Q1 25/26

Aug 7, 2025

Summary

Q1 FY26 revenue rose 18.7% YoY, including TNQ Tech, while EBITDA margin expanded to 16.2%. FY26 organic growth is expected in the mid-single digits, with mid-teens growth including acquisitions and 50–100 bps of margin improvement targeted.

Please note that this conference is being recorded. I now hand the conference over to Mr. Pratik Jagtap from EY Investor Relations. Thank you, and over to you, sir. Thank you, Bhavya. Good afternoon to all the participants in the call today. Welcome to Q1 FY26 earnings call of Datamatics Global Services Limited. The results and presentation have been already mailed to you, and it is also available on the website of Datamatics. In case anyone has not received a copy of press release or presentation, please do write to us and we will be happy to send you all. To take us through the results today and to answer your questions, we have with us the top management of the company, represented by Rahul Kanodia, Vice Chairman and CEO, Ankush Akar, SVP and Chief Financial Officer, Mitul Mehta, EVP and Chief Marketing Officer. Rahul will start the call with the brief overview of the quarter on business, which will be then followed by Ankush, who will take us through the financials. Then we will open the floor for Q&A session. I would like to remind you that anything that is said on this call, which gives any outlook for the future or which can be construed as a forward-looking statement, must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties are included, but not limited, to what we have mentioned in the prospectus filed with SEBI and subsequent annual reports, which you can find on our website. With that said, I now hand over the call to Rahul, sir. Over to you, Rahul, sir. Thank you, Pratik. A very warm welcome and thank you all for joining our Q1 FY26 earnings call. I will begin with the key highlights from our quarterly performance, after which Ankush will walk you through the financial update. After that, we will open the floor for Q&A session. We delivered a healthy performance in Q1 FY26, reporting a revenue of INR 467.6 crores and 18.7% year-on-year growth, though reflecting a 6% sequential decline as Q4 traditionally tends to benefit from our tax processing business and we see a spike in Q4 normally. Our EBITDA stood at INR 75.9 crores, a healthy margin of 16.2% on revenue, driven by continued focus on operational efficiencies and cost optimization initiatives. We remain focused on sustaining this momentum throughout the rest of the financial year 2026. These efforts have led to a notable margin improvement in Digital Technologies, while Digital Operations margins remain stable. I would like to take a few moments to share the key updates of our business segments, starting with Digital Technologies. I am pleased to report that our ongoing cost optimization efforts have led to an improvement in margins across Digital Technology segments that is a direct result of disciplined execution on operational efficiencies. On the innovation front, we made significant strides with AI-driven solutions. We successfully built AI agents tailored for key verticals including insurance, banking, and logistics, showcasing the depth and versatility of our capabilities. We are also proud to be partnering with a leading bank in UAE, where we are playing a pivotal role in helping them define their AI strategy and establish their AI center of excellence. This is a long-term strategic engagement that underscores our thought leadership in the AI space. A major Japanese consumer electronics company has selected our Intelligent Automation suite, including TruCap+, TruBot and TruBI, to drive process automation. This win validates the strength and relevance of our Intelligent Automation offerings on the global stage. Moving to our Digital Operations business, we recently launched the latest version of FINATO order-to-cash applications, which now include our enhanced version of cash credit and collection features. Notably, this upgrade introduces an AI-powered collection agent, which provides out-of-the-box functionality to proactively follow up with customers on pending payments, driving faster collection and improved cash flows. Our deal pipeline continues to look healthy, giving us visibility into the future growth. In the Digital Experiences business, we observed a revenue and margin decline in Digital Experiences, primarily due to one of our top 10 customers transitioning partially some of its operations into their captive unit. We expect another customer to transition to their captive unit, to their GCC, in Quarter 4 of this year. However, we have signed long-term contracts with a large American optical retail chain to reevaluate their omni-channel customer experience and with an American pharma enterprise for their customer outreach initiative. Across these customers, we are implementing digital AI agents to augment human agents for delivering enhanced productivity and customer experience. Additionally, we are working on GCC offering as a growth driver for the organization. We have a good pipeline of AI-based projects across all our lines of businesses. Some of the pilots we have done are now converting into full-fledged commercial projects. As far as tariffs are concerned, we see no direct impact on us. However, many customers are still treading slowly due to the tariff situation. I am proud to share that we recently celebrated a remarkable milestone, the 50th anniversary of Datamatics. Over the past five decades, we have not only witnessed but also played a role in the evolution of India's IT and BPO industries. What started as a bold vision of our Chairman and Founder, Dr. Kanodia, has now grown into a resilient and innovative enterprise, thriving through every wave of technological change. As we look ahead, I am truly excited about the future. We stand at the forefront of a new technological revolution, and Datamatics is strongly positioned to seize the opportunities it brings. A heartfelt thank you to our customers, employees, and investors for being an integral part of this journey. With that, I will now hand over the call to our CFO, Mr. Ankush Akar. Over to you, Ankush. Thank you, Rahul. Welcome, everyone, and thank you for joining us in Q1 FY 2026 earnings call. Let me take you through the financial performance for the Q1 FY 2026. Our Q1 FY 2026 revenue stood at INR 467.6 crore, reflecting a growth of 18.7% on year-on-year basis and a decline by 6% on quarter-on-quarter basis. Typically, the fourth quarter is a seasonally strong quarter with higher volumes, which is followed by a sequential decline in first quarter. Our cost optimization efforts and enhanced operational efficiency helped us improve our EBITDA to INR 75.9 crore, a growth of 1.9% on quarter-on-quarter basis. On a Y-o-Y basis, we grew by 47.7%, which includes numbers from TNQ Tech. This reflects our commitment to improve performance despite macro environment challenges and softness in revenue. Our EBITDA margin for the quarter stood at 16.2%, reflecting an expansion of 319 basis points on year-on-year basis and 125 basis points on quarter-on-quarter basis. Our EBIT for the quarter stood at INR 56.4 crore, which is up by 3.5% on quarter-on-quarter basis and 32.5% on year-on-year basis. Our EBIT margin was at 12.1%, reflecting an expansion of INR 126 basis points on year-on-year basis. Our PAT after non-controlling interest was at INR 50.4 crore, up by 12.3% on quarter-on-quarter basis. Our PAT margin stood at 10.5%. EPS for the quarter stood at INR 8.52 per share, reflecting a growth of 12.2% on quarter-on-quarter basis and 15.7% on year-on-year basis. In terms of segments, Digital Technologies contribution to total revenue was at 31%, Digital Operations contribution at 55%, and Digital Experiences contribution at 14%. Our Digital Operations revenue for the quarter was INR 255.6 crore, and EBIT margin was at 16.4%. Digital Technologies revenue for the quarter was INR 144.4 crore, and EBIT margin was 6.9%. Digital Experiences revenue for the quarter was INR 67.6 crore, and EBIT margin was 6.8%. We continue to maintain a healthy balance sheet. As of June 30, 2025, our net cash and investments, net of debts, stood at INR 457.3 crore. Our bill DSO was at 56 days as of June 2025, as compared to 57 days as of March 2025. In terms of geographical footprint, U.S. remains our largest geography, with 55% of our business coming from here, followed by U.K. and Europe at 21%, and India 16%, and ROW at 8%. Our client concentration remains very healthy, with top five, ten, and 20 clients contributing to 25%, 38%, and 52% respectively. With this, I will now pass on the call to the operator to open the floor for questions. Thank you for your patience and continued interest in Datamatics. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Srinivas K from TIA. Please go ahead. Hi, sir. Hello. Hi, sir. Am I audible? Yes, you are audible. Thank you, sir, and congrats for the excellent set of numbers. My question is about your IP strategy for the AI. How does your AI stack, like TruAI, TruCap+, TruBot, how it actually differentiates from the global players like UiPath or even Indian players like Mugen Software? In some ways, we compete with them. In some ways it is similar. I do think that we have had an edge in terms of our partnerships with the OEMs like Microsoft and Google, where we were able to implement a lot of the AI technologies into these platforms, and that does give us a differentiator. Having said that, competition is not going to be slow. They will catch up very soon. Yeah, we compete with them. We are in a similar space. But the fundamental difference is because Datamatics comes from a services background, we understand how to make sure that these products go live with the customer, whereas the others are purely product companies. Once they sell a license, then beyond that, the success of that license really lies in the hands of the customer. Whereas in Datamatics' case, we are able to ensure that it goes live and gives the customer an ROI, and that is why it gives us an edge. Okay. You also mentioned in your presentation that small language models and Copilot integrations with Microsoft and Google. Is it used internally or offered commercially? These are commercially done. Small language models are built specifically for each customer, so it is very customer-specific. Copilots also, we are using it internally, plus we are implementing it for our customers as well. Many customers have bought the licenses, but they struggle to get an ROI from it or struggle to really implement it, and that's where we make sure that they succeed. Okay. What is your go-to model for monetizing this AI, sir? How are you pricing them? It's not a product that has a standard price. A lot of this is customized depending on the need of the customer and depending on the integration it needs to be done with the customer's enterprise systems. There's no straight answer as to how do we price it. Today, AI is at a little bit of a premium price, so that we do see that premium coming in. My last question, sir. Are clients asking for AI-based intelligent automation versus the traditional automation and RPA? Yes, you see a significant move in that direction. Okay, thank you. Also, what happens is when there are certain use cases which traditional automation solutions cannot address, that is when the AI is brought in. So they both have very clear use cases. It is not that the traditional RPA is out of the window. It definitely has its set of use cases, but intelligent automation with AI-driven RPA and IDP reaches a little farther down in terms of solutions and automation. Are you going beyond this document processing with respect to AI? Yes. Document processing is one component, but the moment you put rewards RPA, and then you put agentic AI, it is a very different game. Correct. It helps you do more complex tasks. You can automate much more complex tasks. You can go live much faster because your training periods are less. There are definitely value propositions around AI and a larger automation suite, which is what comprises of IDP, RPA, agents, and BI. Thank you, sir, and all the best. Thank you. Sure. Thank you. A reminder to the participants, you may press star and one to ask a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The next question is from the line of Krishma Shah from Envision Capital. Please go ahead. Yeah. Good evening to the management team, and thanks for taking my question. Keen to know how we have done organically. I understand the integration of TNQ Tech in our business. So year-on-year, the growth looks fantastic. But if you could highlight how is the organic business done, how is Dextara done, that should be helpful. Sure. On a sequential quarter basis, we have de-grown 6% as we have showed in our numbers. On a year-on-year growth, I think we have had a mid-single digits kind of growth, so it has been sort of muted. Going forward, we see a similar trend because there is a lot of slowness in the decision-making that we see on the client. As far as Dextara and TNQ concerned, the integration is going smooth. I think they are both in a very stable situation, so we are in a good place with both these organizations. Given that Dextara has integrated and finished one year, I suppose now, how has Dextara grown on a year-on-year basis for this quarter? This quarter is flat, but what is happening now is that we see a lot more traction from our existing customer base, and we have been able to take the cross-sell strategy. It seems to be delivering, and we have been able to take the Dextara expertise to a lot of our current and new opportunities. That integrated offering, we see much more happening now. It has taken about a year, but we have started seeing that already. Last quarter, if you remember, we had talked about five customers where we were cross-selling. Today, in one quarter, it has gone to eight, so there are three additional customers. Hopefully, this should pick up a little more as we go forward. The other traditional sales team of Datamatics now come up to speed with understanding their offerings. Okay. TNQ, how has it grown year-on-year? I understand it was not part of Datamatics a year ago, but just to understand how the business has grown. TNQ has shown a good growth quarter-on-quarter. Their profits are also very stable. In fact, that acquisition has turned out to be very good for Datamatics. Right now we are in the process of integrating it, so that will take a little more effort, but it is going very smooth. It has- So quarter 1 last year to quarter 1 this year, TNQ has grown? 2%. You were talking about quarter 1 of last year to quarter 1 of this year? Yes. Yeah. We have had a 2% growth, but our sales cycle is about 9 months, roughly. You cannot expect anything to change in 1 or 2 quarters. Okay. On the margin side of it, one looks at various segments. Margins on the Digital Experiences side has taken a significant- Correct. dip. Is it just because of the customer migration that you spoke about? That is correct. There is a customer migration, and also what has happened is when the customer migrates to their captive- Yeah. -we might still have a headcount that remains with us for a while. Because you cannot- Sure. We are not rebadging, we are not moving the people. Yeah. So the people stay back, customer moves, and it takes a quarter to streamline that piece. But on that front, we are on the verge of signing some very good deals, so I think we will bounce back quite quickly. Okay. On the Digital Technology side, year-on-year, we see improvement as highlighted by you because of operational efficiency. Do we see margins improving significantly as we close the year in this segment? I think we will see another 100 basis points improvement at least. Overall at a company level, Okay we will see between 50 to 100 basis points. It will vary. Digital Technologies will be a little better. Digital Experiences will bounce back a little bit, so it will be a combination of all these things. Digital Operations and the whole digital content will be very stable. Okay. Overall for the year, the organic business would grow low single digits, and TNQ, what is the outlook? Sorry to interrupt. There is a bit of echo from Krishma Shah's line. Yeah. I am on speaker. Yeah. I am looking at the mid-single digits kind of growth. Across the board. Okay. But TNQ business is supposed to deliver much better growth within If you see the TNQ details when we had acquired them one of our strategies was to plug in our sales team into their operations and get that growing faster. It has only been two quarters. The sales teams have connected. They are talking to each other, they are working together. So we should see an improvement, but the sales cycle is about nine months to 12 months in our business. So yeah, you will not see an uptick in one or two quarters. Okay, fine. Thank you and good luck. Thank you. Thank you. Participants, to ask a question, you may press star and one. We will wait for a moment while the question queue assembles. The next question is from the line of Garvita Jain from Seven Islands PMS. Please go ahead. Hello. My question is that we have new addition of customers and new orders, so could you please clarify these orders are out of U.S.A. or worldwide? They are across the board, U.S.A., Europe, India, and Middle East. I do not have that breakup handy, but across the board we are having new logo acquisition. Mostly U.S. and Europe. There is a little more focus on Europe and the U.S., therefore there is more over there compared to India and Middle East. Majority is from U.S.A., right? Yes. U.S.A. would be number one. Europe is also there, but yeah, U.S.A. would dominate. Okay. Any number that you can give me or percentage? I don't have those numbers handy right now. Okay. All good, sir. Thank you. That's all. Thank you. A reminder to the participants, you may press star and 1 to ask a question. We will wait for a moment while the question queue assembles. The next question is from the line of Dhanshree Jadhav from Choice Institutional Equities. Please go ahead. Yeah, thanks for taking my question. Sir, you spoke about the growth to be mid-single digit for all the three segments. If you can throw some more light, like are we seeing a turnaround led growth in Digital Technologies? Because margins have expanded quite strong there. Plus Digital Operations growth will be led by TNQ. Just want to have a long-term view on how our growth will look like. FY 2026 will be strong led by inorganic, but going forward for FY 2027 also, if you can throw some points. Yeah. This year we are looking at mid-single digits, as I mentioned. Some of these will grow a little stronger. Digital Experiences, as you saw, had a little downswing and it will bounce back, but net at the end of the year will be a little under pressure. Having said that, because the decision-making has been slower because of all the tariff wars and uncertainties that we have, I am not looking at an aggressive performance this year beyond the 5%-6% that we talked about. Next three years, if you are looking at that outlook, I think on the back of AI, I am looking at a very good outlook. Our pipeline is quite decent on that. A lot of our POCs or pilot projects are now converting into commercial projects. And we should see a significant uptick in an AI-led kind of operation, both in DO, DE, as well as DT across the board. So I am very bullish about the next three years, but this year will be a little soft. Okay. A lot of our new acquisitions also based on some AI solutions that we have been able to showcase. Okay. Regarding the margins we have set around, if I am not wrong, we have set expansion of 50-100 basis points, right, for this year? Yes. Okay. Predominantly will be led by Digital Operations, if I am not wrong. Digital operations for sure. Some of it also coming from Digital Technologies. Okay. Yeah. The turnaround and whatever new progress we are seeing on the AI front, AI-led offerings. Can I infer that going forward FY 2027, 2028 also, there would be a steady improvement in the margin profile that we are seeing currently? That we will see. That you are talking about next year and year after. We will have to see how the AI thing pans out. It is beginning to show good productivity gains and therefore better margins. It also depends on how we are investing in it. Right now, as we have talked about that we invest about INR 40-50 crores, depending on investment, the impact. But I think we take that call towards the later part of this year. This INR 40-50 crores investment we have already done in FY 2025, right? Our annual investment is in that range. Earlier, we were investing in the IP development on robotics and IDP and things like that. Now we've sort of pivoted a little bit of that into AI. We've reduced the investment in those IPs that we had traditionally and putting the investment into AI, Generative AI, to be more particular. Great. Okay. I think that's it from my side. Thanks for taking the question. Thank you. Thank you. A reminder to the participants, you may press star and one to ask a question. The next question is from the line of Srinivasu K from TIA. Please go ahead. Hi, sir. What is your hiring trends and utilization levels, sir? That's not a straightforward question. Utilization goes typically when you're looking at bodies in the tech space. In the BPO space, Digital Operations and Digital Experiences, you don't go by utilization. It's really the volume that a person does. If you see our attrition, our attrition is down. The industry overall is soft, so we do expect the attrition to remain under control quite a bit. In terms of headcount increase, it will be proportionate to our revenue because on the IP side and the AI side, we are still converting the pilots into commercial projects. That's still going on. So you're not seeing the differential between the group. However, for example, on the Digital Experiences side, increasingly we are now deploying AI agents versus human agents. And AI agents are augmenting our human agents. So you see, to some extent, a disproportionate revenue increase compared to headcount increase. But right now it's not clear because some of these still have to have an adoption by the client, and right now they're still kind of early stage of adoption. Okay. Thank you. What is your revenue outlook for FY 2026? So, as I said, we are looking at a mid-single digit kind of growth in this financial year. Organic. Okay. Organic. Then, of course, you can bolt on the inorganic, which is the key increase. Thank you. Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Sumuk from Codman Capital. Please go ahead. Hello, am I audible? Yes, you are. Sir, my question was, you have a company called InfoBeans, which basically they have a partnership with Microsoft and they implement AI tools to their clients. Your line is very unclear. The audio is coming muffled. Better now, sir? Hello? Yeah, a little better. Yeah, sir. My question was, how is your company different from InfoBeans? Because from what I know, even they have a partnership with Microsoft and they do the implementation to their clients. If you could throw some light on how you guys are different, that would be great. I do not know InfoBeans. I really cannot comment on what they are doing and what we are doing. Companies like Microsoft and Google have tens of hundreds of partners globally. I do not think the partnership, the question is what kind of solution are we building along with these OEMs? That is what is important. How do we jointly go to market and customize unique solutions for the customer base? I know that we are working both on the technical side with the technical R&D team, which is a very good engagement that we have, and we are able to jointly go to markets and build unique solutions for customers. As far as InfoBeans is concerned, I really do not know what they are doing, so I would refrain from any comment on that. Okay. Thank you. Thank you. A reminder to the participants. You may press star and one to ask a question. Ladies and gentlemen, this was the last question. I now hand the conference over to the management for the closing comments. Thank you and- Yeah. Thank you everybody- Sorry to interrupt, sir. There are more questions. Okay. Go ahead. The next question is on the line of Vimal Parekh from Sunidhi. Please go ahead. Hello. Am I audible? Yes. Yeah. Thank you for taking the question. As you mentioned that this year, you are expecting a mid-single digit kind of growth. The first quarter we have shown around 17% or a 16% growth. Does that mean that the next few quarters are we looking at a negative growth or? No. Let me clarify. We are talking about organic growth at mid-single digits. Then you bolt on the acquisition that we made with TNQ. Therefore, you are looking at, so we have showed a year-on-year growth of 18%. That should continue. That trajectory will continue. However, in Q4, it will be slightly different because last year, Q4, we had the TNQ numbers reflecting in our numbers. So this year, Q4 will not show that. So I am differentiating between organic and inorganic. So I think you will see it in the themes. All right. I appreciate it. Thank you. Thank you. The next question is from the line of Yogesh Bhatia from Sequent Investments. Please go ahead. Hi, sir. There are a lot of AI initiatives that we are taking across the DT, DO, and DE. So I want to know, is there any sort of metric that we are tracking in which we can say that this growth is because of the AI initiatives and otherwise it is the conventional growth? Is there any? That is difficult because today we are infusing AI into every opportunity that we have, because that is going to be the norm very soon. Across these three operations, some of the newer wins are on the back of the AI solution that we have been able to showcase. I think the days of the traditional services are numbered, and we are not going to see that. It is very difficult to pull out whether you get very few these are purely AI deals. They are all integrated with the DT, DO, DX. Pure AI, you will not find, and then everything has AI in it. It is very difficult to pull out a number saying this is specifically due to AI. But we can see that because we were able to showcase some uniqueness and productivity improvement to the customer, we were winning those deals. Okay. Thank you, sir. That should be all, sir. Thank you. Thank you. Participants, to ask a question, you may press star and one. The next question is on the line of Vimal Parekh from Sunidhi. Please go ahead. Sorry again, sir. Just wanted to understand that you mentioned that this growth trajectory of around 18% will continue, right? For the year. Yeah. If you are looking at the year-on-year, in Q4 it will dip a little bit because Q4 numbers has the TNQ numbers. But yeah, you are looking at certainly mid-teens. Mid-teens for the year. Yeah. Okay. In terms of the EBITDA, we will continue our higher EBITDA, what we have shown? Yes. We plan to. On the EBITDA, we see improvement. Actually, we see a 50 to a 100 basis points improvement during the course of the year. Okay. Thank you. Thank you very much. Thank you. A reminder to the participants, you may press star and one to ask a question. Ladies and gentlemen, this was the last question. I now hand the conference over to the management for the closing comments. Thank you, and over to you, sir. Thank you, everybody, for participating in our earnings call. Really appreciate the time and attention that you're giving to Datamatics, and thank you for your vote of confidence in the company, and our performance. Look forward to once again meeting all of you in the next quarterly earnings call. Thank you again. Thank you. On behalf of Datamatics Global Services Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.