Ladies and gentlemen, good day, and welcome to Coforge Limited Q4FY 2025 earnings conference call. Please note all participant lines will be in the listen-only mode, and this conference call is being recorded. We have with us today from the management team, Mr. Sudhir Singh, CEO; Mr. John Speight, Chief Customer Success Officer; and Mr. Saurabh Goel, CFO. We will begin the call with opening remarks from the management team and post that we will open the floor for questions. Before we begin, please note that some of the statements made in today's discussion relating to the future should be construed as a forward-looking statement and may involve risks and uncertainties. Please refer to the disclaimer to this effect in the company's Q4FY 2025 earnings press release. With that, I hand over the call to Mr. Sudhir Singh.
Thank you, Inba. Ladies, gentlemen, thank you very, very much for joining us today as we share our quarter four and our fiscal year 2025 performance, as also the outlook for fiscal year 2026. Fiscal year 2025 was a landmark year for the firm where we recorded 31.5% US dollar denominated growth. In addition, quarter four again has been a landmark quarter for the firm because in this quarter we booked $2.1 billion of orders in a single quarter, and we've signed five large deals paving the way for what is likely to be a very strong growth year in fiscal year 2026 as well. With that preamble, and before I run through our commentary, I want to share an important reminder with you. Almost a year back, during the last year annual investor call, we made three assertions.
Those three assertions and our performance against those assertions bears remembering as you listen to our commentary today. Assertion number one a year back we had shared was that what we were making, that we were making a contrarian yet high conviction bet by acquiring Cigniti. Assertion number two that we made a year back was we had shared that we were stopping the process of providing annual guidance not because we were unsure of our performance in fiscal year 2025, but because in fact we were very sure that we would continue to drive robust and sustained growth in fiscal year 2025. As you can see, we have.
Finally, assertion number three a year back that we made was we had shared that despite the bleak demand outlook painted by some of our peers and analysts for fiscal year 2025, we had said that we believe that there were definite areas where a focused firm could pivot and drive significant growth, and we have. We are pleased that our performance was exactly in line with the three assertions that we made a year back on this same call. I shall call out the full year and the quarterly performance in order. A few highlights before we dive into the details. It is not just the 31.5% growth in fiscal year 2025 that is remarkable, but even more important has been the quality of that growth.
Our growth in fiscal year 2025 has been large deals led and has come off the back of 14 large deals signed through the year. The deal momentum has kept accelerating every quarter over the last four quarters with five large deals signed in the most recent quarter. Our order book at the end of fiscal year 2025 is now 47.7% higher than it was at the same time last year. The growth again has been balanced. Every industry business unit of Coforge has performed well. Every service line of Coforge has done well. Every geo that Coforge operates in has grown, and all client cohorts, including top five, top ten, and top 20 clients have grown. As I noted earlier, in quarter four, we have booked $2.1 billion of orders, which is equal to the entire order book that we did in all of fiscal year 2024.
Therefore, we look at the coming quarter and the coming year with great confidence. With that preamble, I shall now walk you through the annual performance. Let's start with annual performance revenue analysis. In fiscal year 2025, we registered a consolidated revenue of $1.445 billion. We clocked a revenue growth of 31.5% in US dollar terms, 33.8% in Indian rupee terms, and 32% in CC terms. Our ability to drive growth in tough macros was aided significantly by growth across each one of the industry verticals that we operate in. The growth was led by the travel vertical, which saw 33.7% year-on-year growth, followed by government outside India vertical, which saw a 27.1% year-on-year growth. The banking financial services vertical through the year grew by 20.4%, and the insurance vertical grew 13.3%. Other emerging verticals, including healthcare and retail, grew by 67.9% in dollar terms.
On the margin front, annual performance commentary is as follows. The adjusted EBITDA margin came in at 18% for the year. Our proforma adjusted EBITDA, including Cignity, was 17% in fiscal year 2024, and the margin improvements have borne clear fruit. Our reported EBITDA was at 13%, and our margin improvement efforts have assured us that our EBIT, reported EBIT, shall expand materially in fiscal year 2026. Moving on quickly to quarterly performance revenue analysis, I'm pleased to report that following an 8.4% CC sequential growth in Q3, the firm has registered a sequential revenue growth of 3.4% in CC terms in Q4. In USD and INR terms, the sequential growth was 3.3% and 4.7%, respectively. The growth during this quarter was led by the BFS vertical, which has grown 13.4% sequentially in dollar terms.
Our travel vertical grew 7.5% sequentially, and the government outside India vertical grew 8.5% sequentially in dollar terms. Other emerging verticals declined 8.3% QOQ in dollar terms. Our top five clients and our top ten clients declined 5.9% and 4.6% quarter on quarter. You will recall they had grown 13.5% and 14.4% sequentially last quarter. It is important to note that our top five clients and our top ten clients have grown by 12.1% and 15.1%, respectively, over the same quarter last year, and these relationships continue to be very robust. We expect very robust growth to return to this client cohort in the coming quarters and through fiscal year 2026. Order intake commentary is as follows. Quarter four was an outstanding, I repeat, absolutely outstanding quarter from both an order intake and the number of large deal closure perspective. During the quarter, we signed five large deals.
The velocity and median size of large deals signed by Coforge has been increasing over the years, and I've remarked upon it often. I shall reflect more upon this in my concluding remarks. The total order intake during Q4 was an exceptional $2,136 million. We have closed fiscal year 2025 with the highest ever recorded order intake of $3.5 billion, and this metric is up 75.1% year on year. The executable order book, which reflects the total value of locked orders over the next 12 months, now stands at a record $1.5 billion. This number, some of you might recall, was only $1 billion a year back and has witnessed a 47.7% growth. On the people front, our total headcount at the end of quarter four stood at 33,497. We saw a net people addition of 8,771 people during the year and 403 during the quarter.
Utilization during the quarter stood at 82%. Last 12-month attrition for the quarter fell further and is now at 10.9%. We remain, as always, one of the lowest iteration firms across the industry. With those comments, I will now hand over the call to John Speight, Chief Customer Success Officer of Coforge, for providing insights into our operations and capability creation. Over to you, John.
Thank you, Sudhir. I shall now touch on the quarter's highlights related to our delivery operations, starting with the progress on our AI and GenAI capabilities. Q4 saw significant progress on the implementation of our AI-led solutions. We now have over 200 real-world solutions developed and deployed. All of these solutions, frameworks, and assets are available to our clients via the Coforge Quasar AI Marketplace. I will now share some examples with you. We implemented a GenAI-infused solution for a large US insurer that enabled the automated extraction of policy and claims data for insurers, integrating seamlessly with platforms such as Duck Creek and Guidewire, delivering 30% operational efficiency. For another US insurance company, we [Uncertain] documents a year, significantly enhancing data extraction accuracy, quality, and speed.
In the travel sector, for a major European transportation company, we implemented an AI-powered solution that provides real-time insights on Next Best Actions during customer calls. Meanwhile, for the world's leading air transport communications company, we implemented an AI-based prioritization solution that has been instrumental in reducing by 75% the volume of weather alerts sent to pilots. Agentic AI is driving a lot of interest in the market currently, and we are actively building capabilities in this area to deploy agentic AI solutions. For example, we are developing an agentic AI-based product catalog solution for a major US building products distributor to improve their B2B sales effectiveness. We've also used the NVIDIA NeMo framework to develop our model lifecycle as a service offering.
This enables organizations to build out their own proprietary AI and GenAI models within managed secure environments, enabling them to safeguard their IP and enable data confidentiality embedded within their proprietary models. Within Coforge, our engineering teams are leveraging tools such as GitHub Copilot across the software development lifecycle, achieving more than 30% reduction in time and cost on large modernization programs. Through our AI Spark, 94% of our employees are now AI-trained, and more than 50% of our developers are proficient in GitHub Copilot. Moving on to partnerships, I want to share a couple of highlights this quarter. In collaboration with ServiceNow, we launched the Coforge Generative AI Center of Excellence, COE. It will focus on developing agentic AI solutions that help customers accelerate their ServiceNow adoption journey. Areas of focus include payments processing, fraud detection, dispute management, and digital operations resiliency.
Coforge and ServiceNow have also partnered to accelerate AI-powered dispute management. In March, we delivered for a US-based branded payment company the first dispute management solution on the ServiceNow platform. In the cybersecurity space, we have achieved tier one MSSP status for Zscaler on the back of a successful client implementation of their Zero Trust architecture, the latest being for a telecommunications service provider. On a final note, we are particularly proud of achieving Pega Global Elite Partner status for 2025. This prestigious recognition underscores our exceptional capabilities in delivering client value-add with Pega-led solutions. With that, I will now hand it over to Saurabh Goel.
Thank you, John. Let me take you through some of the financial highlights for the quarter and the year. During the quarter, we signed the definitive agreement to sell entire stake of Advantage Go business at a consideration of GBP 43 million. As a result, the reported financial performance of the quarter reflects performance of the continued operations, and all metrics in my commentary will be for continued operations, unless otherwise specified. During the current financial year, Advantage Go business generated revenue of $23 million, EBIT loss of $5 million, and a cash burn of $8.5 million. During the quarter, we also acquired data and cloud asset in the US, generating quarterly revenues of $6 million, and our ServiceNow asset in Australia generating a revenue of AUD 2 million per quarter. Both these acquisitions generate margin in line with company's performance.
Revenues from these acquisitions will be largely set off by the sale of Advantage Go business. We've also ended the year with net cash of $43.3 million, as against a net debt of $9.8 million at the end of FY2024. From a full-year perspective, the revenue for the year stood at $1.45 billion, reflecting a growth of 31.5% in dollar terms. Adjusted EBITDA margin for the year was 18%, and EBITDA margins were at 16.6%. EBIT margins for the year stood at 13%. The structural changes executed by us and large deals signed during the year reflect our continued focus to drive profitable growth. With these changes, we have a clear line of sight of improving margins over the next two years. Currently, our cash and bank balance totals to $125 million. Excluding the $82 million working capital loan, our net cash position is $43 million.
Full-year OCF stood at $147 million as compared to $108 million last year, reflecting OCF to EBITDA of 61%. Excluding integration expenses, the OCF to EBITDA for FY25 stood at 71%. During the quarter, the quarterly revenues stood at $403.8 million. Including Advantage Go, the revenues for the quarter were $410.7 million. Adjusted EBITDA margin in the current quarter, which was a tough quarter, expanded by 100 basis points to 18.7%. ESOP cost has come down by 33 basis points, as we guided in the previous quarter, and now stands at 1.8%. As mentioned earlier, it is expected to come down to a level of 100 basis points from H2 of this year. The exit EBIT margin for the quarter stood at 13.2%, which reflects an expansion of 123 basis points over the previous quarter.
Operating cash flow, excluding transaction expenses related to integration expenses for Q4, stood at $75 million against $48 million in the previous quarter. This reflects OCF to EBITDA of 108%. With that, I will hand over the call back to Sudhir for his comments and outlook.
Thank you, Saurabh. We are entering fiscal year 2026 with a record signed order book, which is 47.7% higher than where it was at the same time last year. Let's start with that for outlook. Equally importantly, our pipeline of large deals, where we have high conviction that they will be closed in the short term, is unimpaired. For more than eight years, despite the changing macros, both the number and median size of large deals signed by our sales engine has continued to increase year on year. That trend, despite the uncertain macros the industry is currently facing, will continue to be on track. The Sabre $1.56 billion deal that we announced through the quarter has seen an impeccable transition and a ramp-up so far.
We believe that more than the robustness of our growth, what is truly remarkable is the balanced nature of our growth across all cuts, that is, across geo units, across industry vertical units, across service lines. Our confidence in sustained growth in the future rides off the fact that there is no over-reliance on any one growth vector. All vectors, including geo-based units, industry-based units, and service lines, are firing. They are all not just growing, but they're all growing robustly. Finally, as we conclude the year, we would like to reflect upon the three key reasons why Team Coforge has delivered robust and sustained growth over eight years. Remember, eight years, this is not one, two, or three years, including during years when the industry has faced headwinds. Those very reasons give us confidence in our quest to be the industry growth leader in fiscal year 2026 as well.
Reason number one out of those three reasons is an execution discipline and an execution intensity that is uniquely our own. For eight years, the three-step iterative process of plan, execute, debrief, plan, execute, debrief, plan, execute, debrief has been repeated by every function and every unit of Coforge. It has now become hard-coded in the DNA of our firm. Reason number two is our outsized focus on driving growth essentially through solution-based, proactive, large managed services deals. This large deals-based growth approach has meant that our teams count more on wallet share expansion and not client budget expansion as the primary arc for expanding our revenue. We enter every downturn with a strong signed order book and a high-conviction short-term pipeline ahead of us, allowing us to outperform irrespective of the macros.
Reason number three is our unwavering eight-year dedication to building deep, differentiated architect pools and SME-led industry-specific engineering competence. We believe, as things stand today, after eight years, we are one of the most credible challengers today in the financial services tech partner landscape, and we further believe that we have now entered the leaders' box in the travel services tech partner landscape. Our government business outside India and our healthcare business is being built up painstakingly following the exact same approach. Each three of these aspects, the execution-intense DNA, the large-deal-oriented sales mindset, and the industry-led engineering focus cannot be built overnight. They take years to build. Once built, they become a lasting growth pillar which does not just sustain high growth, but actually accelerates growth every year. Our growth outlook for fiscal year 2026, despite the uncertain macros that the industry faces, is very robust.
We believe very significant growth in fiscal year 2026 will be accompanied, as Saurabh said, by a simultaneous and a material expansion in reported EBIT. With that, ladies, gentlemen, I conclude my prepared remarks. Saurabh, John, and I look forward to hearing your comments and addressing your questions. Inba, all yours.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may click on the raise hand icon from the participant tab on your screen. We request our participants to please restrict your questions to one per participant. You may rejoin the queue for more questions. We will wait for a moment while the question queue assembles. Our first question is from Mr. Abhishek Pathak from Motilal Oswal. Please go ahead.
Hi. Thank you for the opportunity, and congrats, team, on a great quarter. I have got a couple of questions. Firstly, as you mentioned, right, over the past eight years, the growth has been quite significant. Would you agree that this is probably going to be an extended period of downturn for the industry? If so, does the deal win engine have to kind of permanently pivot towards large deals and cost takeouts, or is there still room for discretionary and in other areas? That is one. The second question is on the Sabre ramp-up. Could you please tell us how the margins will be impacted in the short term, and how should we model them? Just on the margins as well, right? I mean, how should we expect the reported EBIT margins to expand from here on in terms of margin walk? Thank you.
Abhishek, thanks for both the questions. As far as the pivot towards large deals is concerned, that's a pivot that we've embraced over the years. That is not just a pivot that we've done. That's part of our approach towards sales, irrespective of the macros. Discretionary spends up or down, we continue to focus on managed services-based, proactive solutions-led large deals. That is not going to change. It's difficult for us to comment at this stage in terms of how long the demand downturn is going to last. Irrespective of the demand downturn, as you would have noted from our tone, all three of us, we are confident that the large deal velocity and the large deal median size will continue to grow for Coforge. As far as Sabre margins are concerned, it will not have any downward dip in our margins.
Saurabh had guided to the fact that by fiscal year 2027, reported EBITDA, I'm not talking adjusted, reported EBITDA will hit 18%. This year, you've seen we're at 16.6%. We will deliver on that pledge.
Abhishek, on EBIT, the Q4 exit EBIT is 13.2%. As we mentioned, there was a burn of 50 basis points on Advantage Go business. Now, that's behind our back. 13.2% is the exit for the year. We were looking at $2 billion of revenue guidance for FY2027, EBITDA guidance of 18%. That translates to typically an EBIT guidance of roughly 14%. I guess that by end of FY2026, we would have done a large part of the journey coverage from 13.2% to 14%. I think that's where we are.
Just to add regarding the downturn points, I think the continual drive of AI, GenAI, to deliver long-term efficiency gains is focusing many organizations on business transformation, legacy modernization. They are having to get the value out of AI. I expect those to continue actually to accelerate.
Thank you so much. All the best.
Thank you. We take the next question from Vibhor Singhal from Nuvama Institutional Equities . Please go ahead.
Yeah, hi. Thanks for taking my question. Congrats, Sudhir and team, for a solid performance yet again. Sudhir, two questions from my side. One is in terms of growth, you had called out that the deal pipeline also looks quite healthy at this point of time, despite the very strong bookings that we've had in this quarter. I mean, it's just because we are operating in an environment in which there's quite a benign commentary by a lot of our peers. How do you see this basically pipeline shaping out over the next few quarters? Any specific pockets that you want to call out in which we have seen very good strength that you believe could be the driver of the deal wins next quarter, next year? The next year growth is, of course, taking care of what the deal wins this year.
What could be the driver, or what segments could you see be the driver of next year's deal wins? I have a question for Saurabh. Maybe if you can answer this, and then I'll have a follow-up with Saurabh.
Sure. The drivers, in our case, the two areas we focused on are the same areas that John talked about: transformation and legacy modernization. There is always the cost play out play that we are all always aware of. We expect growth to come from multiple quadrants, not just one or two. If you just reflect back on the five large deals that we have signed in the current quarter, quarter four, when the industry in general has been struggling, one, of course, was clearly the Sabre win. The other deal is a very interesting deal where we are offering GPU as a service at scale. The third one was for one of the largest banks, AI-led QE services and QE for AI. The fourth has been a very large Salesforce-led win, again, for a bank.
The fifth has been a very interesting $62 million TCV win from one of the top three clients of the erstwhile Cignity organization. It is not just one pillar. It is not just one vector from which we are exploring deals. We see significant avenues. The broad theme continues to be what John talked about: transformation, legacy modernization with cost outlays.
Got it. Got it. Specifically, if I could just pick your brains on the travel vertical, that is one vertical in which we have seen a lot of airlines coming with profit warnings. United went ahead with a bimodal guidance in terms of the environment. How is the environment in that vertical looking like? I know we've had a very large deal in that vertical in this quarter. Going forward, are you seeing some sort of, let's say, uncertainty or delay in decision-making from the airlines specifically, the airlines part of the travel vertical?
It's a mixed bag. I'll talk about the pros and the cons both. On the con side, given the recent change in geopolitics impacting the global economy, we are seeing the travel industry take a more cautious approach in increasing capacity and sharing their own outlook. Specifically, there in the U.S., while year-on-year reported travel bookings and revenue are higher for travel and hospitality, a number of companies have reported reduced velocity. There's a fear of booking cancellations in the near term. More or less the same commentary in Europe, right? Low-cost carriers, digital-first models continue to drive recovery growth, especially in the leisure travel space. However, there again, rising labor costs, capacity constraints pose ongoing challenges. Interestingly, again, just continuing on that geo arc, Vibhor, across Asia-Pacific, Middle East, Latin America, Africa, travel demand is growing steadily.
It is not the same feedback as it is coming to North America, Europe. For fiscal year 2026, despite the cons that I talked about, our outlook on travel is strong, and we are well poised to grow while factoring in the industry dynamics that I talked about. This outlook is based on the bookings in hand, the current sales pipeline, and the demand that we are seeing in our existing key accounts in travel still, despite the cons that I talked about. We are seeing client opportunities in travel in GCC setup, in modern airline retailing, in data modernization, in M&A integrations, and in loyalty and personalization. That is a quick overview in terms of travel, what is happening, and what we see going forward.
Got it. Got it. That's really helpful, that detailed explanation. Just one last question for Saurabh. Saurabh, I think our OCF reported a very sharp jump in this quarter. Last two, three quarters, it had been $50 million. This time, it's around $74 million. If you could just take us through that, will this be the, can we expect it to be the ongoing run rate over the next few quarters also, or are you expecting some headwinds to this number?
Vibhor, this is how, at least structurally, over the last many, many years that our H2 from OCF perspective has been higher than H1. In fact, in prior years, the H1 OCF used to be negative or zero, and then all the heavy lifting used to happen in H2. Current year, also in H1, our OCF was low, largely because of QIP expenses. If we knock that off, the OCF started the year with 30-odd % OCF, and then which went up to 100-odd %, so that we ended up delivering 71% OCF for the year. I guess on an ongoing basis, we believe that anywhere between 67%-70% OCF is what we would generate in the business with the kind of growth that we have seen.
That would have the normal seasonality that the first half will be weak and the second half will be stronger.
Absolutely. We are trying everything to make sure that it is smoothened out to an extent, but then there are certain structured things which result in heavy payments happening in quarter one and quarter two, resulting in OCF to be lower in quarter one and quarter two.
Got it. Got it. Great. Thank you so much for taking my questions, and wish you all the best.
Thank you, Vibhor.
We take a next question from the line of Ankur Rudra from JPMorgan. Please go ahead.
Hey, thank you. Maybe just wanted to talk about the outlook to start with.
Mr. Ankur Rudra?
Hi. Can you hear me now?
Yes. Yes, sir.
Okay. Thanks. Saurabh, thanks for taking my call. I wanted to get a sense of the outlook outside of the Sabre deal. We understand that will be a significant component of the growth outlook. Outside of that, if you can share, how does the overall momentum look like given the environment has probably weakened a bit? If you can, give us any kind of update about the medium-term target of hitting $2 billion in revenues.
As I said, Ankur, we do not believe that the velocity of large deal closure, and in quarter four, as I just shared, we signed five large deals. Sabre was only one of them. We do not think the velocity, or I mean, if you leave out Sabre, the median size is going to deteriorate for us. We understand, we acknowledge, and I just shared the commentary around travel as well, that the demand outlook has worsened. Given the pipeline that we already have, given the sales orientation, which is very sharply structured on proactive proposal creation, we would expect the velocity, we would expect the median size of these large deals to sustain.
As far as $2 billion is concerned, we would not like to share a timeline, but I mean, given our performance of late, given the commentary you've heard, we feel we're going to get there pretty soon. Actually, let me make that very soon without qualifying what the very is.
Understood. There is no risk to that number for F27 that you previously stated, right, given the weakness in the short term? You are saying very soon.
Oh, no. I do not think there is any risk at all to fiscal year 2027 getting to $2 billion. The intent will be to get there faster. We would be a little disappointed if it took us all of fiscal year 2027 then to scrape by to $2 billion.
Understood. In terms of the near term, if you can comment on anything about revenue conversion from all these large deals, anything to note given some of the weaknesses you might be seeing on travel side, which you've acknowledged?
Nothing of concern. The immediate quarters are going to be very good, as will fiscal year 2026.
Appreciate it. Thank you.
Thank you, Ankur.
Thank you. Our next question is from the line of Manik Taneja from Axis Capital. Please go ahead.
Thank you for the opportunity and congratulations for the steady performance. My question is for Saurabh. Saurabh, if you could help us understand how does the number of working days in April, May, June differ and should be a tailwind to sequential growth in the current quarter, if you can provide some insight into that. The second question is with regards to the margin outlook. If you could talk about the different margin levers, especially in context of the lower ESOP charge as well as sales and marketing expenses outside of ESOP expenses and the gross margin progression that we should be seeing in FY2026.
Okay. A couple of things. One, when we look at the number of days, yes, there will be leverage coming in. That is why I said that between Q3 to Q4, it was a tough quarter. There were a lesser number of days. Even then, we did a 100 basis point margin expansion in the current quarter, number one. Number two, like you remember that we had given wage hikes in quarter two last year. Again, it is not happening in quarter one for sure this year, which means that there is no depression on margins that is going to come in quarter one. We believe that we will be able to sustain margins that we are delivering now. To the extent of the adjustment that can happen, it would happen on account of these costs that get paid upfront for the whole of the year.
Apart from that, we believe that the EBITDA margins or the gross margin should hold, or gross margin should marginally expand. That is number one. Number two, from a leverage standpoint, 13.2% is the EBIT exit in quarter four. As you know, by Q3, this ESOP cost is going to come down from current levels almost by 70-80 basis points further. That is going to flow down into the EBIT number in Q3, which will get marginally set off with whatever wage hikes will happen at that point in time. We believe that between 13.2%-14% EBIT guidance, at least that we have, a large part will get covered this year, largely on account of structural changes that have happened in the business, wherein the scale lever will start playing in. The large deal expansion with no depletion in gross margin will start playing in.
That is why we believe that whether it is gross margin or EBITDA margin or EBIT margin should sustain and should expand materially over the next couple of years.
That's helpful. If I can chip in with one more question, if you could clarify what the segmental margins for Asia, they appear to be the highest in several quarters. If you could help us understand what drove the big upswing in terms of segmental margins in this geography.
What has happened is that Australia as a geography, and a large part of that revenue comes from Australia, and it comes from ASEAN. These were two regions which earlier were not doing well. Over the last couple of years, or maybe I would say 18-odd months, the correction in Australia happened because of the investments that we had made there and the new leader that was hired almost two years ago. That margin had already improved. Now, the ASEAN business has also started firing, and there was some small part of the business which was not doing well. Even that's behind us. Smaller geography, not a significant impact on the overall numbers. Yeah, I think there were certain areas which were stressed, which are now behind us.
Thank you. I wish you all the best.
Thank you.
Thank you. Our next question is from Dipesh Mehta of Emkay Global. Please go ahead.
Yeah. Thanks for the opportunity. A couple of questions. Just want to understand your utilization. How would you understand our optimal utilization range? I'm looking at.
We can't hear you, Dipesh. Dipesh, can you get closer to the mic, please? We can't hear you clearly.
Is it better now?
Yeah, it is.
Yeah. So my question is about utilization. What is the optimal utilization range you are looking for? In the context of, if I look at headcount addition, it is roughly a percentage this quarter where we are expecting some of the large deal ramp-up to play out in the next few quarters. In that context, if you can provide some sense, that is question one. Second question is, if I look at your service mix, there is a sharp growth in engineering while IMS is soft. Just want to get some sense because in geography, also, America is very soft compared to the rest of the world. There are some quarter-specific nuances playing out. If you can provide some color around it, thanks.
Dipesh, utilization, we are at 82% for the quarter. We think that's a good number because in our utilization, we count pressures as well. The second question was around headcount, is it?
Yeah.
What was that specific question?
The second question was on the headcount. See, headcount addition for the large deal ramp-up had started happening, Dipesh, last quarter itself, which is Q3. It was getting added over a period of time. That is why you see the current headcount addition. Over the next few quarters also, you will see material headcount addition that will be happening.
Also, the other thing you have to note around headcount is, while we've declared a headcount addition of 400-odd, from that number, we've subtracted 600 people of Advantage Go. If the business had been continuing as is, this quarter would have seen 1,000 people headcount improvement, right? John, do you want to comment on engineering versus IMS?
I didn't actually hear the.
The question was engineering contribution seems to be far outstripping the contribution of the infrastructure business.
At this point in time, I think a lot of it is down to the Sabre deal. A significant proportion of that is pure-play engineering services. I think that's the major factor that I see affecting that.
Correct. The longer-term secular trend that we are also seeing, Dipesh, in addition to that, is our engineering business, and we've called it out repeatedly, is very firmly grounded in the functional expertise that we bring in across industries. Whether it's a geo-based unit or an industry-based unit, with the new delivery and the new engineering leader that we've had in play for the last 12-plus months, that business is picking up incredible speed while the IMS business continues to grow strongly. In relative terms, it's picking up speed.
Understand. Last question about the Sabre deal ramp-up. How would you look at the ramp-up? Whether the linear equation is a good way to look at it the way it should contribute over a period of time?
The Sabre ramp-up is proceeding extremely well. We would expect the ramp-up to continue over a three-quarter period, and that's proceeding as per plan.
Contribution would be roughly linear, right, across 13 years if one does that division?
More or less, Dipesh, I mean, deal of this size, the revenues are never linear, but as you mentioned earlier, it will be a zip code of $10-$20 million plus-minus.
Understood. Thank you.
Thank you, Dipesh.
Thank you. Our next question is from Abhishek Kumar of JM Financial. Please go ahead.
Yeah. Hi. Good evening. Thanks for taking my question. First question is on Sabre deal, and it's a question that is asked to us very frequently by investors. Given the financial situation of Sabre, do we foresee any risk of ramp-down or any challenge to receivables or receivable days? If at all, any risk mitigation that we kind of use to protect ourselves?
Abhishek, a couple of things. One, we have been working very closely with the leadership team of Sabre. This is one of those accounts wherein we not only have a connect with the CIO organization or the CTO organization or the CMO organization, but also to our CFO and our CEO and even at board level. That is point number one, which allows us to get insights on what the strategy of the business is, what they are planning to do, and what are the future steps they are going to take. That is number one. Number two, they have very recently announced a sale of their hospitality business, which we were not supporting. It was a small business, roughly $250 million-$300 million of annual revenue, had $1.1 billion to pay off their debt. We were aware of it.
Out of the debt of $4.7 billion-$4.8 billion, $1.1 billion will be shaved off. They've always been operating at a debt of $3 billion-$3.5 billion. We continue to monitor. The point I'm making is that we continue to monitor their financial performance, their business strategy very, very closely. Obviously, we've also taken non-recourse factoring, and we've also taken a credit insurance policy in case anything unforeseen happens. Apart from that, we continue to work very closely with the management team, with the board, so that we know what's happening into the customer.
Okay. That's helpful. My second question is in the others vertical, which saw a sharp decline this quarter. A lot of what is included in the others vertical, like retail, healthcare, etc., seems to be where Cignity has contributed. So just wanted to understand, is that attributable to some softness in Cignity, or that's just quarter-wise? Thank you.
No, it's not attributable to any softness in the Cignity portfolio of accounts. As I noted, one of the largest deals, the second largest deal during the quarter after Sabre, is a deal with one of the top three accounts of Cignity. That is a $62 million, not five-year, but a three-year TCV deal. The incremental revenue from that deal is going to be bigger than the size of the account was when we took it over. The others vertical, also the second thing I want to tell you is the others vertical, if you forget the quarter, look at the full year. Others vertical has grown 67% over the previous year.
What you're looking at in this relatively smaller vertical is a temporary quarterly blip, not attributable to any softness in Cignity, which continues to be a fantastic acquisition from our vantage, where the pipeline of large deals from accounts that used to be Cignity is growing. To that extent, we feel reassured around Cignity.
Abhishek, just to add to that, Q3, there was a sharp spike that had happened in others. I think it's more of that revenue that came in Q3 has just gone away, and that's why you see a blip. Otherwise, structurally, year-on-year basis, you will see that there is growth happening. There is not a single vertical otherwise which is not doing well on an ongoing basis.
Okay. Good. Thank you so much, [Uncertain] .
Thank you.
Thank you. Our next question is from Sandeep Shah of Equirus. Please go ahead.
Yeah. Thanks for the opportunity. The first question is, if I look at FY 2025 and strip out the inorganic growth based on my estimate, we have roughly done a mid-teen kind of organic growth. If I look at also the announcement on Sabre deal plus other acquisitions, it looks like that the coming year with these announcements will also contribute 15% growth automatically through Sabre and inorganic acquisitions. Is it fair to assume the growth momentum, what we have seen in FY 2025, which is upwards of 30%, can be maintained in FY 2026 as well?
You know, we can't give a number-based guidance, Sandeep, but I will just reiterate what we said. We expect very strong growth in FY 2026 as well. Without qualifying the number, the growth should be very strong.
Okay. So Sudhir, you expect the macro admins may have some taperness or some impact on organic growth in FY 2026 versus FY 2025?
Not at all. I do not see organic growth slowing in any shape or manner in FY 2026 over FY 2025.
Sandeep, just to add to that, I mean, last year when we got into FY 2025, we had a headwind because our quarterly growth rates were actually coming down. I mean, we started the year with the exit of FY 2023 was around 4-4.5% quarterly growth, which came down to 1.5% quarterly growth when we exited last year, FY 2024. This time when we are exiting quarter four, we have had quarters wherein we have grown 6%, 8% on CC basis on an organic basis. That is why we believe that at least that directionally, I mean, next year should be better than the current year on an organic basis.
Okay. Okay. Thanks. And just I have joined late. Apology for the same. Can you once again give a detail about the margin guidance for FY 2026?
We have not given a hard number guidance. We believe that EBIT will see a significant improvement. That is reported EBIT. Our guidance for hitting 18% reported EBITDA in FY 2027 also stands.
Okay. Saurabh sir has said that this year would be between 13.2%-14.2% at the EBIT level.
I had said that the guidance for FY 2027 was revenue of $2 billion, reported EBITDA of 18%, which would mean an EBIT of 14%. From 13.2%, a lot of that journey to 14% will get covered this year itself rather than leaving it for next year to kind of scraping towards reaching 14% EBIT number.
Okay. Thanks. All the best. Thank you.
Thank you. Our next question is from Vaibhav Chechani of Nirmal Bang. Please go ahead.
Hi. Congratulations on great set of numbers, and thank you for the opportunity. My question is for Saurabh ji.
Vaibhav, you're not audible.
Hello.
Is it better now?
Yeah. Much better.
Yeah.
Yeah. Congratulations on great set of numbers, and thank you for the opportunity. My question is around the exchange rate. In our fact sheet, what I found, the reported rate is around 86.6. However, when I calculate our reported numbers, which is $404 million versus INR 34,099 million, it comes with a deviation of around $2. Any color on that?
Number one, see, our exchange, that is just a dollar exchange rate. When you look at our mix, it's a little different from most of the other organizations wherein almost only 50% of the revenue is actually dollar-denominated revenue. A large part also comes from pounds, euros, Australian dollars, and Singapore dollars. That's number one. Number two, we also take hedge losses in the top line, which actually translates into a very different number. These are two reasons why you see just a dollar average rate versus the revenue that's got delivered in the quarter from a reported revenue in rupee terms or dollar terms.
Understood. Sir, Saurabh, a second question on that is around the GCC business. Any color on our GCC business, how is it ramping up, and how significant is it becoming in our Asia geography? Our Asian geography has significant revenue growth in this quarter. Is it primarily driven by GCC, or is GCC just a part of the higher-end growth in Asia geography? Thank you.
Asian growth has not been driven by GCCs, Vaibhav, but a lot of our growth is being driven by GCCs. GCC-driven or GCC-influenced revenue is almost 10% of our aggregate revenues as we speak. The largest deal that we are pursuing right now also is a GCC-specific deal currently. Short answer, Asia growth is not necessarily a function of GCC growth, but a lot of our pipeline is significantly influenced by our GCC growth. John, would you like to add more to that?
The only thing I'd add to that is, given the success we've had with GCC over the last 12, 18 months with a number of customers, that is in itself being used as referencing into new customers, and that is driving change. What we're also finding is a number of organizations are struggling to drive their offshore strategies alone, and it's feeding into us significantly, and hence why we're having so many conversations with customers in this space.
Great. Thanks, John. Thanks, Vaibhav.
Understood. Thank you, Saurabh. That's it from us.
Thank you. Our next question is from Chirag Kachhadiya from Ashika Institutional Equities. Please go ahead.
Hello. Congrats on a great set of numbers. I have brought you two questions. The Cignity is offering in one vertical, they're offering testing-related services. How that particular division is now integrated in this consolidated entity and providing some synergy benefit to the existing business of the Coforge? In the advent of this AI-related disruption, how this disability offering on real-time basis will not get impacted by this AI-related disruption at all? What risk do you see in FY 2026 and 2027?
Cignity, QE, out of the five large deals that I talked about, two of the large deals were influenced by our AI for QE and QE for AI-based offerings. That's a hard data point in terms of how successful the Cignity business, especially the AI-driven QE, has been. Second, in November this year, given our confidence around the AI suite in QE, we are organizing an event in New York City, a four-hour workshop, inviting every analyst there is in the world just to talk about the differentiation that we have built, which was part of our premise around acquiring Cignity in this space. Third, the Cignity QE team has been fully integrated into the Coforge unit. There is no longer internally, if you look at us, a standalone Cignity team. QE is now a horizontal business unit. It is run by Mr.
Raghu Krovvidi, who used to be the global delivery head of Cignity earlier. As far as the risks are concerned, no outsized risk that I can call out when it comes to the revenue. We have not given a guidance, but the confidence that you hear in our tone, we believe we have considered most risk scenarios. We have most importantly considered the demand downturn that our industry is dealing with. After baking all of that, we still feel extremely confident about what we have shared with you. I am going to request John to layer on anything else to that.
Yes. Just one thing which we're seeing is the cross-sell upsell opportunities into the accounts that have been onboarded as part of that acquisition. That is significant because that business that we acquired was 90% QE, small smattering of RPA, digital. Now we've got the full gambit of other engineering platform plays that actually can deliver value to those customers, and that we are very confident on leveraging.
Thank you, Chiragh.
Thank you.
Thank you. Our next question is from Vibhor Singhal from Nirmal Bang Equities. Please go ahead.
Yeah. Hi. Thanks for taking my question again. Sudhir, just a question on the Sabre deal again. I mean, more of a subjective kind of assessment if I could ask you for. I mean, it's very seldom that we see a company of our size, mid-tier company, grab such a large deal. These large deals had always been the kind of forte of the large-cap companies that we had always seen. You mentioned, of course, that this was a long-standing client. We've had a long-standing relationship, and our domain expertise in the travel vertical is also known. Is there a kind of a paradigm shift in which more and more companies like our size are being called for large-cap companies? In your pipeline, are there any more large deals that you are chasing?
Are the customers now becoming more open towards, let's say, including more companies of our size into these large deals as compared to, let's say, three or four years ago?
Yeah. Thank you for the question, Vibhor. When our size, we believe we are within touching distance. It's a question of which year we touch $2 billion. So we're no longer a small firm as we see ourselves and as our clients see us with 33,000 engineers across the world, hopefully likely to be 50,000 pretty soon. It's a very significant cohort of engineering talent that we have. The Sabre deal was one against two of the largest SIs in the world. When I look at the final shortlist of four, two of the folks who were against us were two of the largest SIs that do play within our industry.
We believe the Sabre deal was won not just because of our industry expertise in travel, but also because of the iterative series of workshops around the engineering solution that we delivered for Sabre, which gave them comfort to choose us as their deep engineering partner for a 13-year period. That is how we see this. When it comes to pipeline, there are a significant number of large deals in the pipeline which are of a significant scale as well. John, do you want to add to that?
Just the one thing I want to add is what we're seeing certainly in Europe is a number of the segments proactively bringing in and even defining frameworks, which are their barriers to entry, to encourage engagements with an organization of Coforge's size. Quite often, it is to break up those mega deals into smaller chunks and to de-risk and also to ensure outcomes are delivered.
Got it. Got it. Thank you so much for the detailed explanation. Just one last bookkeeping question from Saurabh. Saurabh, if you could provide some update on the Cignity's share swap proposal, what is the status? Where is the approval pending? What is the timeline that we are looking for the full integration of Cignity into our business?
Vibhor, right now, it is with SEBI. Exchanges have already cleared, and it is sitting with SEBI. It went to SEBI around the end of March. There are no, I would say, turnaround times that are there typically with the regulators, but one can expect anywhere between two to three months. Then NCLT, then shareholders' approval. We believe that somewhere toward December to January is a time frame when the merger should get consummated. Having said that, as far as we are concerned from a business standpoint and from an operations standpoint, apart from the fact that there are two separate listed legal entities running, the business synergies, the operational synergies have started flowing in already.
That is where you see the margin expansion, 100 basis point margin expansion on a proforma basis over last year to current year, or an asset which was $220 million in revenue with 12% of EBITDA going up to exit of 18% in the current quarter. I mean, it is the result of synergies that have come in between both the businesses.
Completely agree. Thank you so much. Thank you so much for taking my questions, and I wish you all the best again.
Thank you. Our next question is from Abhishek Pathak of Motilal Oswal. Please go ahead.
Yeah. Hi. Sudhir, just very quickly on the client complaint that it's been an ongoing issue for the past, I guess, 18 months. Just a brief update on that and how do we expect to sort of close this. Thanks.
Thank you for the question, Abhishek. The client complaint claims that a hacker tricked service desk agents into resetting employee passwords, allowing access to the client's customer loyalty database. It misrepresents the company's engagement terms, role regarding the database, and the service desk agent responsibilities. The company did not handle—and when I say the company, I mean Coforge—the company did not handle core cybersecurity services for the client. We had no access to or responsibility for the database, and we were not involved in its management. We are consulting our insurance provider and consulting legal counsel regarding the complaint. The liability amount cannot be determined at this time. We do not want to comment on the name of the client, but the company continues to serve the client regularly since the last 18 months.
The client is not a material client of the company and does not form part of even the top 50 clients of the company. That is an overview in terms of the complaint.
That's very helpful. Thank you so much.
Thank you. We take a last question from Pratik Maheshwari from HSBC Securities. Please go ahead. Mr. Pratik Maheshwari, could you please unmute your microphone and ask your question?
Sorry, guys. I was on mute. Thank you for the opportunity. Guys, I just wanted to ask on your net other income. It continues to be negative, and I just wanted to check if this could be a strong lever for PBT margin growth next year.
A couple of things. If you look at our presentation, we have explained where the net other income is coming from. There are two things there. Number one, there is interest on borrowing, which is there on the working capital. That's number one. Then there is lease discounting, which is a standard because of the right of use of assets that's being created. Over a period of time, once the working capital utilization starts going down and with the improvement in the cash flows, the interest income will start going up and will become a lever for PBT expansion. Right now, with the growth that we are sitting at and with the working capital requirement that we have and we continue to pay dividends, we believe that at least it will continue for a year or two.
For now, and then we'll kind of start thinking of PBT or interest other income as a lever for margin expansion. Right now, we're first focused on improving a bit of the organization, and then we'll start focusing on this.
Thank you so much.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the floor to Mr. Sudhir Singh for closing comments.
Thank you, Indra. Ladies and gentlemen, thank you very much for your time, for your interest, and for your support and mentoring and guidance over the years. We look forward to these conversations. We enjoy these conversations. We learn from these conversations, and we look forward to more of these conversations. Thank you very, very sincerely. We wish you a very good morning or a very good evening or a very good night. Thank you.
Thank you, members of the management. On behalf of Coforge Limited, that concludes today's conference. Thank you for joining us. You may now click on the leave icon to exit the meeting. Thank you for your participation.