Ladies and gentlemen, good day and welcome to the KPIT Technologies Q1 FY 2023 Earnings Conference Call hosted by Dolat Capital. As a reminder to all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you, and over to you, Mr. Rahul.
Thank you, Ranjit. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technologies Limited for giving us the opportunity to hold this earnings call. Now I would like to hand the conference over to Mr. Sunil Phansalkar, who's head of IR at KPIT, to do the management introductions. Over to you, Sunil.
Thank you, Rahul. Good evening, and a very warm welcome to everybody on the Q1 FY 2023 Earnings Call of KPIT Technologies Limited. On the call today, we have Kishor Patil, our CEO and MD. We have Sachin Tikekar, President and Joint MD, Priya Hardikar, CFO, and of course, myself, Sunil Phansalkar from Investor Relations. So as we always do, we'll have the opening remarks by Mr. Kishor Patil on the performance of KPIT in the last quarter and the way forward, and then we'll have the house open for your questions. Once again, thank you for joining the call and a very warm welcome to all of you. I'll hand this over to Mr. Kishor Patil.
Good evening, everyone. I would like you to take two salient features for this quarter. To start with, as you know, the revenues have grown 23% in constant currency year-on-year during the quarter, and a 6% quarter-on-quarter growth. In terms of reported numbers, revenues in terms of dollar growth, it is 16.4% year-on-year and 3.2% quarter-on-quarter. Because of the currency movement, there has been more gap in terms of constant currency numbers and reported numbers. It has been generally across the industry. We were a bit impacted because of our higher revenue in the Euro zone as well as yen currency movement in the last month.
On account of, you know, it could get balanced because of the dollar movement which were favorable during the same time. The overall revenue growth has come more from the PACCAR vertical, and large revenue growth was also driven by what we call software-defined vehicles, basically middleware and new architecture. Overall, otherwise, the growth has been broad-based. The good part about this growth is the programs which are winning will drive further growth over the years in other parts of the business because middleware is something. In SDV programs, you start with the middleware, and then the other parts of the business follow next. During this quarter, we had contracted engagements of INR 155 million, which is quite good.
Overall, our order book looks good. In terms of profitability, EBITDA margins, there is an increase to 19.4% from 18.6% last year. Year-on-year EBITDA growth is 35.7%, and quarter-on-quarter growth of 9.7%. Now, this has come, 19.4% has come in spite of, you know, the promotions, et cetera, which we have made during the year, during this quarter. There is a negligible impact of the currency in improvement of this EBITDA margin. Most of it has come because of the growth in the revenues and operational efficiencies.
In the quarter, well, the net profits are at INR 85.4 million, and there is a growth of 41% year-on-year and 8.3% quarter-on-quarter. The cash, we are with the cash of INR 10.6 billion with the 46 days of receivables, which has been the lowest till now. Going into the other parts of the business, if you look at on the people side, we have added about 900 people during the quarter. Now, with the overall we see as a result, in the market on the people side, attrition has looking to trend downwards. It has substantially come down in terms of what we call top performance bracket.
It has come down during the quarter, and we can see that going down in the next quarter. It has also allowed us to bring the more stability in terms of delivery of the programs we are giving. We do believe that attritions may soften over next few quarters. We continue to connect with multiple. We are increasing our range, our reach both in India and outside India. In India, setting up new development locations, growing locations outside Pune, Bangalore. We are looking at setting up certain locations outside India, in many places.
We are tying up with the universities, multiple universities, and that would allow us to really scale and bring the specialist talent we need for relevant to different parts of the world in different time zone, and different language and you know, environment. For example, we have had with the Coventry University for many years, and we worked with the universities, et cetera, to change the curriculum, bring it what is more relevant to our current business and have those specialized courses both for our mainly for our current employees. That really helps us.
In recognition of KPIT contribution, Coventry University, which is a leading automotive, I would say focused, you know, university, very well known in the automotive world. They have given honorary PhD to our chairman, Ravi Pandit. On the client side, if I have to say, the clients continue to change their business model. Again, from selling vehicles they are moving towards selling more services. They are trying to see what new services they can bring to the client. In order to enable that, they are continuing their investment in CASE and the new architecture as we call middleware and new architecture. That is where KPIT has really both paved in terms of both competence, domain knowledge across knowledge across different domains and specifically into middleware area.
Being the scale which is probably the largest in automotive software that is allowing us to get more than 75% of the programs which are globally happening. KPIT is a significant player in these programs. From that perspective, we remain optimistic about the environment. There are also on the rate side, if you look at it, we are in a position to increase or get partially, if not fully, compensated for some of the inflation-related payments or increments which we have to make to our employees. We change business model with bringing different business models, we are in a position to increase our realization.
In new technology areas, we are still in a position to command premium rates. With all this, from that side, it looks very positive. On the other hand, while it may have a minimal impact in the next few quarters or at least for this year, but cross-currency movement is going into a negative way. That's why there has been gap between the reported currency growth and the constant currency growth or revenues. That may continue, maybe further increase during the Q2 for sure and maybe in Q3 too. That's one part which is, if I have to say, volatile as of now.
Overall, we feel very positive about the business environment, and we are very positive the way we have built our business and our relationship with the client and the employee base we have and our ability to scale and excel. Thank you.
Should we start the question and answer session?
Yes, please.
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 Vimal Gohil from Alchemy Capital. Please go ahead.
Yes, sir. Thank you for the opportunity, and many congratulations on sustained very good execution. My first question is around margins. Given the fact that you are already running ahead as versus your guidance in Q1, but you have sort of maintained that band of 18%-19%. Would it be fair to say that the wage hikes that we are expected to see in Q2, if at all, I mean, if there is a different timing, please let me know. The wage hike that you are offering in Q2 would be far higher or maybe higher than what we have offered historically. That's question number one. The second question, sir, would be on the deal announcements that you have made for the last couple of quarters have been fairly strong.
If you can just highlight the average deal tenure over a period of time, let's say if we take three years. How much has the average deal tenure moved up by? Because in the past we have highlighted that, you know, we are running for long-term annuity kind of deals. If you could just highlight, you know, has the average deal tenure also gone up over the time period? Lastly, on the integration of our acquisition of FMS. How is that integration going? I do understand that the 100% acquisition is still some time away, but any small updates on the same will help. Yeah, that's. Those are my three questions. Thank you.
Coming on the margin side, I think first is our margins were a little ahead of what we had expected also because of the stronger growth during the quarter. However, to your point, you know, our increments are in the quarter two. It's not. I mean, last few times in last three we had given you know much better than in the industry increments. We will try to do it then this year too, and it will have some impact. The other part I mentioned about the currency and some of those issues, that's why we cannot completely estimate the impact of some of these changes. Generally as a practice, once
I mean, there are very few people who give outlook. Once we give the outlook, we revise it in quarter three, if we think we see the need so. That has been our practice all along. Now, coming to the, I'll answer one more question and then my colleague will take over. On the integration of FMS, I think things are going very well in line with what we have thought about. Our whole idea was to really focus on a client and build a significant practice or presence in that client, which is happening pretty well. There is a lot of interaction integration which is happening, which are all positive.
As you mentioned, we wanted to let them go certain distance on their own to maximize the momentum. In next two, three quarters as we you know acquire additional stake, that's when we will be in a better position to share. Overall, let me say it is going in a positive way, both on terms of strategic intent as well as the numbers.
Right. Just one follow-up there, sir. Sir, FMS and of course, most recent one, SOMIT, both these acquisitions seem to be more on-site led. What is going to be our thought process or what is going to be our strategy to sort of get these deals there more offshore? Because we have been talking about offshoring more, and that has been one of the drivers of your margin improvement in recent times. Once the full integration of these acquisitions happen, do you expect a transitory impact on your on-site offshore ratio? I mean, will it temporarily skew towards on-site, and then probably we might see some offshoring over there? How will it play out?
Just to put it in the context, we added 900 people during the quarter. The total employees of both two together is about 100. The whole idea we acquired them is basically for a specific competence and very skilled and very special talent they have in certain areas. To your point, we will leverage it as we get the larger deals in due course. That's why actually it made, you know, that was one of the reason for our acquisition and from their side also. That lot of growth we can leverage offshore. Anyway, the margins are good on its own for them. Does it answer your question?
Yeah. Of course. I got the product point, sir. Lastly, on macros, most awaited question. Any impact that you're seeing on the burgeoning macros in the West? Thanks a lot. That's all from my side.
Impact of macro.
Macro environment on demand and.
From where we stand today, our mid-term outlook continues to be positive. This is not to say that we are not keeping our ears to the ground to see whether there are any changes that are happening. Right now, I think it's the demand continues to be fairly robust for us.
Sir, on the average deal tenure, I mean, I think we missed that.
Yes. I missed that. The whole rationale behind having that T 25 strategy was to go deep and wide in every account. We are seeing more and more of that over the last couple of years. What that also means is whenever there is an engagement, usually the size of the engagement is getting larger and also duration is getting longer. Your question was what is the average duration? Typically for a program, it's three-year kind of duration. The potential when the program, the production program gets over, there is always ongoing support and maintenance or even the new feature development work that happens after that. Usually we'll the.
When we work on any kind of large engagement, it's at least for three years, and there are opportunities to extend it well beyond that. So that's the whole rationale behind having that sharp focus on T25. Does that answer your question?
Absolutely, sir, absolutely. Thank you so much, sir, and all the very best.
Thank you.
Thank you. Next question is from the line of Karan Uppal from PhillipCapital India. Please go ahead.
Yeah, yeah. Thanks for the opportunity, and congratulations on another strong quarter. Partly, you answered my question on macros, but just want to delve a bit deeper. In your conversations with your clients, what is the feedback you're getting from both auto OEMs and tier one clients in terms of if they are pushing for you know certain projections, their ADAS, electrification or connected space, which might impact our business?
As I mentioned earlier on, given our recent conversation, more and more of our business is actually coming from their architecture with the middleware. These programs are essentially an existential kind of programs for most of the OEM. They are not backing off those programs. We have not seen any signs of that. In fact, for the last couple of years, we've been accelerating all of these programs. When we believe that given the critical nature from their future perspective, you know, we feel very confident that they'll stick to these programs. Having said that, every OEM and every Tier 1 is looking to save money because they all want to be competitive and, you know, save for the rainy days.
Most of those savings are happening in other areas where, you know, a company like ours is not impacted. That's how we are reading the market at this point in time.
Sure, sir. Thanks for the detailed answer. Second question is on margins. Gross margins over last five, six quarters has been very stable despite very heavy and supply-side pressures and the strong hiring done by you. Is it fair to say that the margins are getting the, you know, benefit because of the high pricing you are able to charge, and because of that you are able to mitigate the supply-side pressures? That is the main lever you are using or other levers are also at play which you can, you know, explain it to us.
There are two, three things. One, first is a strong growth. That is a point. The second is increase in the offshoring. The third is, of course, commanding a reasonable price and premium in some specific areas. It's a combination of all three. In addition to that, I think, I mean, it's not that we really tighten things everywhere, that we are, as you rightly mentioned, we are actually paying pretty well. I think we have given the increments pretty well. We are also tightening our operations. With all this, we have been in a position to achieve this.
Okay. Just last two questions, sir. Please, first is what would be the impact of wage hikes in Q2? Secondly, what would be the cross-currency impact for the full year, for full effect, anything based on the currency which is like today as you see it?
I think we cannot answer both the questions, but I can tell you that whatever people are looking at industry, because I cannot share it in the public domain till my employees know. It will be a little higher than what industry is doing, I think, for sure. Right now it may be anywhere, it will be a little higher than last year as the industry. That is point number one. A cross-currency impact, we cannot really talk, I mean, we cannot estimate. That is the one thing I mentioned. Next quarter, if I look at it, right now, our growth constant currency is 6% and our reported growth is 3.2%. Roughly we are at 2.8% impact. It could go as high as 4% for the next quarter.
Cool. Okay. That's it from my side.
It depends on how the currency moves, but that's our estimate.
Sure. Thanks a lot for answering our questions.
Thank you.
Thank you. Next question is from the line of Mohit Jain from Anand Rathi. Please go ahead.
Hi, sir. A related question, actually. Last time you spoke about shift to offshore, and it was supposed to be little slower compared to what we observed last year. Where are we in that?
No, I think we have been increasing our offshore, overall. Many of these large program in last two quarters, specifically last quarter and so many of these again are very large programs. Initially it starts on-site. We are at the same level as we have been in the on-site offshore ratio for about four months or so, four to five months. I think from it will change in a quarter. Hello?
Hello? This is Sandeep Shah.
Yeah. Hello. Can you hear me?
Yes. Please go ahead.
Yeah, yeah. Just the new classification of the revenue, where Mr. Sachin has explained that most of the growth is coming through architecture and middleware, where we are not seeing a spend cut despite the macro. However that as a percentage to the total revenue is 14%. So how should we read the nature of the other two segments, which are future development and integration and cloud-based and connected services? Is it more sticky business or is it more business which is project-based, which can have some sensitivity issues?
If you look at, we'll talk about both the future development as well as the cloud-based. Essentially, let me talk about the first part, which is the middleware architecture piece. Yes, it today forms a smaller percentage of our business, but most of the future projects and programs are from middleware and central architecture. That's point number one. Point number two, when we work on central architecture, there is a higher chance that we'll actually get future development work. Additional feature development and cloud related business also depends on doing a great job with central architecture. Both are interrelated. As far as the engagements on both are concerned, future development programs usually go on anywhere between one year to three years again.
The maintenance part can go on for a longer time. Cloud connected and cloud related programs, some of the connected programs also go on for three years and fairly large in size. Cloud is something that we've been working on for the last few years, but it's one of the newer practices for us. Given the base, we'll see a lot more growth coming because it's a smaller base that we are working with. Our hope is that, you know, we will not build any practice unless it has a potential to become a large boulder in future. Our hope is as we get, you know, our entire strategy and execution in place, the cloud business will also be a longer term stickier business.
Just a related question, with a higher concentration of revenue coming out of Europe, which is based out of Europe, mainly Germany, if I'm not wrong. Most of your peers are talking about macro outlook being much more weaker and could be serious in Europe versus that of U.S. In that scenario, you believe there could be more caution in terms of the spends from the clients based out of Europe? Or you believe the electric vehicle as a platform there are no spend cuts and the sensitivity is much lower to the macro.
Okay. As you might have seen during the quarter, our growth in Europe has been pretty strong. Our pipeline in Europe is pretty strong. We cannot overlook this, but as Mr. Tikekar mentioned, we have not seen that yet. We are actually in multiple discussions on new businesses in that region.
Okay, thank you. Just a bookkeeping question. Is it fair to assume that some portion of wage hikes could be absorbed through growth leverage and the other margin levers in Q2? Or you believe Q2 may see some slide in the margin and then there will be a pick up in Q3 and Q4 as I hope to achieve the full year guidance on margins?
It could be partially. We cannot really give an estimate of that.
Okay.
It could certainly.
Okay. What is the contribution of SOMIT Solutions in terms of revenue in this quarter? The payout in terms of SOMIT looks lower versus what we have said during the acquisition press release. What is the difference that the acquisition, if I'm not wrong, is 65% owned currently, and by Q3 it may go to 100%, right?
Yeah. This payout that has happened is only for the first tranche during this quarter. There are no revenues added from SOMIT during the quarter. It will only happen next quarter. The total payout that we have mentioned in the release when we did the acquisition will happen, as you rightly said, over a six-month period. Next quarter, we'll go to 100%. But right now what is reflected is about the 65% payment that we have done.
Okay. Thanks. We'll come in with follow-up.
Thank you.
Thank you. Next question is from the line of Nitin Padmanabhan from Investec. Please go ahead. Nitin, we are not able to hear you if you are speaking. Mr. Nitin, please go ahead with your question. Since there is no reply from the line of Mr. Nitin, we'll take the next participant. The next one in line is Mr. Jay from Investec India. Please go ahead.
Hello. Thank you for providing me opportunity. Sir, in the initial discussion you have told that you were able to increase the pricing due to new tech areas or new skill set here. Would you like to, and also the new business model that you have that's going.
No, I think in this case, we are taking the full ownership of the program and managing it, and we are basically charging basically based on that. The business models, as basically you said that wherever there are, we are using in specific technologies where we are guaranteeing certain performances, et cetera. Where we are in a position to charge higher rates. That's what I mentioned. The business model is, as we are taking full ownership of the programs wherever, we are in a position to again charge premium.
Okay, sir. Sir, what is the contribution of FMS to the revenues?
FMS? Zero.
Okay. Thank you.
Thank you.
Thank you. Next question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.
Hi, good evening, and thank you for taking my questions. My first question is on the recent leadership change at one of your large clients, Volkswagen. The outgoing CEO was also the head of CARIAD, which is their in-house software entity, which I'm sure you've been working closely with over the years. In your long history of working on automotive software contracts, I just wanted to understand, what are the sort of changes that a partner like you will need to cycle through in such a leadership change situation?
See, this, if you look at CARIAD, I think, or Volkswagen, they would have changed at least 3-4 leadership change in every position in the last 5 years. That's how it has happened at CARIAD and Volkswagen. Generally, this does not impact because the strategy is clear and there clarity is there. Maximum what can change is spend from one pocket to another, if there is any reorganization of the engineering organization. The only case in this case can happen is from CARIAD to the brand itself. Fortunately for us, we are engaged with both brands as well as the central software organization. We do not see any change in this.
Got it. That's helpful. My second question is more specific on the pricing commentary that you've given out, just the answer you gave to the previous participant. Are you able to give any sense of quantification on what sort of pricing improvements you're able to see in some of the new contracts that you're winning?
Well, in terms of pricing, there is always an effort to improve it, you know, as our positioning in the eyes of the clients go up, so we are not backing up on that. There were some in the past couple of months, I think, with some of our clients where it was overdue. We've been able to get upward revision and we'll continue to work on it. We'll see where it goes. Maybe there is an opportunity with another couple of them in the immediate future.
The second part is, other than that, we just have to make sure that we continue to go up the value chain and demonstrate the right kind of value to the clients to sort of demand premium pricing.
Absolutely. To add to this, basically, if you look at it, wherever there is an engagement, more on-site, if I have to say, clients are very cognizant about the high inflation and they are very considerate to compensate for that, if not more. So that is there. In other cases, I think as Mr. Tikekar mentioned, we are looking to change the business model and make up and add to whatever the additional expenses we are incurring. Through change of business model, asking for higher prices, offshoring all these three levers.
Got it. That's helpful. My last question is on the guidance. The guidance is unchanged despite the margin beat this quarter. I just want to understand the top line. You had given the 18%-21% constant currency growth guidance for FY 2023 at the end of Q4. Now you've announced the SOMIT transaction over and above that. Is the SOMIT transaction included in the 18%-21% or is it over and above that?
It's a very small part and you can consider either way, but it's a small part. The point I had mentioned about it, and we are happy, we started on a stronger profitability. We would wait for our two things. One is the increments, how it works out. There are a few other factors also, you know, which we are waiting and the currency movement. There's too much uncertainty on all this front. Overall, as a practice, if we have to revise any numbers, we do it only in the quarter three.
Got it. That's very helpful. Thank you very much, and all the best.
Thank you.
Thank you.
Thank you. Next question is from the line of Saurabh Tendulkar from Mitsui O.S.K. Lines. Please go ahead.
Hello. Good evening, sir. Thank you for the opportunity, and congratulations for the great set of numbers. Just wanted to ask, how much is the revenue contribution from this middleware segment?
If you look at the metrics that we have given right now, I think we have given it by the three business units. The business unit that talks about middleware and architecture, that is the revenue contribution that we have. Which is, if you look for the quarter, the absolute number, it's about $12.83 million.
Copy on that, sir. My second question is on the currency impact which you said. Actually, how much it is, as you mentioned in the presentation, the currency impact from yen and other currencies. How much it is actually?
If you look at it, what we mentioned in the opening remarks is our constant currency growth is 6% and our reported U.S. dollar revenue growth is 3.2%. The net impact of these cross-currency fluctuations for the quarter has been 2.8%.
Next quarter you said it will be around 4%, your estimation.
The current currency levels, it could be around that number. If that moves, then of course, it will move.
Thank you, sir. Thank you.
Thank you.
Thank you. Next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Yeah. Hi, good evening. Am I audible?
Yes.
Okay. Thank you. Anyway, congrats on the strong quarter. I have two questions. The first is on margins. Just wanted your thoughts on obviously there are wage increases next quarter. Just wanted your thoughts on what could be the you know potential offsets that could sort of mitigate some of those wage inflation impact. What are the levers that you see out there? The second is, has there been any incremental offshore shifts we have seen in the last two odd quarters from a business perspective? Finally, I think historically you have mentioned about some four large deals in the software architecture area, of which I think one we signed in the prior quarter. How are we on the pipeline there?
Has the number of deals sort of increased or are you hopeful of closing anything that's come to, you know, advanced stages of closure? Any thoughts there would be helpful.
I will just answer the last question. We are already engaged in most, as I mentioned, 75% of the programs which are happening in this area. Sometimes we cannot really put together a big deal and make an announcement as we have to. We cannot do it always. We are already engaged in 75% of the program as a key partner. That is exactly what we have mentioned, and we are implementing that. Rest, Priya.
Yes. On the margin front, yes, there are levers like offshoring, as Kishor mentioned earlier. Offshoring is one of the factors. Also leveraging the fixed cost that we have. Both of these will contribute to you know, sustainable EBITDA margins as we move forward. Therefore, the currency headwinds will not have a significant impact on the profitability.
Yeah. I mean, naturally it will be helped by higher growth that we can achieve in the quarter and higher realization, as I mentioned.
Sure. That's very helpful. Lastly, I think if you look at the U.S. geography, we have seen a strong growth over the last two quarters, which is Q1 and Q4. Historically it's been a little patchy, and we have been very strong in terms of growth from Europe. Just wanted your thoughts on the opportunities you're seeing broadly in the U.S. Do you think this sort of growth will sort of sustain or it will continue to be sort of volatile? What's really driving volatility in that geography? Thanks. That's all from my end.
As far as the Americas, where U.S. is the biggest part of our business, there is enough pipeline. We have strong clients there who form our T25. From each one of them, we are seeing opportunities to grow. To us right now that volatility is not very visible. We believe that year-on-year we'll have a healthy growth in the U.S. You know, I think so far so good at this point in time.
Sure, that's helpful. Thanks so much, and all the very best.
Thank you.
Thank you. Next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead.
Thanks for the follow-up. Just a question in terms of the average revenue per employee. If I'm not wrong, I think the earlier comment indicated the offshore revenue is more or less stable versus four to five months back. However, the average revenue per employee has been declining on a Q on Q basis from Q2, Q4, and Q1. How should we read this? Because we are also commenting about the rate increase, which is happening and helping you in terms of margin expansion.
I think one of the key part is we have added more number of people. As you can imagine that some of these technologies takes more time. You can see it in utilization. Sorry, we have you know been going down a bit, and that has an impact this.
Overall. At the same time, you would recognize that our EBITDA margins and overall profit have been good as well.
For us, the denominator includes everybody.
Yeah, yeah.
It includes the freshers when we calculate the average revenue per employee.
Correct. What should be the fresher addition program in FY 2023 versus FY 2022, and how it will look like from Q2 to Q4?
We have changed that, overall, the way we look at it. We generally go to certain key campuses and give offers. The rest, we really hire on every rolling three months from the market because now campus recruitment is very important for us. It has not remained as exclusive as it used to be. People can go beyond the campus offers, and they can take offers from anywhere. We are taking the, you know. That's why it gives us also flexibility to hire people at other points of time instead of committing 18 months before.
Okay. Now we have also changed the classification of strategic team revenue and customer revenue to now strategic customer revenue. Is it fair to say we might have entered in more than 21 strategic clients?
Yeah, this is the T25 revenue. T25 clients. This is a T25 revenue.
Okay. Last question. In terms of the fixed-price contribution to the revenue has been coming down. How to read this? Because increase in time and materials also indicates more project-based business within the company.
No, this is also related to what Mr. Kishor Patil said earlier about some of the new programs that we are starting, which have a little bit of higher onsite initially. The initial part also is done a little bit more on a T&M basis. I think that is the reason why we see a little bit of increase in T&M. But as a secular trend, the fixed price will go upwards as we move ahead and get these projects shifted to offshore.
Okay. Thanks and all the best, and congrats on good set of numbers.
Thank you.
Thank you. Next question is from the line of Chirag Kachhadiya from Ashika Stock Broking . Please go ahead.
Congratulations on good set of numbers.
Thanks.
Sir, I want to understand the scheme of arrangement which you have done two years back between Birlasoft and our company. Are we on track what management internally has decided in terms of growing this business separately? What next step you guys are planning to do to you know garner more markets and what we are doing. Because the underlying segment itself is a huge potential in next decade also.
Thanks for asking that question. As you know, four years ago, we took somewhat of a risk by letting go a big chunk of our business. We are at a stage where we are happy to say that all the stakeholders have benefited tremendously on both sides. You know, as far as our expectations and the plan, we are absolutely on the plan and everybody's happy and we hope that you also share our sentiment. As far as the future is concerned, you know our vision, which is reimagining mobility for a cleaner, safer and smarter world. That's what we are committed to. Essentially, the way to realize our vision is through our clients, T25 clients.
If we can help them with their programs to make their vehicles cleaner, safer and smarter, if we do more and more of that, I think we'll be closer to the vision. In return, we'll have a profitable growth that we've seen over the last several quarters.
The organization has been separate for all this time, so there is nothing changing a long back.
Yeah.
Okay. I'll get back to you if I have further. Thank you.
Thank you. Thank you.
Thank you. The next question is from the line of Vivek Gupta, an individual investor. Please go ahead.
Yeah, hi. Thanks for the opportunity. I would like to congratulate the management for brilliant set of numbers. KPIT reporting highest EBITDA margins is something like worth applause. Conviction on KPIT increases after every quarter. I have some generic questions. I believe most of the intelligent gentlemen have asked most of the questions with respect to macros and all. To begin with, sir, I was reading the investor update. I found that, we have mentioned that we have active clients number as 60, which was same in last quarter as well. Correct me if I'm wrong. Is that understanding correct?
Yes.
We had couple of deal wins in the last quarter as well. Were those deal wins from the existing clients only or they were new clients which were added in last quarter?
All of them are engagements with our existing clients. We are very picky about adding new clients. Our primary responsibility and goal is to go deep and wide in our existing clients and really help them be successful in their journey. We are very mindful. Although, you know, the short answer to your question is, all those engagements that we talked about, they are all with the existing clients.
Does that understanding hold true for the new deal wins also, which you have reported now?
Yes. Yes. All of them.
Okay. One more question which I would like to ask is the margin guidance which you have given is more of from aggressive perspective or it is a conservative guidance which you have put forward, and that's why 2023 outlook also. Why I'm asking this question is because of a lot of things going around with respect to this Russia-Ukraine war and the recession being talked about in the U.S. and all. Do you foresee any impacts on this guidance, like, or is it conservative guidance only taking into account all these things?
I think, you know, you brought out both sides and you are aware of the dynamic situation. What we believe is, it's a very fairly realistic 18%-19% is what we have given, considering all the factors that you brought out.
One of the questions which I would like to ask was that I think has been answered already, that was with respect to fixed-cost revenue being declined QoQ. The new deal wins, sir, are more on T&M basis, or it is also like a mix of T&M and fixed-cost?
They are always a mixture. See, what happens is when we get into new engagements, especially on the new architecture, the initial work is always done on T&M. It's a lot of consulting work that needs to get done. It's beneficial to both parties that it's T&M in nature. Then we carve out programs out of that that may become fixed price. I think we'll continue to get a good basket of both going forward. We just have to be smart about it. I think wherein some sense T&M makes more sense over fixed price to both. That's what we are doing. In general, as an outcome of doing some T&M work, there is always some kind of carving out of the fixed price programs.
Okay. As you mentioned earlier, like in Q2 you'll be rolling out these fee hikes and all. Currently we saw that rupee was at all-time low. Will that compensate a bit to that part?
No. As we said earlier, even though the INR has depreciated against the U.S. dollar, it has appreciated against euro, which is also a major currency of operation for us. If you look at the percentage of share of revenue between dollar and euro, it is the same. Whatever gains were there because of the dollar have been offset by the euro and GBP and yen. Net-net basis, there was no impact on the operating margins this quarter because of the currency movements.
Okay. Makes sense, sir. That's all from my side. Thanks a lot.
Thank you.
Thank you. Next question is from the line of Amar Maurya from AlfAccurate. Please go ahead.
Sir, thanks a lot for the opportunity. Just one bookkeeping, if it is possible to you. We moved to the new reporting and new segmentation. Is it possible, like at least for this quarter, if we can give the old reporting numbers as well, like Powertrain, ADAS and Commercial Vehicles and others?
I think this we have done in line with our organization.
Sure.
how now we have started doing it. The main reason for this is many of the programs are cross practice.
Sure. Sure.
It will be artificially changing the numbers in many of the programs. That is the reason we have done that. It is aligned with the client organization, it is aligned with KPIT organization, and it is aligned with the new trend of cross-practice deals.
Okay. Like, I mean, are you saying now this is the new standard? I mean, we have to look this way, but we, I mean, just for this quarter, if it is possible, if it is handy for you, I mean, if you can share.
No. It will be artificial numbers. We don't trace those numbers.
Okay. Fair enough, sir. Thank you.
Thank you.
Thank you. Next question is from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah, thanks for the opportunity. Just one question more from a macro point of view. Of course, the current sentiment what clients are sharing is suggesting the kind of an outlook that we have given. Just trying to understand from your learning from the past such situation do you think there would be some tweaking in the type of the spend they would like to do? Like, would they like to go slower on the projects that are far off from a revenue monetization point of view versus the projects which are more near-term in nature? Is that a kind of a behavior that you have seen in past or is there any that kind of a conversation happening at this point as well?
Instead of responding, I have mentioned in the last time also when we gave this. The best strategy is to maximize in H1 and then that's the strategy we can agree upon. If we do that, then we will be ready for any eventualities in any case. That's the strategy we would follow and I think that is the best way.
I can just add to the comment about the trends. Trends are great, but you know, the implications of the trends are different every time. You know, there are new things coming up every time, so you always take them with a pinch of salt.
Sure. Got it. Thank you, Sachin, so much.
Thank you.
Thank you. Due to time constraints, we have reached the end of question and answer session. I would now like to hand the conference over to the management for closing comments.
Thank you everyone for your participation. We value your participation on the call. If you still have any questions that are unanswered, please, feel free to write to me, and we'll be happy to get back to you. Thank you and have a great evening. Thank you.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.