warm welcome to all of
you to the Q1 FY 'twenty two earnings conference call of Corcos. You have received our results by now. Those are also available on our website, www.com.com. Within along with me on this call are our CEO, Mr. Sudhir Singh and our CFO, Mr.
Ajay Kalra. We will start this forum with opening remarks from our CEO and post that, we'll be happy to answer your questions.
With that, I would now like
to hand over the floor to Mr. Sudhir Singh, CEO, Copherjee. Welcome to you, Sudhir.
Thank you, Avinandan, and a very good evening and a very good morning to you across the world folks. Thank you very much for taking the time and for joining us for this conversation today. These are remarkable times that you are living through and I hope that your family, your loved ones, your team members, and you yourselves are safe and healthy. We need today, yet again, to see the continued shadow of a pandemic that is still raging across the world. The push on the discussion coincided with the second wave in India.
Team cohorts responded to the situation by establishing 3 ICUs within its premises across cities, by structuring 24x7 ambulance on call services, and by conducting 32 vaccination camps across India. With a nod to the times, let me kick off the discussion today by sharing a rather unusual metric, one centered around vaccination rates. At Cofold, I take great satisfaction in reporting to you that 72.3% of our employees globally have now been vaccinated, and we are on target to complete the vaccination of all our employees who wish to be vaccinated by the end of the current quarter. With that, I would like to share some perspectives on our quarterly performance and the outlook going forward. Before I discuss our quarter 1 results, I would like to point out that the company in the Q1, where our reported performance also includes 2 months contribution from SLK Global, an acquisition that we closed in the last week of April this year.
In order for you to better appreciate our operating performance, I shall call out organic performance not including FLT Global Metrics I shall also call out the firm's overall performance, including SLK Global Metrics, separately where relevant. In fact, here goes. We are pleased to report that our organic growth as a firm accelerated further during the quarter. In Q1 fiscal year 2022, our sequential organic Q1Q growth was 7.6% in U. S.
Dollar terms, 7% in constant currency terms and 7.4% in Indian grouping terms. This organic sequential 7.6% growth in Q1 follows a growth of 7.1% in U. S. Dollar terms previous quarter. As a consequence of the sustained growth that the firm has seen, our year on year organic growth in quarter 1 fiscal year 2022 is 32.3% in U.
S. Dollar terms. In quarter 1, our organic revenue stood at US185.1 million dollars in reported terms and the reported revenue in Indian rupee terms was 13,546,000,000. TORM's overall performance, including the contribution from the acquired circuit business, saw reported consolidated revenue grow by 16% quarter on quarter and 42.8% year on year in dollar terms. In Indian rupee terms, the growth for the firm in quarter 1 was 15.9% quarter on quarter and 38.3% year over year.
Overall, consolidated revenue for the firm for quarter 1 stood at $199,700,000 and INR 14,616,000,000 in reported notes. Sales. With that, I should now detail the verticalized growth for the quarter end review. The numbers I am going to talk about now are excluding the impact of the SLC Global Edition. Not including SLC Global as noted, in quarter 1, our insurance vertical grew 10.1% sequentially.
It contributes 32% to the revenue mix. The BFS vertical grew 3.2% sequentially and contributes 16% of total revenues. Our travel vertical grew 15.8% sequentially and contributes 20% of the revenue mix. The other verticals grew 2.1% sequentially, contributing 31% to the total mix. Our top 5 clients, not including clients from the SLP Global portfolio, grew 3.9% quarter on quarter and our top 10 clients grew 5.6% quarter on quarter.
Top 5 clients contributed 24.6% to our overall revenue and our top 10 clients contributed 35.9% of total revenue. On-site revenues represented 60% of total revenues in quarter 1 fiscal year 2018. This indicates and follows the continuing trend of a gradual rise in offshore revenues over the past 4 quarters. With on-site revenue at 60%, now being lower than the 64% recorded around a year back. Moving on to margins and to operating profits.
During quarter 1, we delivered an EBITDA of INR2,359,000,000 before accounting for the soft costs and part of the SLK Global acquisition related expenses that got booked during the quarter under review. EBITDA margin for the quarter stands at 16.1%. The margin performance for quarter 1 fiscal year 'twenty two reflects the full impact of global annual weight hikes rolled to a successful organization as it happened on April 1. This also reflects the impact of transition expenses in 4 of the 5 material deals signed over the last 6 months and also the movement of some Advantage Go license sales into the next quarter. We do expect margins to expand substantially over the next three quarters.
With quarter 2, which is a quarter that we are currently in, expected to be around 200 bps higher than quarter 1 margins. Our consolidated reported after tax profit for the quarter stood at INR 1236,000,000, a decrease of 7% quarter on quarter and an increase of 54.7% year on year. Depreciation and amortization during the quarter also reflects amortization of intangibles created as part of purchase price allocation done for the acquisition of Esselk Global that was included during the quarter. The impact of the change is $700,000 in the current quarter, primarily reflecting a rounded impact of 2 months. Moving on to order intake and commentary around order intake.
This quarter, for the quarter under discussion, quarter 1 fiscal year 'twenty two, South has a record quarter for the firm in terms of composite order intake, order of executable book and also importantly the size and the significance of the larger deals that were signed. Our organic order intake, not including SLK Global contribution, for the quarter was US318 $1,000,000 We will recall that in the last four quarters, our order intake has been between $180,000,000 to $220,000,000 Gasco itself for order intake, again you will recall, was $201,000,000 This was an appreciable jump. Equally importantly, booked orders for the next 12 months, which is what we call out as order and distribution, not including the SLK Global Business, now stands at $516,000,000 US dollars. This metric is up 20.4% year on year. If we were to include Assilp Global, the order attributable for the firm raised at the end of last quarter stands at US645 $1,000,000 During the quarter on review, 7 new logos were signed.
The spike in order intake has come on track of 3 large and 3 very special deals signed during the quarter. 2 of these were signed across the BFS and the insurance verticals. The third was a large deal net purely by the horizontal cloud and infra services business. In the insurance domain, the firm signed a $20,000,000 plus contract over 3 years, which is the largest ever license contract for the Advantage Pro business. Revenues for this, of course, will be recognized over the 3 years from the license.
In the DSS domain, the firm signed a $105,000,000 contract to be delivered over 4 years, exceeded by a staggered 8 months long transition. The BFS team will bring into place all our core transformation capabilities across enterprise architecture, industry consulting, data architecture, product engineering, digital integration and intelligent automation. Out of this organic US318 million dollars order intake excluding the S&K business, the U. S. Contributed US46 $1,000,000 EMEA was at US227 $1,000,000 and US46 $1,000,000 was secured from the rest of the world.
Secondly, to round off this section, in addition to the 3 large deals that I referenced, we wish to also share that we are one of the largest banking and financial services institutions in the world. We have signed a global NSA to provide technology services from and to segments across U. S, Europe and India. I shall now pivot to quick commentary around delivery operations and capability in build activities. Today, more than 51% of our global tech revenues comes from our digital service lines.
Another 20% comes from our cloud and infrastructure service lines. The firm's service stack today as a whole is a composite of $100,000,000 engineering service line, dollars 100,000,000 cloud and infra service line, dollars 100,000,000 intelligent automation service line, with the addition of SLK, a $100,000,000 business process management service line and a $50,000,000 digital integration service line. The cloud services business continues to drive both accelerated growth and sharp differentiation. It also powers fully or partly almost every large deal pursued that we are undertaking. Our engineering convergence based agenda for the cloud that we crafted our own cloud innovation stack in December our infrastructure as a core transformation program approach falls out, and our advanced AI ops platform, which is fundamentally an integrable programmable platform, continue to deliver distinct and tangible value and differentiation in this space.
Our product engineering service line with its Agile Next framework continues to power through product creation and updates. The Advantagro specialty insurance suite is a prime example of this. This. This quarter, one of the world's largest publicly traded property and casualty insurance companies signed Advantage Go for the implementation of our advertising product. Another U.
S.-based Fortune 500 insurance company has successfully entered our risk insurance risk management software. We need a broader digital practice outside cloud, also outside product engineering. For a global provider of risk management product and services, cohorts implemented a domain driven design framework to modernize the API architecture to avoid crucial lines of business. And I'm John has helped them with a faster onboarding of their partners. Our digital consulting services team also leads our enterprise transformation offering, our largest independent global workforce deployment platform, which is incidentally a multinational conglomerate of over 7 companies.
Again, we are engaged at the senior executive steering committee level itself to drive that transformation. And finally, to round up this section, on the recognition front, for the 3rd success of the year, we have been awarded a platinum partner series by Tega. Our Digital Integration business was awarded our 7th MuleSoft Partner Award Receipt and we were also placed as a leader in the Everest Group Fleet Metrics Insurance Business Model Innovation Enablement Services. Sifting once again towards the future metrics, Quarter on revenue broke the record established in the previous quarter of the highest net head competition in a quarter in the history of our firm. On an organic basis, and not including SLK Global FX, our headcount recorded a net increase of 1,138 people during quarter 1 fiscal year 2022, implying a 9.2% sequential increase.
This comes in the back of an 8.5% sequential increase in headcount during the last quarter. Effectively total headcount for the firm excluding SLK Global has increased by around 18% over the last two quarters. On a reported basis, after adding in the 6,962 employees of SNC Global, who now form part of the 4th 1st revenue, Our total headcount stands at 20,491. The strong headcount growth aligned with the significant number of employees engaged in transition activities to service business deals and material deals that we have signed has led to lower utilization during the quarter at 77%. You will recall last quarter we were at 81%.
We expect utilization to normalize as newly secured these ramps. Finally, I am happy to note that attrition continues to be at a healthy level despite very broad market conditions around balance efficiency. In fact, it stays at 12.6%. Very quick commentary around balance sheet and then I'll kindly pivot to summing up on the outlook. On the balance sheet front, cash bank balances at the end of the quarter were INR 3,017,000,000 and material payouts towards the interim dividend expense in May and the SLP Global acquisition.
CapEx spend during the quarter was INR 5.70 1,000,000. Debtors at the end of the quarter stand at 71 days of sales outstanding. The CF for quarter 1 fiscal year 'twenty two stands at US12 $1,000,000 We are pleased to share that in line with our intent to return excess cash generated to shareholders, the Board is recommending an interim dividend of INR 13 per
share. Summing up and I'll follow the summing up
with an outlook as well. Before I share the updated outlook for fiscal year 2022, I would like to quickly summarize and reflect on the headwinds and also the tailwinds that drive our revenue and margin assessment for the year. On the revenue front, the tailwinds include: 1, a 12 month organic committed order book which is 20.2% higher than what it was a year back 2, revenue momentum that has accelerated the $20,000,000 plus in short break win and the $105,000,000 BFS can represent a material milestone for the firm. 3, our client concentration and the associated risk of that client concentration continues to be low retention. 4, upfront resource hiring over the last two quarters has increased double headcount by 15% plus.
This SME pool is available after demand that we clearly see. 5, and I think this is important, the increased recognition of our product engineering expertise and our ability to stand up, manage and grow industry platforms independently continues to have a very positive rub off on the services revenue stream of the firm. 6, again important, our forays into newer verticals over the last 18 months have now stood at 3 dividends. We have set up 3 material verticals in addition to our 3 core verticals over the past 3 years. PreCheck and Manufacturing now accounts for 8.9%, that's almost 9% of our total revenues.
Retail and Healthcare accounts for 8.1% of our global revenues and government outside India accounts for 7.5%. 7th big point, the continuing rebound of the travel business and you have seen the metrics gives us confidence. We believe this business shall seize and serve the lift when the air travel in Europe results. And finally, the portfolio of 14,000 clients where we are enrolled as a preferred partner has doubled over the last 18 months. Growing these relationships alone reflects a material revenue expansion opportunities.
Now while all of these are favorable, on the headwind side, supply challenges are a clear headwind around revenue growth. We recognize in our attention to resolve supply challenges, particularly supply challenges around niche skills.
In May, we had shared that
we are planning for an organic constant currency growth of at least 17% in fiscal year 'twenty 2. You will have noted that our organic 41 revenue times revenue multiplied by 4, just extrapolating, will by itself represent an organic constant currency annual growth of 18.6%. Given this momentum and the backdrop that I just shared, we are now planning to deliver at least 19% CCA organic growth for the year. Moving on to the margins outlook for the year. The key wins around margin include: 1, the continued growth of and the discount reversal in our travel vertical 2, a gradual increase in offshoring percentage as logistics fees have been closed 3, the operating leverage that is coming from the accelerated growth that we have seen.
Headwinds on the margin side include: 1, wage increase effective day 1 of the June fiscal. You will recall last year there was no wage increase 2, retention cost and hiring cost increase 3, decrease in utilization and this is important we believe as larger net new deals warrant constant transitions and transition cost. We recall that
in May we had shared that
we are targeting an EBITDA pre RSU cost of 19% for the year. We continue to plan to target a 19% EBITDA as confirmed last quarter. In quarter 2 itself, we expect EBITDA to jump around 200 bps over quarter 1. This immediate jump in quarter 2 over quarter 1 will be facilitated by 1, a forecasted increase in utilization. Our global headcount has grown 18% in the last 6 months in an effort to staff on new large deals.
4 of the material deals signed in the last 6 months have an upfront transition period. In quarter 2 of the 4 material fees will complete. 2nd thing that we give a short term feel is that the annual visa cost that we booked in Q1, Korea will not recur in quarter 2. 3, advantageable license fees that could help us towards the end of quarter 1 have now been realized in July and will provide a fill up of our margins. That's the aggregate summary on the margin front.
Coming up,
Cofo is the name that we adopted around a year back, hence we're working together to create lasting value. We believe that at the core of our operating culture is an intense focus on execution and surprise free operations. We believe that over the last 4 years, we have taken place the leadership, the strategy, the culture and the tech capability stack to grow and differentiate. Moving ahead, we remain committed to building on the foundation that we created so painstakingly over the last Ladies and gentlemen, I come to the end of my opening remarks and I look forward to hearing your comments and to addressing your questions. Thank you.
Thank you, very much. We will now begin with the question and answer session. The first question is from the line of Deepu Sinhgal from Flipkartou. Please go ahead.
Yes, hi.
Thank you for the question, Zivar. Let me just take both of them in order. You're right about the mathematical calculation on the growth required to hit the 19% threshold. It is a very low number. The intent before has always been to be conservative around revenue guidance and that's how we've always offered guidance and this is why we've always met guidance and in most cases exceeded guidance.
That is the intent currently as well. So we do not see any headwinds, digital headwinds to revenue growth. And the hindrance will be to hopefully exceed the 19% threshold, which is why the guidance has been called out very clearly as at least 19% CCRP. Moving on to your other question about margins, Sobeys impact during the quarter had an impact of between 200 to 200 bps. Realization, you've noted has grown 400 bps.
Every 100 bps decrease in utilization has a material spend. Advantage Go, and we always share those numbers during question answer sessions like this. The negative impact on the firm because of license revenue recognition which is about 100 bps. So very high level wage at 200 bps to 200 bps in 2020. Advantage Pro Business, license revenue recognition roughly about 100 bps negative going down and utilization has gone down by about 400 bps.
That again would have had a has had a significant impact. Finally, of course, there's a 4th parameter that we're talking about, which was a Visa cause that's all been booked in 'forty one. Back through has an impact, but not as strong as the wage of the utilization. In Europe, which is a very significant geography for us on the travel vertical front, recovery is still in its early phases, largely because the UK where we have a material presence. Airline recovery has not been on expected patterns and hopefully that will start roughly about in service from now.
The U. S. Again has now started limping back to the levels that it was at pre pandemic. That's how I would represent the outlook for travel. Pre pandemic, as you are aware, Wimal travel was about 18% the one thing that Sytosh recovered has been said that now we have 3 out of So that's how we see travel in the 2020 trend.
Over the last four quarters, as you rightly said, the travel vertical to drop in Q1 of last year has broadly been growing almost 7% sequentially over the last 4 quarters. Thank you.
Before we take the next question, in order to the management today, we will take questions from all The next question is from the line of Avishik Shandran from Incred Capital. Please go ahead.
Yes, hi. Thanks for the opportunity and congrats on great execution. Two questions. First is, just wanted to understand how durable is this demand? Any comments could be interesting.
And the second question is, in the employee metric given in the presentation, the others which likely is a sub staff has seen a substantial jump. Is this primarily related to SLT? Does it appear high for a captive business? And does it also create a lever for margins and growth? Thank you for taking my question, sir.
Thank you. Thank you for the questions, Abhishek. Let me take some in order again. At this point in time, when it comes to demand, there's been a lot of commentary that's been pushing around which talks about the fact that there is material buoyancy in the demand environment and that is active. When we look at the current scenario and we try to project 3 to 4 years out and we see a scenario when demand will normalize.
We believe that the capability matrix that we've created over the last couple of years, the tech feasibility matrix around cloud engineering is likely to see sustained long term demand. Cloud is likely to follow the same pattern. Digital integration is going to follow the same pattern easily as will integrated automation. So finally, marketplace demand quite clearly is buoyant and at peak levels or record levels. Longer term for our tech services slack, we think there is a long term secular high growth ramp on the demand side.
We are seeing from the ventures right now. The same thing would apply if I were to flip this and talk about the vertical story. BSS innovation dollars continue to come in. Compliance dollars have been stable and at a high level. Insurance still seems to be in the early stages of pivoting towards longer term investments in the tech stack.
And travel, of course, should from the average that's been in for a few years, are you looking at significant demand because of cloudification picking up, because
of touchless travel picking up, because
of automated sales force picking up, because of security related aspects picking up. So that's how we see the demand. You see it, at least from our vantage as a firm, as something that is durable, to use your words. As far as employees are concerned, your observation is right. There has been a step jump.
That step jump has come largely because of almost entirely is how I would characterize it because of the SLK addition from the Matrix acquisition last quarter. We believe SLK and we called it out last quarter as well. We believe SLK in the short to medium term should be growing even higher than Coforge minus S and A, that portfolio. The intent is to keep these numbers static. We are not in the business of extracting people and taking them out, but we will, as we have done with cohorts, try to keep G and A steady and drive accelerated growth so as a percentage that cost keeps decreasing.
Just summing up, your observation is correct. The increase in others has come from a single game. We plan to catch it at more or less the same levels where SMPL is and we plan to drive accelerated growth even higher than the Cofours mothership and try to offset G and A percentage cost as a consequence. Those were the answers, Avish.
Thank you for taking my questions, sir, and best wishes for 20 2. Thank you, Anshul. Thank you.
The next question is from the line of Sandeep Shah from Equidus Securities. Please go ahead.
So just first question to be in terms of the EBITDA margin guidance of 19%. So you have commented that there would will be increased Q on Q in the next three quarters. It looks like that there would be a heavy lifting still required in Q3 and Q4. As Q4 exit rate on the EBITDA front could be close to 21% as a whole. So any risk to this?
And if this is achievable, is it also fair to say that we may enter FY 'twenty three with 20% kind of an EBITDA margin
So, little differently for us just to comment on FY 'twenty three, but FY 'twenty two that we are in right now, our short term focus is to make sure that we first get to around the 200 jump that we commented on over the last quarter and then try to extend it if it's possible to extend it so that the ramp expected in H2 around percentage margins is not very severe. It takes some time for the initial wage increase impact, which tends to be significant, dollars 200 to dollars 200 to be offset and that happens progressively over the remaining 3 quarters and we've seen that play out over the past many, many years. We expect discount reversals from the travel vertical to continue and almost all of them to go away almost completely by flow. On retention and hiring costs, the fact that you've done so much of it upfront to service demand that we've been talking about from almost the last few quarters should allow us to have some slack around being a little selective around how many folks we onboard and at what salary points we onboard. So as a consequence, I gave very detailed commentary around the headwinds on the headwinds on margin.
I talked in response to an earlier session around what's the margin walk, what's the impact of utilization, what's the impact AdvantageCo license revenues not being recognized, what's the impact to the market penetration has been. As a consequence, the significant overall fees will be distinct in the short term as the Q2 plans play out on margin and for the full year 19% you just have 3 of the COVID-nineteen cost which is what we talked about is definitely achievable.
Okay. Just a follow-up in terms of after closure of such a great deals on an organic basis, how is the deal pipeline looking out? And still, you are having deals about $60,000,000 in your pipeline? And your last question in terms of if you look at the year, generally, your Q2 and Q2 are seasonally great.
So the deal pipeline continues to be robust and our intent not just for this year but in the years to come, it continues to be as it has in the past to drive growth in the past. So, drive growth is sustainable and is not just a function
of time And the
dry growth spend put profitable and over time increase in margins. This pipeline is robust and of course we closed $100,000,000 for the deal and it's taken us about 4 years to come here, so we'll only speak back to the cloud almost immediately. But as an aggregate, if we look at the deal pipeline, size of deals, number of deals, the spread of deals by like horizontals and geos, we feel good about that. Quarter 2 and quarter 3, and I noted this earlier as well, we do not see any headwinds. It should result in any kind of a negative surprise against the plans that we have drawn for ourselves for growth.
Thank you, Sandeep.
Thank you. The next question is from the line of Vimal Goel from Union Asset Management. Please go ahead.
Thank you for the office, Shruti. Firstly, congratulations on a great number of numbers. Steve, mostly you've answered most of my questions. I just had one clarification on utilization. Can you just highlight given the kind of revenue growth that you've seen given recently the difference behind all in utilization?
Thanks for the question. Two questions, Ramin. Let me take them in reverse order. I just want to clarify, VJ utilization will go up. I have not indicated utilization will go down.
What I did say was that utilization has gone down from 81% in quarter 4 to 77% in quarter 1, but we believe utilization will go up and that is going to be a very critical and a very important margin lever for us going forward. So that's one. Coming to your first question around why has utilization fallen? 4 of the material deals that we signed during the last 6 months are still under the transition phase and that has warranted upfront transition investments in cost and in employees and people and SMEs. That's why utilization number has higher margin
Yes. So when it comes
to revenue guidance, we had always qualified saying it will be at least 19% now at the end of this quarter growth. And as far as EBITDA guidance is concerned, we are targeting 19% of the composite organization, which basically plays a relatively small part of the overall firm. Even if it comes up at higher than the firm's average, it is not going to move the needle too much. So 19% is the CETA target for the composite firm for the current fiscal year and 19% plus is the revenue target for the corporate front for the current fiscal year. Okay.
Thank you so much and to the very best. Thank you.
Thank you.
The next question is from the line of Monique Tanja from GM Financial. Please go ahead.
Yes, hi. Thank you for participating and congratulations on a great quarter and starting a second through very solid mode. I had a couple of questions. Number one is on the
deal wins in the U.
S. Is there some one off impact there?
Basically, we had about $200,000,000
of deal wins in the U. S.
How do you see the
on-site offshore mix of revenues progress move from a 2 to 3 year entry given the fact that we've had some offshore shifts in the last 4 quarters despite some of the large deals we are transitioning currently?
Thank you for both the questions, Manik. Deal wins, the model $318,000,000 in the U. S. Is $46,000,000 in this quarter, it's just a pressing blip. Demand pipeline in the U.
S. Is very strong. Investments around sales and marketing have also been very, very focused on the U. S. In the recent years.
So U. S. Should be back to near normal to higher than normal starting quarter 2. As far as on-site offshore is concerned, on-site revenue is now falling from about roughly it used to be roughly around 60% to 65%, 60% this quarter. If the deal velocity and if the median size of the deals going up, if that trend continues, we think on-site revenues might fall below where they
are or at least
at a minimum stay where they are.
The next question is from the line of Mukulshwar from Mubiala Oswal. Please go ahead.
Thank you. Sumeet, before I take the question, just wanted to share a feedback. Your revenue growth performance has been really exceptional. And while we understand and you have clearly laid out all the pulls and pushes on what is driving growth, It would be a lot more useful if the guidance can be a bit realistic. You guys are doing an amazing performance and I don't feel like there is any harm in kind of portraying the growth you are seeing going forward over the next few quarters than a flat top of the performance.
So just wanted to kind of share that feedback. On the question, I just on the margin guidance which you are giving. Is it possible to quantify the support from the shift of license sales to Q2 and the notion of discounts on the overall margin improvement margin guidance for FY 'twenty 2. And excluding these, is improved pricing one of the reasons why your margin will go up over the next 3 quarters? Or is this more a case of containment on
the SG and A side? Thank you for the feedback, Mukul, and thank you for the question. Let me quickly respond to the feedback. I think we as a firm, we will take that as a backhanded compliment that percent revenue organic CEC guidance is conservative. I do agree with the max part of what you're saying.
There is scope for us to perform better. And I want to assure you and we are being honest on the call that it is our intent to maximize growth. Thank you, Sachin. Coming back to your question around margin guidance and a more granular basis on margin guidance. License results from Q1 and Q2 had a negative 100 bps impact on our quarter 1 margin cycle.
So that's something as we think on the walk from Q1 to Q2, that's something that we are impacting in. Discounts, especially in the travel vertical, continue to reverse. But as I noted earlier, we expect for the firm object material in margins going to complete discounts going away given how the pandemic has progressed up to date had to happen around Q4 of the current season. 3rd, your point around pricing improvements being a lever is correct. We have seen that and this is still 20 days of you from the trenches.
And interestingly and it's been a little bit of a surprise to us. Interestingly, the ability to ask for and get higher price realization for especially niche skills, this time around has been led by the 8 type of geography. So, the willingness of clients at APAC to align with increased pricing offs is higher. I'm not saying it doesn't exist in Europe and North America, but it is higher in APAC. And we continue to have conversations with clients across North America and Europe and also secure pricing increases.
In our experience, those pricing increases are not cost abroad, MSA linked, for all skills kind of price increases. They are more structured around individual engagements or individual niche scale SMEs, the home prices are getting renegotiated. So that is how I would characterize the answer of the pricing improvement coming that you had, Mokul.
Thanks. The second question was on SG and A. There was a meaningful improvement or increase in the SG and A cost this quarter. Was that primarily because of SLK getting integrated into the organization? And second part is, if I look at the SG and A investments, SG and A sales you guys have been doing at just slightly longer term over last 4 years, it has very meaningfully trailed your revenue growth at around like 1.5% quarterly increase versus revenue growth kind of almost reaching 4% on a Q on Q basis between Q1 FY 'eighteen and Q1 FY 'twenty two.
So how should we see this? Because SG and A is always supposed to be more variable in line with the revenues, unlike a fixed cost, but the behavior and the performance is more fixed in nature. How should we see this going forward?
Mukul, if you look at our SG and A, and I think just reference the points that you're talking about, right? Our SG and A from around fiscal year 'eighteen, it used to be roughly about 19%. In the quarter under review, it's come 16.6%. So there is a trailing impact that we talked about, the long term secular impact as growth has accelerated towards the SG and A adjustment has been coming down. 13.6%, which is where it is, is a number that seems to be a number that you would like to hold.
We don't want to put it beyond this because it's not just this year. At some stage, maybe after quarter 2, we need to start setting over next year and how to make sure the growth sustains and hopefully exceed it. So that's how we're looking at SG and A numbers breakdown. So, 15.6% this quarter is lower by 40 bps from the 14% that we saw last quarter. The other interesting metric that you would have seen in the fact sheet that we shared with you is that the number of sales and marketing people have actually excelled.
They have gone up, 1, not just because SLT is connected to us. They've also gone up because as we've been creating newer verticals and as horizontals like cloud have started securing larger deals with us, We have started adding some of our existing delivery SMEs through the presales tools of the horizontals of the newer verticals that we created and also the U. S. Geo which we think can be a very material growth ramp for us over the next 3 to 5 years. Did I answer your question, Mukesh?
Clearly, that is a very fair assessment. We just wanted to add just kind of context to this. Are you seeing any forced multicar because of your insurance platform on your SG and A cost? Because obviously, the margins on product sites are generally higher. Is that also one of the reasons why over a longer period you have been able to hold the cost while improving your revenues?
The biggest lever as we assess it, Mokul, is the fact that over a period of time, right, I mean, if I look at strength growth rate, they are almost twice as large as what we were 4 years ago. So the biggest lever for us has been growth. Our SG and A costs have been rising and they should keep rising, but they've been lagging as you rightly said the growth that the firm has experienced. That's the biggest driver. I would not say that Advantage Go, which is roughly only 5% of our global revenues, has been a very significant push multiplier on the SG and A side.
Understood. Thanks a lot for taking my question.
I will take a look into the queue.
Thank you. Thank you.
The next question is from the line of Dipesh Mehra from MT Global. Please go ahead.
Question from my side. First is about, can you help us with this and whether Q1 could have been like what you anticipated at the beginning of quarter
quarter? And if that's then what
Thank you for the question, Bitesh. Let me first request our CFO, Mr. Ajay Kalra to take the depreciation question. And if you'd like to address question 1 well, please go ahead, Ajay.
Sure. Thank you, Sudeep. On the purchase side, I'll go into reverse order. On the purchase price allocation, we have done the preliminary assessment of purchase prices assessment for S&P Global. As you would recall, the total consideration of 60% was INR 9.20 crores.
Total identified tangible assets net of liabilities were INR 122 crores. Identified intangible assets were valued at INR 315 crores. The goodwill we recorded was INR 615 crores. The amortization period would be approximately 10 to 10 years. It's currently consists of customer relationship and contract which is around 10
There was a question preceding the second question as well. Let me give a quick start. The question was, we changed whether Q1 could come in line with what we expected. It was in line. It was broadly in line with what our expectations were.
Getting into quarter 1, we knew that we were chasing $100,000,000 deal. And we haven't closed $100,000,000 deal at least in the last 4 years as an organization. So the fact that we were able to close it was not a surprise, but in many ways it was a valuation of the efforts that have gone on over the last 2 years in replicating the technology stack and domain stack. Because and I have said this in the past and I guess also the references, because the revenue has been such a spike, utilization has gone down because of the investments to be made to start sapping these things. So they aren't surprises, but those are the 2 aspects, see very, very sharp and accelerating revenue growth leading to a lower utilization.
Wasn't a surprise, it was a conscious decision. It was a little away from what we had built in around our utilization plans for quarter 1.
Thank you. The next
question is from Sandeep Agrawal from Evercore ISI. Please go ahead. Yes.
Hi, Sudhir. Congrats to your whole management team for taking my question and I congratulate you on 3 fronts Why you are so giving such a big guidance behind you? And I understand that you may have given something for grade 3 or
Thank you for the questions, Philippe, and thanks for your comment, Vijay. I just want to reiterate and I think I said this earlier, we do not have any holdings linked to headwinds around potential client loss or an existing revenue stream loss at all. I want to be absolutely clear about it. We've never lost a material client at least over the last 16, 17 quarters that we've all been getting together and talking about performance. And we really see nothing of that sort on the horizon at all.
Ratings and I won't want to explain it, and we will underline it again is at least, we haven't said, unlike EBITDA, we've given us each number. For revenue, 1, we have taken it up by 2% from last quarter. 2, we continue to qualify it as at least 19%. As this month was recognized and I'd like this back to Moksha's question as well. It is going to be a dynamic number.
We have the next 2 or 3 quarters to continue to assess how the market progresses, how our deals progress. And if there are further upsides, we will continue to keep revising our guidance on the revenue side. So then I would encourage you given the way we wanted it also to look at it as a threshold. That's what we are calling out for Deepak. There is no material headwind that is playing into any other commentary on revenue guidance.
And yes, sorry.
Go ahead Sandeep. And
second thing which I wanted to know is how long you are seeing a position in the client market where pricing power is coming back? Is it a decade or more?
That's an interesting question. There is always deem pricing power whenever platform or whenever we've been able to stand up with bunch of SMEs who delivered clear supply chain able impact sometime. So it's never been a situation where things were so bad that you can work to a client after doing excellent work after providing for an exceptional SME pool and not ask for a revision. Kola has been driven into a lot of our contracts and there have always been ongoing conversations. The trend has intensified over the last 12 months.
I haven't let me just make sure I get this right. The way I would put it is, in the last 7 to 8 years, this is possibly a point in time where the ability to go back and have a conversation and have a very high conversion rate the highest I have seen over the last one decade. That is how I would call this up.
Thanks a lot Sudhir for taking my question and best of luck for the questions. You have excellent team in place and you have retained all your key thoughts of commercialization. Shunag, once again and I am very confident that you are at least Shunag once again and I am very confident that your at least 19% session will be done very, very significantly. Thanks.
Thank you.
Thank you. Next question is from the line of Vikram Sohuja from Antiques Shop Booking. Please go ahead.
Hi, thanks for taking my question and congrats on a good quarter. Roughly little over 40% to 40% to 36% now in 3 years. But you think we need to use the same template for vertical price exposure as well, BFSI, mobile digital revenues now post acquisition. Have you given that kind of a sooner or do you think we need to diversify over time? And second one is, as you know, before mentioned earlier, we are 10% behind pre pandemic on the non travel vertical, Do we still think from here travel will continue to lead the overall track assuming Europe follows U.
S. Maybe in the lag of 3 to 6 months? And also last quarter you talked about a couple of large deals we have won in that in the travel segment. Have the ramp ups have already come this quarter or those will
be coming next quarter? Thanks a lot. Thanks for the question, Vikas. I'm going to take it to strategic and then once you can add your questions also on the question. Client concentration in your head, top 10 are down 36% and we feel very good about it.
Do you always believe that an organization that the biggest risk from our clients is having too much of our figurative eggs in a single client for a few clients. So, the fact that client concentration is low gives us very significant confidence that growth will be sustainable in the medium to long term. We always talk about robust, sustainable and profitable growth. And the sustainable growth largely drives off the fact that we do not have high client contribution. Your comment around the fact that you need to mirror what comes from the client concentration side on the vertical side as we have been pursuing.
If you look at us as an organization and I can look out, there are 3 verticals that have been created over the last 18 months, which are now somewhere between 7% to 9% of our global revenues. And we made very, very concerted efforts terms. Very different dynamics in terms of insurance is roughly 15%, BFS on the technology side is 16%. Given the large deal that we signed $105,000,000 on the banking side, we expect BFS to face very significant and to be driving growth for the firm, which has not been the case in the last 2 or 3 years. So banking should be a clear growth lever.
Insurance continues to have a very differentiated and a story that stands to attract COVID-nineteen services should continue on the economic curve it is. And I will discuss our expectation is that the growth that we've seen over the last 4 quarters, post quarter 1 last year, is likely to sustain in the medium term that comes from the mainly ups and downs in a few quarters here and there. Largely because we believe the full recovery from our vantage has not played out because Europe travel has still not recovered. Recovery has largely been North America travel and APAC travel, the same way. So that's answered the question number 2.
Question number 3 around travel, we talked about 2 material deals which were 1 in travel and quarter. And I did talk today about the fact that 2 out of the 4 material deals are expected to complete transition in the current quarter. They happen to be the 2 travel deals that were signed in the previous quarter. Benjie were where we had 3 facilities and we will now move to steady state operations in Q2. Did I answer your question, Vikas?
Yes. This is Rahil. Thanks a lot. Thank you. Thank you.
The
next question is from the line of Rishi Jhunjhunwala from IFL. Please go ahead.
Yes. Thanks for the opportunity. Just to answer any question, maybe a couple of things. So one, can you give
Sure. Ajay, would you like to give it or would you like to go ahead?
I can give the numbers. The advantage to revenue for the quarter was INR750 1,000,000, EBITDA was 15% and of which was the revenue for the quarter was $689,000,000 and EBITDA was 15.5 percent. Another thing which I would like to add is that ratio of equity under the CNY Cofovde after the equity stake will be acquired in Q FY 'twenty
two. That's a good question. And this can be, Sujeet, can you give some clarity in terms of comments you just made around
As we've shared earlier and as we've shared earlier this morning, as you know, the Board has a process in enabling resolution on the 69, and we have shared details of that resolution with everyone. Our assessment, our proposed assessment at the same point in time is that we do not have any primary requirements, which we are pursuing as part of the process. The Board's assessment also, with the current point in time, under this enabling resolution which is still awaiting approval by the shareholders and that process will complete on the 30th July at this year. And if the Board were to discuss to go for the issuance of depository receipts, we would prefer to do it the GDR route and not the GDR route. So that's where we stand currently the ratio on the NLP resolution cost in the system.
So that's basically the conversion of
the revenue study, yes, no impact on our generic activity, right? Yes. At this point in time, the Board believes that we do not have primary requirements of entry service.
The next question is from the line of Sudhir Ritubhavathi from B. A. Securities. Please go ahead.
So it's a pretty simple side. INR 200 crores increase sequentially and it is more or less a sequential increase in overall firm revenue. Across industries and across companies, I understand that the growth is coming from a low base. Some amount of working capital is getting absorbed back into the business. But in our case, the quantum of this increase seems to be pretty high.
So if you can give some more color on whether we are witnessing any change in the working capital terms in new contracts or there is any change in the revenue recognition policy or if this change is being driven by any one particular vertical. While incidentally, another competitor
of yours at high exposure
to travel has also witnessed a similar trend this quarter?
Thank you for the question, Sudipt. Sir, can I request you to complete that, please?
Sure. Thank you. The increase in the receivables which you are seeing includes the SNC S&P Global, there is no change in the DSO of the firm and the overall composition of the firm, the payment terms and the overall cash flows and capital structure, working capital. So it's just the addition of the S and K Global that is driving the increase in the receivables.
I would suppose if your the revenue also got muted, right? So in terms of if you're looking at the incremental revenue at overall firm level, So are we suggesting that Sault Digital has a much different working capital profile than what we have in the SOAR business?
No, no. We are not suggesting that. So there was one there was some commitments that that was got delayed in India, government because of the pandemic, chicken rate pandemic to get you know approximately $5,000,000 That will get recovered in Q2. However, in Q1, there was an impact. In addition, I just want to also add that if you would look at the Q4 of FY21, the OCS was 124% of the EBITDA, which was significantly higher and we had a significant good collections in Q4.
And on that of that, the next quarter obviously has some headwinds because of the higher collections in the previous quarter. On overall period basis, it evens out, but there is no changes in the payment terms over the last couple of quarters.
Okay, Ajay. And just if you can repeat intangible assets, you said INR 315 crores and goodwill is INR615 crores?
That is correct. I'll repeat the numbers once again. Overall purchase concentration for 60% was INR 920 crores as you're aware. Total tangible assets were INR192 crores. Intangible assets were valued at INR 315 crores, and the goodwill recorded was INR615 crores.
So we are also considering the future payouts related to that, right, of INR 9.22 because obviously these fees will add up to more than 9.22.
That is correct. The future acquisition cost has been recorded at INR213 crores and there has been non controlling interest, which was recorded at INR102 crores.
Thank you. The next question is from Rana Vasujam with JMP. Please go ahead.
Yes, Sumitiy and congrats on strong growth this quarter. So, Suneet, just one clarification in terms of
the deal flow. We were
talking about last quarter that we are chasing 3 to 3,000,000,000 plus deals, of which one was 100,000,000 DKK100 1,000,000
has been tracked in time.
But it doesn't either 2 or does
the deal for this quarter include that or we are expecting positioning on that growth happening in the system resources?
1 of those 2 has been converted and they were referenced in the 2 other large deals. The other one that is still in place and continues to be in place.
Okay, okay. Fair enough. And just a follow-up, This quarter, there was an increase in terms of ESOP charges.
So do we see going forward a normalization of
Thanks for the question, Ashwin. Hadek, can you take that, please?
Yes, sure. Thank you, Puneet. Ashwin, the increased cost of MIP basically includes the grant issuance leadership that was hired during the quarter, including the leaders of our recent acquisition as we take over at the higher macro market price. We do expect that the overall ESOP cost would be at approximately 85 bps instead of the 60 bps which we had guided early for the
financial
The next question is from the line of Sunil Shah from UBS
Securities. The next question is from Saina Samir Shah from UBS Securities. Please go ahead.
Yes. Thanks for giving me opportunity again. Just one question to be on the pipeline side. If we look at more than 50% of your portfolio, which you indicated, Saks engineering, cloud, digital, intelligent automation are in high demand. And usually, there could be a multi year demand for this game as a whole.
So I'm not asking for a And can you actually see some down uptick in FY 'twenty three?
At least even last year during the pandemic, if you think about travel vertical, right, the rest of the business outside travel platform grew at 18% organic CC terms. Pre pandemic, the previous 2 years, we were growing at about 16% CC organic and we were of course building the building blocks around tech stack buildup in those 1st 2 years. Year 3, during the pandemic season travel, we still delivered 18.4 percent cc organic growth. Travel for us is a very big vertical we did. This quarter clearly we've followed on 19 plus percent and we'll see when we finally line up.
Our intent as a team, as an organization has always been to discover a path from sustainable 20% organic CEC growth. But that's an ambition, that's not a guidance. We believe there are clear parts that journey to that destination that exists. We have seen organizations which are not necessarily India based in the IT services space create those and be on those for the past 3 years. So, we are attempting and we are putting in everything that we have to try to get to a model where we can start delivering those growths on a sustained basis.
Are we confident just to close, are we confident that we found
the test already? I think
the answer is no. But are we very, very intent on trying to get there at some stage? The answer is yes.
Okay. And just second question, Paul, maybe you can answer overall Saudi industry as a whole because But for for customer engagement as a result MSC as
a whole. So what do
you believe to be the net increase over the realized pricing at console level may
I think the blip that we've seen on pricing is likely to be temporary. I do not in the medium to long term see pricing as something that's going to keep going up. At some point in time, that leverage will start decreasing and we will come back to near normal levels. Pricing is something that needs to be negotiated on an ongoing basis. To my mind, the bigger margin lever that we will have available to us as an industry will be 1, making sure that we start eating our own dog food and inject automation impact office operations with the same intensity with which we've been able to inject it into some of our kind of organizations.
2nd,
with these sizes are progressively going up and I'm talking in relative terms to mid tier players like us, offshoring itself is going to be a very significant lever. But on the margin increase, given the historical offshoring percentage levels that mid tier firms have had, where we can land up if we continue securing the large ticket deals that we have in the recent past. So that's why I would promulgate it in margins as we see them from our advantage.
Okay. And last, just looking at your question, 213 is towards earn out, 102 is towards what?
102 is towards the non controlling interest. If you would have acquired 80% where we have acquired a subscription upfront and contracted to acquire another 20% after 2 years. And the balance 20% is considered as non controlling interest and that's at least under the 2 curves.
That was the last question.
I would now like to
hand the conference over to Mr. Sadeep Singh, CEO of Force Limited for closing comments.
I'd like to reiterate the gratitude of the team, all 20,000 plus employees of cohorts to all of you for having me and the time for this conversation. It's late evening in India at least. We also thank you for your interest and for the comments and insights that we continue to pick up from our interactions with all of you. I look forward to speaking with you along with Jay 3 months from now. And we hope that you, your families, your friends and things will be safe for the next 3 months and beyond.
Thank you very much for your time and for your interest once again.