Ladies and gentlemen, you're connected to NIIT Learning Systems Ltd Q1 FY 2026 earnings conference call. The conference call will begin shortly. Please stay connected. Ladies and gentlemen, good day and welcome to NIIT Learning Systems Ltd Q1 FY 2026 earnings conference call. As a reminder, 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. To show any restrictions during this conference call, please signal an operator by pressing zero on your touchtone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Vijay Thadani, Vice Chairman and Managing Director. Thank you, and over to you, sir.
Thank you, everyone. Good afternoon to all of you. Thank you very much for your interest in NIIT Learning Systems and for joining the call today. The results time, busy times, so thank you very much for making the time to be with us. We will provide an update on the results of quarter one FY 2026. We'll also provide an update on the inorganic activity which nearly got completed during the quarter but got completed before this call a few weeks ago and we thought we would give an update on that. Lastly, the outlook for the business in the coming year. I just make one opening comment and that is that we are in a period of very high global uncertainty and I think everybody is happy with it and every organization has its own response. We believe NIIT Learning Systems Ltd has demonstrated a high degree of proactivity as well as high resilience to the changes which are taking place and have taken advantage of the opportunities that have been presented.
We also have a new member in the NIIT family between the time we spoke and now. That is an acquisition which we made with the company called MSP Group in Germany and we're very happy to welcome about 80 more colleagues into the family. To take us through this as well as the outlook for the business, I have with me Sapnesh Lalla, who's the CEO of the company, and supporting him will be Sanjay Mal, who's the CFO, Kapil Saurabh, Justin D'Souza, Gaurav Arora, and Saurabh Sinha. All of us will join together and I also have the Chairman of the Board. With this backdrop, I will hand you over to Sapnesh.
Thank you, Vijay, and thanks everyone for joining. I will take us through our prepared comments and review the performance during the quarter as well as share expectations that we have for the future. As Vijay pointed out, the global economic environment continues to remain volatile, creating heightened uncertainty for businesses across sectors. This macroeconomic uncertainty is driving increased complexity and ambiguity in both strategic and operational decision making, often resulting in longer decision cycles and sometimes change in key stakeholders and movement of relationships. Despite this challenging environment, the business delivered an 11% year on year growth and 5% quarter on quarter growth. In constant currency terms, the business grew 8% year on year and 5% quarter on quarter. This is a marginal improvement on the guidance that we have provided last quarter and it echoes the trust and the faith that our customers put in NIIT to be able to service their critical needs.
We continue to see strong customer traction, securing two new MTS logos and all the three contracts that came up for renewal this quarter were renewed, further reinforcing a differentiated value proposition and our continued leadership in the Managed Training Services market. The MTS performance, as I pointed out, remains robust, maintaining 100% track record across all customer segments. Our ability to expand share of wallet with existing customers remains a key growth driver supported by BPM relationships and demonstrated delivery excellence. While spending from existing customers appears to be stabilizing, the recovery remains gradual and is at below the slowdown levels that we saw four or five years ago. We remain optimistic as early indicators point towards a bottoming out of this trend. Notably, the business continues to outperform peers, demonstrating resilience through industry-leading growth and profitability.
Please note that as guided earlier, we successfully completed the North America real estate contract on June 30. Going forward, we will be involved mostly in teaching out the existing students and transition related activities. During this quarter, we made significant progress in building out AI capability. We now have a pole position as acknowledged by our customers as well as industry analysts. We've gone live with a few key enterprise implementations of our AI solutions in the previous quarter, and that gives us confidence that where we are and where our ambition lies, we will be able to significantly improve the way learning gets delivered globally. Coming to our results, as I pointed out earlier, our revenue for the quarter was INR 4,514 million. That was up 11% year on year, 5% QoQ. In constant currency terms, it was up 8% year on year, 5% QoQ.
The EBITDA for the quarter was INR 951 million, while it was down 7% year on year. As guided earlier, EBITDA posted a spot recovery QoQ and was up 11% quarter on quarter. The EBITDA margin was 21% for Q1. It was up 112 basis points quarter on quarter. During the quarter, we added two new MTS customers. These include a leader in pharma and a leader in the hospitality sector. The company renewed the three MTS contracts that came up for renewal, maintaining 100% renewal practices. The number of MTS customers at the end of the quarter stood at 95, and like Vijay K. Thadani pointed out, with MSP Group joining the NIIT family as of early July, the count of MTS customers has now crossed 100. The revenue visibility stands at INR 388 million versus INR 350 million at the end of Q1 last year.
Going deeper into financials, the depreciation was at INR 181 million as compared to INR 157 million in the previous quarter. Please note that this includes the most amortization cost of INR 32 million on account of St. Charles. The net other income was negative INR 40 million. This includes cavity income of INR 125 million. Exceptional expenses toward transaction-related costs for the acquisition of MSP Group were INR 63 million and final acquisition-related expenses of INR 49 million. Tax was at INR 237 million. The EPS was 32.5. The tax rate was higher in Q1 due to the impact of INR 30 million due to withholding tax on intercompany transfer of funds during the quarter to fund the acquisition of MSP Group and then certain expenses on consolidation that are not included in tax computation. The PAT was INR 493 million, EPS of INR 3 and 62.34.
If you were to remove the transaction-related expenses that were incurred to acquire MSP Group, PAT would be INR 578 million as compared to INR 493 million. After including the exceptional expenses on account of acquisition of MSP Group, the balance sheet metrics continue to remain steady. DSO stood at 68 days as compared to 56 days last quarter on account of marginally higher working capital given a few collectibles got delays which have since been received. Cash and cash equivalents are at INR 8,349 million. CapEx for the quarter was INR 88 million versus INR 145 million for the previous quarter. Reflecting continuing investments in generative AI, net cash stands at INR 7,704 million versus INR 7,036 million last quarter and INR 6,489 million last year.
Coming back to an update on the market environment, the market volatility continues to heighten the emphasis on cost optimization, prompting increased client engagement on large-scale cost payout and transformation initiatives. We believe that NLSL is well positioned to capture a disproportionate share of these opportunities, unlocking by continued investments in AI consulting and advisory services, disproportionate investment, sales and marketing as well as establishment of strong and trusted brands. The NIIT deal pipeline remains robust, active opportunities across large authority standing technology, professional services, automotive, life sciences with the SSI and other sectors, so a wide depth of opportunities.
However, I would like to point out that due to the significant marketing cycles are starting to stretch beyond what we would consider typical, we continue to see accelerating structural transformation across industries we serve, driven by digitalization, decarbonization, biopharma and more importantly now by AI. Many organizations are actively recasting to improve host agility, fueling increased demand for outsourcing and I think this is where our opportunity lies and we are well positioned to take advantage of this opportunity. NLSL continues to make disproportionate investment, new capabilities and go to market strength. Generative AI is becoming increasingly central in client discussions, though a broader adoption at enterprise scale for L&D remains cautious. Nonetheless, we are rapidly expanding our use of generative AI across multiple work streams.
Where deployed, we are becoming more ambitious in delivering measurable learning outcomes for clients and significantly transform how learning is delivered. I'm glad to note that a number of enterprise-grade generative AI projects went live this past quarter and are starting to show early progress. On the admission that you have put forward. We talked about Vijay talked about MSP Group joining the NIIT family. As announced on July 9th NIIT Learning Systems has successfully completed the acquisition of MSP Group. They are a leading provider of managed learning services based in Munich, Germany. The acquisition was made through our wholly owned subsidiary NIIT Ireland Ltd. We acquired 100% equity in MSP Group for a total consideration of EUR 22.37 million, which includes EUR 15.35 million for equity and EUR 7.02 million in assumed debt.
The transaction has been funded through a combination of internal cash and loan and has been structured as an R&D. The transaction is fully aligned with our stated strategy to drive growth through investment in new capabilities, geographies, and industry verticals. MSP Group significantly strengthens our presence in the DACH region, which is Europe's largest economy and one of the fastest growing markets for learning. MSP Group brings with it a high quality client portfolio with over 20 marquee customers across automotive, industrial, and energy sectors. Some of the marquee names that you might associate with Germany are part of their customer list. Their Quick Start Learning Academy capability, powered by the proprietary Extra platform, further strengthens us to offer agile, scalable, and customized learning solutions to global customers.
For calendar year 2024, MSP Group reported a gross revenue of EUR 17.43 million as per local GAAP with pro forma consolidated net revenue of EUR 10.6 million with margins that would be accretive to our business. The business is asset light, margin accretive, and fast generating, and we expect it to be EPS accretive from the first year on. With this acquisition, we will add seven new Global 1000 clients to our Managed Training Services portfolio, taking the total to over 100 managed learning services clients globally. It also expands our capabilities across Europe, including a nearshore hub in Hungary. It will enhance our ability to deliver multilingual, on-site, regionally tailored services across Western Europe. Importantly, the MSP Group leadership team, including their Chief Executive Officer Lena Jens and Chief Sales and Marketing Officer David Woodis, will continue to lead the business.
Their deep domain expertise and strong client relationships will be invaluable as we integrate and scale the MSP business across Europe as well as globally. We also welcome MSP's team of over 100 L&D experts that joined the NIIT family, bringing the total headcount to approximately 2,500. This combination is a powerful one. We are bringing together MSP Group's local agility, deep sector expertise with NIIT MTS's global scale and AI-enabled learning solutions, positioning us to lead as the partner of choice for large enterprises navigating learning transformation globally. We're confident this acquisition will generate strong strategic and financial value and is an important step forward in our journey to global leadership in managed learning services. I wanted to spend a minute on our guidance. We see robust contract pipeline and ramp up in new customers.
Revenue growth during the year would be moderated by the completion of our North America real estate contract on June 30th. As I pointed out earlier, for the full year, therefore you will have a netting impact. For the full year we expect 10+% growth in constant currency. For Q2 we expect an 8% year-on-year growth in constant currency. MSP Group acquisition would add another 3 to 4 percentage points to this growth. The organic growth in Q2 would be at about 8% year-on-year. In constant currency terms, the revenue from MSP Group would add 3 to 4 percentage points in growth by way of inorganic flow. Margins are expected to trend brighter in the 20 to 21% range for the full year, while the Q2 margin would be just about 20%.
With that I would hand you back to Vijay for any closing comments and then we will go into Q&A.
I think you are excited for the addition of industry group amongst us and has already covered their details. At this point of time, I think we will open the floor for questions.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants, I requested your answers while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Sudan from Goodwill. Please go ahead.
Yeah. Hi. My question is regarding the MSP Group acquisition. You know, the clients of MSP , you know regarding them. When we speak to auto ancillary companies or IT companies who are supplying to these guys, those guys are under severe margin pressure because of increased competition and some slowdowns. Do you see a risk seeing business over there or do you see this as an opportunity to lower cost and increase our share?
You said it. We see it as an opportunity. We see it actually as a great opportunity because what we've seen in the past through different slowdowns is that when margins are under pressure, organizations think about transforming themselves. L&D in the ACR workstream is a key area for transformation and we stand a great chance to benefit from Atabi's transformation.
Thank you.
Of course, the acquisition of MSP Group with their existing relationships would help us accelerate.
Thank you.
The next question is from the line of Shradha Agrawal from AM Securities. Please go ahead. Since there is no response from the current participant, moving on to the next question. The next question is from the line of Penny Shetty Analytical Investment. Please go ahead.
Congratulations for the given performance of commerce during the tough macroeconomic conditions regularly. My question is regarding NLSL acquisition which is acquisition, our major dependency from North American market can slide these deals to European market. You will see that after two, three years of business, we still have a very substantial part of our business coming from Europe including MTS and NIIT Learning. Can you please throw some light on?
Sure. Our current mix is 70:30. About 70% of our business comes from companies that are domiciled in North America. About 30% comes from companies that are domiciled across UK and Europe.
I would say that a very large percentage of our customer clients are large multinational companies. In a way it is a moot point where they are domiciled. However, I think Europe, especially with its complexity and its ways of working and its languages, is a market that is hard to penetrate, has been hard to penetrate. That's the reason why we have a 70:30 ratio. This acquisition will enable us to bring benefits to our clients on two dimensions. One, on local relationships which can be agile, which can be custom tailored, can be high touch relationship for the client, but also provide the same clients the reliability of the NIIT MTS brand, the global capability, and the investments that we are able to make in AI and other emerging technologies to improve our capabilities.
My second question was regarding the sectors which are being cashed by and industrial products. My question is whether the capability of NIIT Learning can be integrated into these offerings from MSP. Similarly, MTS offerings in auto and industrial products can be deployed in North American markets. Whether there is a possibility of this situation, we have really made use of both competency in both companies and increase our revenue from these companies. Can you please explain regarding this?
I must compliment you on how well you know your NIIT. You have read from the page. We work on our strategy. You're absolutely right. While NLSL has significant strength in the industrial vertical, we do not have enough in terms of a market share of the German market, which is very strong on industrial and automotive.
We will be able to bring our capability across the industrial sector into the German market and be able to accelerate growth in the German market by leveraging relationships that MSP already has. Also, like we pointed out, the fact that they have deep relationships into automotive as well as in energy. Those reference customers would be key as we span relationships and industrials and automotives beyond Europe into North America and the market.
Thank you very much for the explanation. All the best for the future.
Thank you.
Thank you. The next question is from the line of Shradha Agrawal from Asian Market Securities. Please go ahead.
Yeah, hi. Sorry. Last time I got dropped off. Congratulations on a good quarter and with acquisition of MSP Group. I was looking at the historical financials and the numbers suggest that MSP Group had strong growth of upward of 50% in July 2023 and 2024. In an environment where other L&D players are struggling, what drove this strong growth in Managed Training Services in the last two years and how should we look at growth going forward from MSP Group?
I think the growth that NLSL has achieved is a testament to the close relationships that they have with their clients. They are seen as a trusted partner. Culturally, they are very aligned with how we look at working with our clients. It's a very strong cultural match. They are very, very client focused, they are very agile, they are very nimble, and they are able to structure and adapt their services to meet their clients' needs as they become part of NIIT. Not only will they have advantages that I just mentioned, they'll also have the backing of a global player. I mean, if you think of a large global automotive company based out of Germany, while Germany and Europe tend to be a large part of their market, it's not limited to that. North America tends to be a very large market for them as well.
With NIIT's capabilities, MSP Group will be able to service their needs globally. We're really excited about how NIIT can help MSP Group grow their own client relationships. Likewise, we feel that with NIIT's scale and capability, we will be able to accelerate integration into the DACH market.
Any quantification on growth numbers that we should build in for years to come?
We think that their growth is likely to be in line with the growth that we are aspiring towards, which is 20% growth and 20% profitability.
Right. In terms of slides, do we get seven new slides from MSP Group or is there an overlap in the large plans that we have with MSP ?
There isn't any overlap across MSP 's large customers and ours. It's complementary. All of the clients would be new clients for NIIT.
Next, I have self connected. Moving on to the next participant. The next question is from the line of Kunal Tokar from FPC. Please go ahead.
Hello, I'm audible. Okay, thank you for the opportunity. My first question is about AI. You've talked a lot about how AI has made the environment and outlook very uncertain. My question relates to the downside risks that AI can pose to your business. Which subsegment of your business, and I'm just, if I just read off the corporate training landscape chart that Training Industry has, it has a whole chart of different subsegments which analyze us. Which subsegment do you see will be the most affected negatively by AI? Whether it will be learning management systems or authoring tools or assessment and evaluation parts.
I would say the following. I think AI, and this is in line with what you said in the past, is going to very fundamentally change how learning gets consumed and delivered. Organizations who do not build on that capability are likely to get left behind. Organizations who stay where they are and don't move with the times are likely to get left behind, and the future is likely to be uncertain for them. For that reason, we are investing disproportionately in AI so that we can take advantage of all the opportunities that AI has to offer.
To the extent that the current business model that NIIT follows of being a comprehensive service provider covering all of the different parts of L&D can fundamentally change in a few years because of AI. What probable change do you think it will take? The corollary is, okay, we also think there might be a regressive trend towards in-house L&D because of the efficiencies that AI can give. One of the main support pillars of that view is that the in-house L&D teams cannot compete with outsourcers like NIIT, which aggregates comprehensive experience all over the globe. Do you think that can be a recursive thing, that of examples?
I would say a couple of things. One, it's not a question of can. L&D will transform in a very significant way with the use of AI. It's a question of time. It's like when the automobile started replacing horse-drawn carriages. We knew that the world would move towards automobile. There were still a few people who were interested in using hot carts, but that changed over a period of time. The motor replaced the horse.
I think exactly that's going to happen. With respect to L&D, what AI does do is enable L&D to be far more efficient and effective in their mission to provide great learning to their stakeholders. Organizations who are currently insourced will have a very hard time investing in AI as it pertains to L&D because there are going to be a number of other businesses that are going to be in line for investment in AI. For example, the organizations that do capital allocation would first look at customer service, would first look at R&D, would first look at acquisition of customers or production of goods and services rather than investing in L&D. It's quite likely that as time goes on and AI starts to play a more significant role in house and L&D, organizations are likely to get left behind to a point where they might become irrelevant.
I think that's our opportunity where, given the investments we've made, organizations will be able to see the starkness of the difference between what they are able to do on their own and what they are able to do with a partner such as NIIT.
An extension to that question would be more efficiencies and helping people do much more with less. Do you think a differentiation between players, between NIIT and its competitors, will it narrow or will it grow even larger?
I think it will grow faster. It will grow larger. Like I pointed out, in this race there will be folks who get ahead and there will be folks who get left behind. My bet is that NIIT will be way ahead. At least that's something that we are hearing from our customers as well as in that.
That's good to raise. Just the last question. You spend considerable time obviously thinking about AI and dealing with it. What have you seen your competitors do that you think is wrong? What is NIIT doing differently?
Let me request Raghi to take that question, Chairman.
I think good conversation here. Let me just make on a two point. I think where we differentiate ourselves since the time we started in 1981 is two things. One, we've had a singular focus on the central philosophy, which is that whatever we do is learner-centered, objective-driven. Objective, not a word, is outcomes list. 1981 has been a focus and we don't see that in every other organization. People work on many objectives. This core principle holds in everything that the group does and NIIT does. That's one constant factor. More and more and more valid is second, and this is perhaps more important.
Everybody talks stuff and the technology learning, but not all players have been focused on the science of them, the pedagogy, the psychology. That is one thing which differentiates us even more than most others. At least in the last 10 or 15 years the thirst has been on using technology in learning but not being aware of the underlying science and learning that is foundation. When we look at AI, to us it's not the technology that's important. Yes, it is. Technology tends to give a benefit of productivity in most things. We are looking at the cognitive sciences breakthrough that AI can do. Mind you, even some of the things that we are talking of and others are talking about are not new. Breakthrough has been very limited. I don't know whether you talked about the pulse of the rating that we have.
There are ratings which talk about this dimension of usage of AI in effectiveness of learning, not the efficiency of cutting cost and delivery. Unlike many other productivity things that it does, it cuts cycle time, it reduces, increases productivity. Learning is not just about you can't compress learning and say you learn 50 times more or 10 times. It doesn't work that way. It is how a learner imbibes, absorbs, and translates into demonstrable skill. In that we see that AI already in all our work that we're doing and research that we're doing is showing capability. I think on these two dimensions is where the intensity and focus that we've had has kept us ahead. We expect that AI will give us a layup further because we started with this early. I don't know if that comes to my question more comprehensively.
It does very well. Saying that was very comforting to hear. Those are my questions. Thank you and have a good day.
Thank you.
Thank you.
The next question is from the line of Nihar Shah from Newmark Capital. Please go ahead.
Thank you for the commentary on the performance. I had a question which is very similar to the previous one, but just maybe more from an example based. You know, you mentioned in your opening remarks that you started using AI for certain solutions for your customers. Can you give us some flavor of the kind of work that you're doing within that which will help us better understand your AI capabilities and the opportunity? Therefore, that's available. That's all from my side. Thank you.
Sure. I'll try to. There is a lot of research that shows that if you have a personal coach and if you have ability to connect with your personal coach, often your performance, irrespective of what area of performance you're trying to improve, you are able to do better. You might notice that elite athletes who can afford not one, but several personal coaches rely on personal coaches to improve. That's not just unique to athletes. Leaders do that, politicians do that. Folks across many sectors or segments of society do that. They do that because they believe that personalized coaching is very, very helpful and it could be transformative. The reason why everybody cannot get personalized coaching is because it's very, very expensive. Imagine everyone having an expert coach.
If you think about it today, it's very hard for anyone, any business leader to imagine that they will be able to provide everyone in that pivotal job role with a coach. If they are, that's possible. That's one of the use cases that we've implemented with a large customer who is significantly ramping up and upskilling that developing team. As part of that engagement, not only are we running a consult school training program for them, but in addition offering them an expert coach who can provide reflection sessions, who can provide coaching during their performance to provide coaching as they do role play when they're practicing their pitches and practicing the solutions that would provide to their customers.
One of the things which we are really excited about is the ability of AI to remove this constraint where you always had fewer personal one leaders, 30% needed and that's the reason why you have one teacher teaching 30, 40, 50 folks. I think AI enables us to remove those constraints and bring high caliber coaching, high caliber training, personalized training to everyone.
Got it. That gives us a good flavor. Look forward to hearing your thoughts in the future.
Thank you.
Thank you. The next question is from the line of Pranaya Jain from Banyan Tree Advisors. Please go ahead. Hi sir. Thank you for taking my question.
The first question is that when we look at our professional and technical outputs in cost, this number has been trending upwards at a very sharp rate while our employee expenses as a percentage of sale has not grown at such a fast pace and has come down. Under what circumstances do these numbers go, and do they go up in tandem, or is there an inverse relationship between these two numbers? If you could throw some light on this question, then I have a couple of other questions also.
Whenever there is uncertainty, we try to create variability in our business. One of the key efforts to improve profitability has been to improve utilization, and creating higher variability enables us to do that. That is what you are seeing. We are using more variable services to deliver to our customers rather than adding headcount because of the uncertainty that we see in the market. As this uncertainty subsides, we will see more investment in our own. Got this, that's helpful. Second question is around the technology and telecom sector of ours. While we have seen a lot of news reports which have mentioned that there are layoffs happening in these segments, we are growing this segment at a fast pace. I just wanted to understand what exactly is happening when it comes to our customer.
If you look at why is it that there are layoffs, there are layoffs when an organization realizes that the people that they have are not able to do the job that the organization wants them to do, are not able to do the job well enough for them to continue with that. That is the reason why they take that to lay off a person. Nobody sets out hiring people with the objective to lay them off after a few years. It is a hard choice for most organizations. The reason why they end up making that choice is because the skills that those folks possess are not in line with the skills that are needed. I think that is really our opportunity.
We are able to provide our customers with a choice where, as the rate of change of skills changes rapidly, we are able to reskill and upskill their employees so that they continue to be relevant. My feeling is that technology changing creates a great opportunity for us for reskilling and upskilling employee bases.
Understood, that's again very helpful. The third question is on, like, we have been gaining certain projects which are related to artificial intelligence. Are these margins similar to where we operate on a consolidated company level or are the margins higher here or lower?
It's a little early to comment on margin of AI projects, but for what we have done they are in line with our expectations and the typical margin, sometimes higher because at times it is inverse. I would say still get your earnings judgment on margins that we are seeing on related projects.
Got it. Just one final question on the effective tax rate that we should take into account going forward.
I think I'll let Sanjay comment on tax rate. What we saw was innovative but still less than.
So our typical tax rate will be more in the range of the intervention. If there is any movement and loading stuff like that, that has to be effective tax, and we should take it anywhere between 27% to 28% on overall rates considered and 25th formula because we have this continuum and they'll give impact of even this acquisition of MSP which will also have certain cost which will not be taxable.
Got it. Thank you so much .
Thank you. The next question is from the line of Sankaranarayanan from I Thought PMS. Please go ahead.
Good evening, sir. My first question is regarding the productivity of MSP. With regards to learning and development strength for employee, is it same compared to other industries or does this industry have a higher strength of learning per employee?
I'm assuming your question is related to the industrials and automotive space. In the automotive space, the spend per employee tends to be higher than average because average tends to be about $1,100 per employee. The trend across industrial and automotive tends to be higher.
In terms of wage hike. Are you planning to do the range? If yes, when can we expect in the upcoming quarters?
We announced the rates raising breeze as of July 1st of this year.
Got it, sir. Got it. My last question is regarding our second telecom vertical. You have spoken that in spite of layoff we are getting good traction from this vertical and in management consulting as well. You have seen a lot of little quarter on quarter improvement. Can we assume we have started seeing recovery in those verticals?
You've seen improvement quarter on quarter on the second telecom. It's part of our strategy focused on that vertical just for the reasons that I described earlier. We are also starting to see improvements as compared to previous year in the management and professional services sector. I think we should continue to see improvements on that.
Got it, sir. Most of the bad things which have happened in management consulting and professional services is getting bottomed out. That's what you're saying, sir?
We expect so, but given the uncertainty, it's hard to predict. At this point in time I would say I expect .
Any thoughts on aviation narrow space vertical, sir?
I think we have a strong position in that vertical. That vertical is part of a larger vertical which we now call industrials. You've got energy creation, mining, and automotive combined into industrial vertical. We think over the next few years we should see growth as we start to add airlines into, as we start penetrating into airlines going beyond the industrial side of aviation and infrastructure.
Got it, sir. Just to follow up questions from the previous participant in terms of managing the professional and technical outsourcing expenses, is it like when we are seeing certainty in the environment? That's when we will slowly, gradually convert our variable cost into fixed cost through increasing our own workforce. Is this the right understanding, sir?
Yeah, that could be the right understanding.
Thank you, sir. Great question.
Thank you, sir. The next question is from the line of TTALK from Sundaram Mutual. Please go ahead.
Yeah, thank you for the opportunity. Am I audible? Yeah. My first question is regarding our question of this MSP Group. In the press release I mentioned that in the calendar year 2024 they logged in revenue of around EUR 17 billion and net of pass through expenses it was around EUR 10.6 million. Just wanted to understand what is this pass through expenses we are referring to?
Just like in our business, we have a part of our business that we call strategic sourcing where we buy training from third parties on behalf of our customers. They do that as well. As we've mentioned to you in the past, when we buy training on behalf of our customers, we treat the pass through expenses differently as compared to service delivery revenue. Pass through expenses are treated as gross but not parts. They don't make part of the month revenue that we report and it shows up in the balance sheet as receivables and payables. It's not treated as revenue given that it is not creating a margin. Likewise, MSP Group has the same style of business where they buy training from third-party vendors on behalf of their customers, and we treat that as pass-through, and that's why there is a netting.
Okay. What gets consolidated is the net of pass-through expenses.
Yes. The expense and revenue happen to be the same.
Okay. Secondly, I'll just double-clicking on this telecom and technology vertical, which seems to be doing very well for us. You explained in one of the earlier participant answers also that it is because of the rate of reskilling which we are seeing in the technology and telecom sector that more opportunities are coming to us. Could you give us an example, especially what kind of reskilling are we talking about? Is it technical in nature or is it non-technical in nature? Some example would help us understand it better.
It's mostly technical in nature, and this part would be similar in a professional services firm as it is in the case of a technology firm. Especially if a technology firm is in the business of providing services, their product is the person who they use to implement the services. With the changing technologies, that product used to be refreshed every few months. As there is more adoption of cloud, cloud skills are needed. As there is more test with respect to cybersecurity, more cybersecurity-trained professionals are needed. As organizations move from one technology to another, retraining is needed. As technologies go from one version to another, changes are there in certifications and therefore retraining scope. A very large majority of what we do for tech and telecom companies tends to be technology training, though I would say that we also do non-technology training like I mentioned earlier, implementing consultant training for a company. That company happens to be among the largest technology companies globally. Okay, so largely, but some non-tech training as well.
Okay, so if someone is upgrading its software and you need people to understand how to use an upgraded user interface, that is where we come into the picture and train them. This is the new software, and this is how you have to use it. Something like that?
Yeah. That's one way of looking at it. Using, implementing, configuring, installing, all of that.
Okay. Thank you for the clarification, sir. All the best.
Thank you.
Thank you.
Close to the bottom of the hour, so we have the last few questions.
The next question is from the line of Shradha Agrawal from AM Securities. Please go ahead.
I just have one question. You've indicated that the guidance or the EPS guidance stays at 10% constant currency for SR26. Since you're doing NSC for three quarters, how should we look at the full complete approach number in constant currency?
I think MSP on an average would add 3 to 4 percentage points to our growth depending on, I mean, any quarters. Actually looked at
So 13 to 14% of COVID companies, regarding those.
For every full quarter post acquisition, 75% of, let's say, 10% of 7, sorry, 7 for that they are with us. You can assume having 3 to 4 percentage points of that 10% is the organic stroke [audio distortion] .
Got it. Okay. Thank you.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you very much, each one of you, for joining us on this call. Your questions, as usual, give us many more things to think about. I think we answered most of the questions, but if there are any which are left, all of us will be very happy to answer. You could contact Kapil Khora for any follow-up discussion, and we'll also be very happy to meet in person and explain things. We are going to be in Mumbai on Monday. Yes, we will be visiting Mumbai on the coming Monday and hope to catch up with you then. Thank you once again and wishing you all the best.
Thank you. On behalf of NIIT Learning Systems Ltd, that concludes this conference. Thank you for joining us and you may now disconnect.