccups?Absolutely.Imean,hardformetotell.Icanjusttellyouthatourclientsareunder moreandmorepressureandmoreandmorepressuremeansthattheyhavetodothingsthat they haven't done in the pastandtheirprideoftryingtoowneverythingisdefinitelybeing tested right now. So that is a sortofmacrofundamentaltrendthatisundeniable,buthowthatplaysoutona quarter-to-quarter basis will there be some hiccups in some client? Absolutely. Now, you know, that only time will tell, so thank you. ProlinNandu: Yes,thankyouSachinforthat.Thesecondquestionisthatyouhavedoneafantasticjobon margins,right,andpartofitiscomingbecauseoftheAQuitythingaswell.Soinourkindofa businesswhere50%ofourrevenueisoutcome-basedandwearemovingtowardsamore,you know, platform dealandoutcome-baseddealsaswell,howdoweunderstandtheceilingon the margins or revenue per employee or EBITDA per employee? Becauseinapurelyproductcompany,right,everyadditionaldollarofrevenuecomesatavery little marginal cost. So in some of our outcome-based deal isthatsomethingthatis--will
work out for us as well? So, I think, look,we'renotapureproductcompanyandwe'renotapureservicescompany, right? We still have 13,500 people nearly, which means that there are some tasks that are executedmanuallyandtherearesometasksthattechnologyiseliminating.WhatIwillpoint you to is the fact that for 24% year-on-year growth, there has been 1.5% headcount growth. Ifyouextrapolatethistrendtothelast5years,you'llseeclearevidenceofthistrend,soitis not a 1-year trend or a fluke phenomenon, right? So I think what you should continue to expectismoreandmoretechleverageinthebusiness.Butthatmoreandmoretechleverage will also get offset by continued expansion of R&D investment. As you'veseenourR&Dinvestmentthisquarterisuptonearly5%,4.7%.Ithinkit'sabout INR39crores,giveortake.AndsoweintendtocontinuetoexpandourR&Dinvestmentina worldwhereeverybodytalksaboutAI,we'reactuallybuildingAIanddeployingittomakea real impact on patient lives, on provider lives, and in the process on our bottom line. Andso,expansionofR&Dinvestmentalsoinamarketwherethereissomuchnoiseaboutthe hypeofAI,it'simperativethatwecontinuetoexpandourmarketingspends,whichisgoingto beanotherleverofinvestment.Andthenwe'llcontinuetoexpandoursalesforcebymarket segment because each of the market segments are so nuanced and have their own dynamics. AndsoourstancebetweenNithyaandmehasalwaysbeenthatlook,oncewegettoearlyto mid-30s in margins, that is what you should expect fromthebusiness.Wehadthoughtwe would get there two quarters later, we got there two quarters sooner. I thinkweareinthe range. And so I wouldn't model ifthat'swhatyou'relookingtodosomesignificantmargin expansion at the EBITDA level. Willweconstantlykeeptryingtooptimizegrossmargin?Yes.Asweoptimizegrossmargin willwekeepexpandingourinvestmentsinSG&A,R&D,salesandmarketing?Yes.And,you know,westayconsistentwithwhatIhavesaidisthatthisistheEBITDArangethatwefeel relatively comfortable with. And by that, I don't mean 35%, butthisrangewithinthenext within say 100 to 150 bps. Prolin Nandu: Thank you so much Sachin and all thevery best. Thank you. We take the next question fromthe line of Azim from Barclays. Please go ahead. Azim: Yes,thankyou.Congratulationsonagoodsetofnumbers.Questionisaroundwhatwekeep seeingonTV,right?ThisAnthropicandthewayAIisprogressing.Iknowyouhavecovered enough. Butstillthequestionthatislingeringhereisthathowthecompetitioniskindofmatchingup toyourpacebyusingtheseagentsandtheway,youknow,theentireAnthropicisdisrupting SaaS and otherareas.SowhatisthedistinguishedIPthatyouhavewhichcompetitionmay not have when you're reaching out to your, you know, potential clients?
So,thankyouforthequestionandforthekindwords.Ithinkthesimpleansweristhis.Look, whatisAnthropic?AnthropichasthisplatformcalledClaude.Thatis,it'sessentiallyacode generationplatformanditisaverysophisticatedcodegenerationplatformwherepeoplethat are not the most sophisticated engineers can actually rely on the platform to generate code. And it's very important for us to understand that. We,asabusiness,areconstantlywriting codeleveragingAItodeploythistechnologytoeliminatetasks.AndastheAnthropicsofthe worldkeepmakingtheClaudesoftheworldmoreandmoresophisticated,wewillbeableto do more and more technology build-outs, hopefully at a lower costanddeploytechnology rapidly. So for us, we don’t look -- nobody pays us todeveloptechnologybasedonthenumberof peoplewedeployandallthat,right?That'snotourbusinessmodel.Soforcompaniesthatget paidbecauseittakes50peopletobuildatechnology,Claudemightnowbeabletodoitwith 14 people and so obviously they're going to run into headwinds. Inourcase,thatisnotthecaseatall.So,IactuallywantmoreandmoreClaudestocomeout, more and more Claudesoftwaredevelopmentkitstoberolledoutsothatwecanaccelerate our deployment cycle. Now,yournextquestion,asacorollarytothatis,doesthatdemocratizetherightforothernew playerstoleveragethesetoolsandalsobuildaplatformlikeus?AndIthinkitwouldbenaive onmyparttosaythatitdoesn't.Yes,ofcourse.Traditionally,whattookus3yearstobuildas a technology, today we're building it in 6 months. So,whatistosayotherswon'tbuildit?Butpleasekeepinmindbuildingthetechnologyisone thing, capturing market share is another.Ithasbeen18yearsthatwehavetakentocapture 150,000providers,westillfaceconstantresistanceworkingwithourclients,convincingthem to change what they are doing in spiteoftheirpressurestopenetrate,thenintegratingwith their system of records, the EHRs. Allofourclients,evenwhenthey'reonanEHR,theirdataisinanabsolutemess.So,ittakesa longtimetogettheirdatareorganizedandvectorizedsothatthesetechnologyplatformscan beeffectivewiththatdata.Sothisnotionthatsomehowtheseenterpriseswillleverageatool like Claude and build all of these agentic workflows themselvesisratherunrealisticinmy opinion. And so look, Ithinkwe'rehopingthere'smoreandmoreClaudeandthere'smoreandmore accelerationtotheengineeringcycle.Andifinthatprocesssomeworthycompetitorscomein andcreatetechnologythatiseitherbetterthanoursorhaveamousetrapthatgetsthemintothe market faster, all glory to them. Justkeepinmindit'sa$260billionTAM.Only34billionhasbeenoutsourced.Weareunder a $400 million company today. So look at the growth opportunity and the opportunityfor multiple playerstoexist,whichiswhyasyoucanseethereissomuchinvestmentgoingin this space. And what are we doing in the middle of all that?
We are trying to continuetodriveindustry-leadinggrowthinacapital-efficientmanner,not overleveraging our balance sheet at all, and do deals that are fundamentally differentiated because we're doing more and more full platform deals. I think welcome Anthropic and Palantir to bring more and more technology to benefit us. Thank you. We take the next question from the line of Dhrumil Wani from Girik Capital. Please go ahead. Yes,hi.DhavalShahthisside.Thankyoufortheopportunity.Greatsetofnumbers.Sir,my question is -- am I audible? Hello? Sachin Gupta: Yes, absolutely. Hello? Sachin Gupta: Yes, Dhaval, you're very audible. So,inthe--Yes,thankyou,sir.Sir,inthesecondquartercall,youknow,haddiscussedabout gettingthisEpicEHRsystemintegrationandwhichwasabigmilestoneforIKS.SoIwasjust going through acoupleofYouTubevideosonEpicandallofthat.Socanyoujusthelpme understand, the difference between what isthisEpicproducttryingtoofferandwhatisthe integration all about and why is it a big milestone? You also mentioned thatthereistheothersoftwarecalledNextGenIthink,whichtheother providersareusing,whichwilltakealessertimetointegrate.Socanyouspendsometimeon this what is this Epic and what is the integration all about? SachinGupta: Yes,DhavalI'lltry,butthisiswhereIstartgettingaccusedofjargon.SoI'mgoingtotryand then we're happy to talk to you. This is a very important questionthatdeservessomereal education.Andifyoudon'tmind,reachingouttoSaransh,we'rehappytospendagoodhalf an hour with you giving you details. Butthewaytothinkaboutit,Dhaval,isthatinthisspacetherearetwotypes--therearethree genres of companies that are competing for this $260 billion. Three genres of companies. Forgetaboutthein-houseincumbentsoftheseorganizations,let'sleavethemoutforasecond. The three external genresofcompaniesareone,systemofrecordcompanies,whicharethe electronichealthrecordvendorslikeEpic,Cerner,whichisnowcalledOracleHealth,Athena, Allscripts, NextGen, eClinicalWorks. These are someofthemajorelectronichealthrecords which are calledsystemsofrecordbecausetheywerebasicallycreatedtostorelongitudinal patient data. Traditionallyoverthelast20yearstheywereessentiallysystemsofrecord.NowwithAgentic AI coming in, traditionally they were not in the business of eliminating tasks for these healthcareproviders,infacttheywerecreatingmoretasksbecausehealthcareprovidersspent a lot of time and energy in managing these system of records. NowwithAgenticAItheyarestartingtoalsowanttogetintothebusinessofeliminatingtasks bywritingtheirowntechnology.Whatistheiradvantage?Theyarealreadyincumbentinthe
customer,theyalreadyhaveallthedatastoredwithintheirsystems,andyouneeddatatobe able to orchestrate AI effectively in a customer's environment. So that is their advantage. The second genre of companies is what I call point solution systems of action, which are companies that just do clinical documentation, ambient AI companieslikeanAbridgeora DAXwhichisownedbyMicrosoftorAmbience.You'veheardallthesenames,orcompanies that just do prior auth or companies that just do patient access, which are individual one-two-threetaskswithinouroverallplatform.Icallthempointsolutionsystemsofaction. Their idea was to eliminate actions that are unnecessary from the provider's environment. AndthethirdiswhatIcallplatformsystemsofaction,whicharecompanieslikeusthathave said point solutions are not the answer. System ofactionneedstobecomprehensiveandit needs to eliminate all the redundant all the chore tasks. And so these threecompaniesare fighting with each other for this $260 billion. The systems of record,theEpicsoftheworldhaveanincumbentadvantagebecausethey're sittinginthecustomer'sorganizationwithdata.Wehaveanadvantagebecausewe'resittingin 150,000 providers, already incumbent we understand their workflows indetaillikenobody elseinthenewworldunderstandsthem.NowhowthosedynamicswillplayoutDhavalovera periodoftime,onlytimewilltell,butmybeliefisthereisenoughmarketspaceforallthreeof these genres to succeed. I will make one distinction. Ipersonallybelieveinthemediumtolongtermasvaluationsetc.rationalize,theremightbe somecomingtogetherofsystemofrecordcompanieswithsystemofactioncompanies.Ifthat coming together starts to happen,thatmightcreatethetrue800-poundgorillainthisspace. Andsowearewatchingverycarefullywhat'shappeningtothesesystemofrecordcompanies, we are keeping our balance sheet healthy and strong. If some opportunities emerge we will look to that. Until then, even though they are pseudo-competitors to us, we have to integrate with thembecausethedataiscomingfrom them, which is whyintegratingwithEpicisabigdeal,andtheregulatorseventhoughthey realizethatthesystemofactionandsystemofrecordarecompetitorsareforcingthesystemof recordstointegratewiththesystemsofactionbecausetheyrealizethattheycan'ttake--these systems of record can't take unfair advantage of their incumbency. Sotheystillkeeptryingtotakeunfairadvantage,someplaybetterballwithothersandovera periodoftime,slowlybutsurelyweareintegratingwithallofthese.Sohopefullythisgives youcontext.Happytotalktoyouofflineaboutthis.Thisisaveryimportantdynamicinour business. NithyaBalasubramanian: Just to add I think with respect to Epic we're very happy that several of our proprietary technology products are now fully integrated into Epic. So if you lookatEpicshowroom, you'llactuallyfindourScribbleproduct,ourStacksproductandevenourcodingsuiteisnow available onEpic.Sowhatthatmeanswe'reabletoautomaticallyintegrateourproductinto Epic, we're able to readandwritefromEpicandourproductsareabletoworkthereforein tandem with Epic. Gotit.Andmysecondquestionisininterestoftime.Theamountofcashwhichwearegoing
togenerateafterwepayoffthedebtonthebalancesheet.So,ofcourseit'llbegoingtowards yourownbusinessplussomeinorganic.Sonowthethreesegmentswhichyoujustmentioned. Sowewillbelookingforopportunityinallthreeofthatorwhichsegmentwillbeinterestto usatoursizeandthestageatwhichweareinthebusinesscycle?Canyoujustthrowsome light on that as well? Ithinkiftherearesomesignificantleadersinthepointsolutionsystemofactioninthehealth systemmarket,thosewillbeattractive,andthenabsolutelyasystemofrecordleadersinany ofthesegmentsofthemarketwillbeattractive.But,like,Isaidthemarkethassuchhypeon valuations right now and we are generally prettyconservative,sowe'regoingtobecareful about it, but we'll absolutely keep our eyes and ears open. Gotit.AndtoNithya,whataboutthedividendpolicy?Areweplanningtohaveanythingwith this? Nithya Balasubramanian: I think like Sachin pointed out there are a lot of, I'm sorry are you able to still hear me? Hello? Yes, yes, very much. Yes, I can hearyou. Hello? NithyaBalasubramanian: Yes,sowestillhavemultipleopportunitiestocontinuetogrowourbusinessaswellaslookat acquisition opportunities which willbecomplementarytoourbusiness.Andofcoursewhat the $50 million of debt that we still have, is ofcoursesomethingthatwewanttopaythat down pretty quickly. So those would be priorities in the near term. Got it. Okay, thank you very much. Goodluck. We take the next question from the line of Abhishek Maheshwari from SkyRidge Fund Managers. Please go ahead. Thankyoufortakingmyquestion.Justtwoquestions.Firstisregardingtowhatextentdowe hedgeourforexearnings?Becauseeverythingweearnisindollars.Soisit100%hedgingora little less than that? Nithya Balasubramanian: It's 50% to 60% of our netforex exposure, that's what we hedge. Andsecondquestionisregarding60%ofthenetforexexposureoverthefollowing12months. Understood,allright.SosecondquestionisregardingIknowyouhavealreadytouchedonit, butyou'vebeengrowingverywellthelastfewyears.Anyconcernswithrespecttothebase effect?BecauseImeanafterapointitdoesbecomedifficulttogrowat40%-30%levels.So where are we in the cycle right now? Yes, look,Imean,IthinkasI'vesaidIthinkthemarketopportunityislargeandoursimple thinking is if wegrowfasterthan12%,we'regainingmarketshare.Ifwegrowslowerthan 12%,we'relosingmarketshare.Sofarwe'vebeenfortunateenoughthatweareabletodrive thatindustry-leadinggrowthandwebelievethatwehavethewheelsinmotiontocontinueto try to do that ButagainIwillwarnuseverybodythat,nothingislinearinlife,butIthinkourbaseisstill
small enough relative to the size of the market where growing faster than market is the headline. Tome,that'sthetruedefinitionofsuccessandthemarket,theoutsourcedTAMis growing at 12%. So that's sort of how I think about it even from the current bridge. Sothisyear,thisremarkisbasedonthecurrentenvironment,notthepotentialacquisitionsyou can make in the future right? Yes, that's right. Abhishek Maheshwari: All right. All right, thank youso much. WetakethenextquestionfromthelineofJaiprakashKumharfromKormanCapital.Pleasego ahead. JaiprakashKumhar: Yes,SachinmyquestionisonthisplatformyoutalkedaboutClaudeandPalantirandallthat. So right now maybe they are kind of a subsidized low cost. Given that you use this comprehensively,howlet'ssayiftheyincreasethecost,howwillitimpactyourcostbase?Or isitjustIunderstand,maybeit'sinsignificantrightnow,butmaybeinfuturehowsignificantit is in terms of usage and the cost? Solook,Imean,intheendtherearetwotypesofexternaltechnologiesthatwe'reusing.We're usingsystemsofcompute,right,andwe'reusingsystemsoflogic.SothesethingslikeClaude, Iwouldcallthemsystemsoflogic.Iexpectcoststofluctuatebothinsystemsofcomputeand systemsoflogic,andhencewecontinuetosaythat,ourR&Dcostsarelikelytocontinueto inch up not down even as we continue to try and improve gross margins. Andhence,ourthoughtprocessthatpleasedon'tcontinuetomodelconstantmarginincreases from theselevels.Soyoushouldexpectcoststoperhapsincreaseoveraperiodoftime,but eventually as you know very well as technologies become more and more mainstream adoptionincreases,costscomedownoveraperiodoftime.Soit'sgoingtobevolatileandthat should be reflected in our R&D costs and we're anticipating that in our R&D cost. Jaiprakash Kumhar: We take the next question from the lineof Karan Shah from CWC Advisors. Please go ahead. KaranShah: HiSachin,goodmorning.Ihadaquestion.Youhaveseveralqualitativefactorsthathelpus understand as investors the medium-to-long-term growth drivers, the trajectory, and the opportunity that stands out in front of you. Butquantitatively,whatwouldbethosegranularmetricsthatyouandyourteamholdyourself accountable to on a medium-to-long-term basis, apart from growing over and above your TAM rate? Soyousee,thankyouforthequestion.Imeanthereareawholebunchofmetricsthatwe're holding ourselves accountable to internally that aredrivenbymarketsegment.Sothereare metricsbymarketsegmentandtherearemetricsbyfeatureandfeaturecluster.Sothinkabout ametriclikepenetrationofeachfeatureinthecustomer'swallet,thenpenetrationofnumber
of features in a large enterprise customer. Soyouknow,Imeantherearesomanymetricsbymarketsegmentandbyfeatureandfeature clusterthatitwouldbehardtocallthoseoutonacalllikethis.Youknow,butagainhappyto discuss more of thatoffline.Butobviouslyasyoucanimaginewhenyouhavesuchalarge such a full breadth of the platform Andyou'retryingtoexecutefullplatformdealsandyou'retryingtoexecuteindividualpoint solutiondealsincertainsegmentsofthemarket,themetricsdifferbymarketsegmentandby featurecluster.AndsoI'msorry,hardformetosortofjustenunciatethemonthiscall,butjust know that there are and those are the metrics just around revenue. Then there are metrics around margin, then there are metrics around automation like I discussed,howmuchisthehuman-ledtechintheloop,whendoesitgofromhuman-ledtech inthelooptotech-ledhumanintheloopwherehumansbecomeauditoroftaskversusdoerof task and then whichfeatureswillgettoautonomywhen.Whathappenstothegrossmargin journey asthefeaturesgofromhuman-ledtechinthelooptotech-ledhumanintheloopto full autonomy. So there's metricsaroundmargin.Operatingcashflowsisoneofthebiggestmetricsaround whichthewholeleadershipteamisaligned.Soagain,sorrybutyouknowwehavetoactually headonoutforamediainteraction,buthappytotalktoyoumoreofflineandgiveyoumore color on internal metrics. Ladies and gentlemen, due to paucity of time, we take that as the last question. Further questions canbetakenupwiththeIRteam.InowhandtheconferenceovertoMr.Saransh Mundra for his closing comments. SaranshMundra: Thank you, thank you everyone for joining and asking all the questions. This was really interactivesession.Iknowwewerenotabletotakesomequestions,pleasefeelfreetoreach out to me for any of those questions. Thank you again everyone. Look forward to your continued support. Bye bye. Thank you. Thankyou.OnbehalfofICICISecuritiesLimited,thatconcludesthisconferencecall.Thank you for joining us and you may now disconnect your lines. Please note that this transcript has been edited for readability.