Q3 19/20

Jan 30, 2020

Ladies and gentlemen, good day, and welcome to the Persistent Systems Earnings Conference Call for the Third Quarter of FY 'twenty ended December 3139. 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. Signal an operator by pressing star, then zero on your touch tone phone. Please note that this conference is being recorded. We have with us today on the call, doctor Anand Deshpande, chairman and managing director mister Christopher O'Connor, executive director and chief executive officer, mister Sandeep Kalra, executive director and president, technology services, mister Sunil Safre, executive director and chief financial officer, mister Mukesh Agrawala, chief planning officer, and mister Amit Atrey, company secretary. I would now like to hand the conference over to mister Christopher O'Connor. Thank you, and over to you, sir. Thank you, and good evening. Welcome. I'll open up with a brief description. We enjoy talking about our business units. Sunil, our CFO, will follow-up, and then we'll proceed on with general questions. Just to open up, revenue Q3 revenue was USD $129,430,000 That's a 3.1% growth quarter on quarter, 7.1% growth year on year. Margins, EBITDA stands at 13.3%, while EBIT stands at 8.7 Pat is at 9.5%. We enjoyed and saw pure organic growth across the board. This quarter, we added 53 new accounts to Persistent's customer list, and it was highlighted by multiple marquee wins. A leading private bank in Asia Pacific, employed us and enjoyed us to help build a digital bank with them. Another leading bank in The United States brought us in for our expertise around AI and machine learning to create the chatbot experience and personalization. The largest aircraft manufacturer in the world enjoyed our business around industrial sector and added persistence to assist the certified vendors. A global pharma company created a road map for how they're going to enjoy rationalizing all their applications and moving to a digital persona and how they see the world and their future structures as an IT organization. The drop in our largest customer's revenue impacted our EBIT. We're cognizant of it, and we have a focused plan to get it back to where it was. We likewise had expense due to important events such as attending conferences like Dreamforce, which is the largest Salesforce office in the world, and AWS re:Invent, which is a similar extremely large conference for the Amazon ecosystem. We invested more heavily in those conferences than we have in the past, and that's a single large quarterly expense as well, which is yielding results in terms of opportunity, pipeline growth and conversion as we continue to expand organically the persistent logo out of the new accounts. From a unit overview, in the Technology Services unit, it grew 6.4% quarter on quarter. Sandeep Karra is with us and will provide details on the growth of that. The Alliance business had a V growth of 2%. I'll now cover the Alliance business and talk in detail about that before turning it over to Sandeep. We had a lease exchange in our Alliance unit. We had to part ways with Mark Simpson. He was the President of the Alliance unit. Gianni Zhang assumed the role of acting President of the Alliance business. Gianni joined Persistent in 2019 as our General Manager of Industrial Sector. Prior to joining Persistence, Gianni worked in roles of engineering, software product management and marketing at both AMD and later IBM. Gianni's formal education includes an MBA from UCLA and a Bachelor of Science from the University of California in Electrical Engineering and Computer Science. Gianni couldn't be on this call today because of time side differences. We'll include her in future calls. The revenue of our largest client in this decline surprised us. Our strategy to balance the variation in the largest client revenue is yielding results. We continue, as we've talked about in previous quarters, to grow our industrial sector business overall, growing that business 19% quarter on quarter. However, industrial sector revenue is approximately onefour the size of our total alliance unit revenue. And so making a meaningful impact against shifts in that alliance revenue is still in front of us while we continue to enjoy growth in industrial sector. We continue to see good deal sales flow in industrial sector and in our retail business associated with this, adding 23 new logos to the Persistent books and new clients and new registration of Persistent as a certified vendor to be able to have full access to those clients in terms of our business and our capabilities. We expanded in other areas at our largest client, and we continue to find that our largest client shift and their enjoyment of new software technologies around Red Hat opportunities for us to grow. We have some significant areas of advancement at Persistent overall. We launched our digital bank solution offering in conjunction with our major partners, and this is a great assistant to banks and credit unions to fast track their customer onboarding journey. It's a pure cloud based offering leveraging our partners such as Mandu, AWS and others to help build a digital solution that truly is a bank in a box or credit union in a box depending on the customer's needs. We've built a healthy pipeline here, led by events with some of our clients in The United Kingdom and The United States. We continue to enjoy growth here. Our digital banking offering is now approved by Amazon and listed in the AWS Financial Services Solutions site. We are one of only five vendors that has an approved AWS Financial Services solution for sale and approved by Amazon in a very rare occurrence of being a small set of vendors with a leading solution in a financial sector that can have many people in it. We continue to build new offerings. We build new offerings in industrial sector, health care and data. We signed up new partnerships across the category, and those are now yielding lift in the marketplace, both from a solution point of view as well as a reference point of view. We expanded our presence at partner events. We were a groundbreaker sponsor at Dreamforce, our largest Salesforce event, our largest Salesforce event in the world. We showcased persistent leading edge industry solutions and capabilities. We strengthened our relationships with both Salesforce and MuleSoft across various industry verticals, and we offered thought leadership to speak successfully, and that's why I have appreciation of us. We brought both our North American teams and our European team our newly announced European sales force practice to those events to help them enjoy the customer excitement and the growth that Salesforce has not been enjoying. With our new Chief Marketing Officer, we are, for the first time, putting programmatic lead qualification and opportunity in comparison with rigorous pipeline progression procedures behind these conferences. Likewise, with our attendance at the Amazon Reinvent Conference, we showcased some of the same capabilities in Amazon Clothing and again enjoyed some of our largest pipeline growth that we've seen as a company, generating significant number of leads for the event throughout all of Q3. Overall, we are upbeat on the market opportunity. We continue to have relentless execution. We have focused on our bottom and our top line, and it is very enjoyable to take you through these results. With that, I'm going to hand over to Sandeep, our President of the Technology Service Unit, to provide an update on that line of business. Sandeep? Thanks, Chris. Good evening, good morning to you all. Technology Services Unit had a strong Q3 with a 66.4% percentage growth, which got us into 16.4% volume growth, which was in the back of March growth on Q2. In Q3, we saw a strong growth across all verticals. The banking financial services came in at 6.7%, ISV emerging verticals at 6.4%, Healthcare and Licensing, point 9%. Similarly, we saw a strong growth in our service lines with data and sales force coming in at 9.37.9% Q on Q, respectively. Our revenue progress in Q3 shows the validation of our new sales strategy with effective mining happening across our top 20 customers. If you look at our top 10 accounts, they grew by 5.3% Q on Q and Q3, but top 20 came in at 6.9% Q on Q4. To give you some color on the deal trends, in BFSI, for the leading private bank in Asia Pacific, we have chosen as a timely systems integrator, helping them launch micro loans, savings, and insurance products via mobile apps. For a leading bank in The US, which is a top five bank in The US, we were awarded a deal to work on chatbots providing enhanced web experience in the toll banking and home lending applications. For a top general insurance provider in India, we were chosen to provide and normalize key business applications based on a low code, low code platform. In healthcare and life sciences, we worked with a large pharma company, one of the top five globally on application portfolio optimization and a digital roadmap, helping them go over the next year on to much more digital cloud based native applications. We also chose we were chosen by a leading HMO health plan for end to end ownership of engineering, testing system administration and so on for the HMO plans. On the ISV and emerging vertical side, we are chosen by an AI led education tech startup to build an AI powered learning and support improvement plan. Overall, our pipeline looks healthy the coming quarter and so is the remaining environment for our services. With this, I hand over to Mr. Praveen, our CFO. Yes. Hi, good evening and good morning to everyone and wish you a very happy New Year as we talk first time in 2020. Thank you, Chris and Sandeep, and they have talked about the business update. And I'll take you through the financial information for the quarter. So at the outset, I would just like to explain to you that with respect to financials where we normally have a full audit done for the quarter. This time, the process accounts have been subjected to limited review by the secretary auditor. And we had intimated the stock exchanges about the reason for the same being that we were transitioning to a new ERP and some of the normal audit processes we have required with longer time. We will be back to the normal cycle of full audit in support. On the revenue side, you have heard about $129,430,000 revenues, it's a growth of 3.1% quarter on quarter and 7.1% year on year. In nylon terms, the revenue was $92,000,000 growth of 4.3% quarter on quarter and 6.8 quarter on On the composition of revenue, linear revenue grew at 4.9% quarter on quarter, while IP led revenue declined by 3%. In terms of linear revenue, the increase in volume was 5.7%, while the billing rate declined by 0.8. The Offshore linear revenue grew by 5.1% comprised of growth in volume by 5.5% and decrease in billing rate by 0.4%. On-site linear revenue grew by 4.5% constituted by increasing volume by 7% and decline in billing rate by 2.3%. As Chris mentioned, IPL revenue came in lower with a dip of 3% quarter on quarter and largely attributed to lower than expected royalty revenue, which resulted in drop of gross margin by 140 basis points to 33.3 from 34.7% last quarter. As Sandeep talked about, TSC business had a very healthy growth across all the business lines. What we had in terms of S and M and G and A expenses, you will notice that both these items in absolute terms are more or less flat. The time and expenses actually came down a little bit because you will recall last quarter we had talked about certain one time expenses in terms of carrying some overlap of sales people plus some of the expenses being incurred on the branding last quarter. So as a percentage of revenue, F and M expenses were 10.4% of revenue as against 11% of revenue last quarter. G and A expenses in absolute terms were flat and as a percentage of revenue came in at 9.1% as against 9.6% last quarter. We have provided Rs. 50,000,000 towards ILNFS exposure and the cumulative provision stands at INR382.5 million, again, total exposure of INR430 million. The total SG and A expenses came in at 19.9% of revenue as compared to 21 last quarter. With the above, the EBITDA margin came in at 13.4% as against 13.8% in the last quarter. So eventually, you will notice that the effect of lower royalty revenue at gross margin level was partially absorbed by lower SG and A expenses and the reduction in EBITDA margin was to that extent mitigated. Depreciation and amortization was nearly at the same level in absolute terms and came at 4.7% of revenue as against 4.8% in the previous quarter. The EBIT was INR $8.00 6,000,000 at 8.7% of revenue as against 8.9% in the preceding quarter. On the treasury income, it was INR $232,000,000 versus INR $226,000,000 in the previous quarter and foreign exchange gain was INR102 million as compared to INR138 million in the previous quarter. So with this profit before tax was INR1140 million at a margin of 12.4% as against 13.1% in the previous quarter. The effective tax rate for the quarter was 22.9% as compared to twenty five point five percent in the previous quarter. The ETR was lower on account of R and D tax credits in certain overseas locations. The ETR on annual basis is expected to be in the range of 24% to 25%. As mentioned to you in the last call, we have decided to opt for the new tax corporate tax regime, which allowed us to take the benefit of the reduction in corporate taxes. EAT for the quarter was RMB 79,000,000 at 9.5% as against 9.7% in the previous quarter. On the CapEx side, the operational CapEx for the quarter was INR62 million. The cash and cash equivalents amounted to rupees 13,778 million at the December as compared to rupees 12,661 million at the September. The additional cash flow for the quarter was rupees $1,019,000,000. The forward contracts outstanding as of December 31 was $115,000,000 at an average rate of Rs. 73.24 per dollar. As you have seen from the press release, the Board approved interim dividend of INR 9 per share. The last year, we had an interim dividend of INR 0.8 per share. With this, I thank everyone, and I hand it back to Chris. So thank you. At this point in time, we'll move to questions and answers, and we'll both be looking online as well as taking questions. So let me ask the operator for assistance as well as we're starting to look inside of that too. Sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and 1 on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sandeep Agarwal from Edelweiss. Please go ahead. Hi. This is Abhishek Patak here from Edelweiss. So just one question from my side. Could the management just walk us through their strategy in terms of you know, which verticals sorry, which segments are you targeting specifically because, you know, ITLF businesses have been a little weak with the first effect of last quarter. So is the new sales strategy specifically focused on enterprise and ISV? And how should we look at the isolate business going forward? Should we model in flattish trajectory from here on or there is some recovery coming there as well? Thank you. I'll handle that question. The business with our largest client is multifaceted. We have several components inside of it, and when we bring that number together, it's a combination of work that we do for them, which is enjoying new contracts and new work as they create their own shift with their technology to the cloud, the cloud provider or the cloud data that is a bread app. So we see opportunity, we see the opportunity for growth and we have a healthy pipeline with our largest client in terms of those types of opportunity. And this is what we do for them and we do that across dozens of products. And as they shift to this cloud technology, we're one of the primary providers. Second, we also have a royalty business with this with our largest client. And the royalty business is where we're reliant on their cyclical cycles or their cycles, and that royalty business can go up and down in any given quarter based on really the dynamics of the IBM global sales team and the IBM global partners that move the product. And in that, we see the difference or the surprise that we had this quarter. The third component that we do with our largest client is we actually go to market. We take that product their products to market. We sell them as well as we sell products of others under such as Diesel Systems in the same sales team. So we are category leaders in industrial sector there, and we sell the IBM product as well as we sell others. That area enjoyed nearly 20% growth and it's something that we've been growing quarter on quarter as an offset, a deliberate offset strategy to the royalty business. And so while we continue to do work for IBM, we recognize that the royalty business has, I'll call it, its cycles and ups and downs. And to offset that, we have been embarked on for about eighteen months a strategy to build out the industrial sector space. And we're enjoying healthy double digit growth there. It'll take several more quarters for us to make a significant dent around the size of our royalty business. But there is a strategy we are executing. We've brought onboard more sales personnel in North America to complement the sales team we have in Europe. And we suspect by the pipeline, we will continue to enjoy healthy growth out of that capability. So no offense out to the business and then balancing it out where we acquired growing all the solutions. Thanks. You. Thank you. The next question is from the line of Madhu Babu from Centrum Broking. Please go ahead. Yeah. Hi, sir. Congrats on the strong growth in the services business. So just on the BFSI, which has seen a strong growth. So, I mean, could you talk about more on the deal pipeline? Is it that the clients which we already are there, we are able to go and mine them with the more cross sell, just on the pipeline and your views on that? The BFSI pipeline is healthy across both existing customers and new customers. We are able to sell more service lines to the existing customers, grow the wallet share in both. And in addition to that, as we talked about, we have our options in digital banking that are picking up steam. We have our AIML platform development that is picking up steam and the local local platforms based application development where we are also seeing the newer customer pipeline. So it's both a combination of both. And we talked of trying to build annuity streams to manage services and also once we get into the customer. So what are the changes in the delivery engine we would need to make on that initiative? So good question. And if you look at our growth, some of the deals we talked about in the earlier quarters, the multimillion dollar deals, etcetera, that we announced, and we continue to have those. Those are entity based deals. And if you look at it, some of our existing deals were like that, but more and more, we are investing in our managed services part as well. So while we will do cutting edge platform development, so we will not just do development, we'll also, you know, endeavor to put in managed services around that as we kind of work with our customers and that is where we are reinforcing that liberty wherever required. But we are adequately, you know, having that capability in house as of this point in time. Okay. Yes. Thanks a lot, sir. All the best. Thank you. The next question is from the line of Dupesh Mehta from SBI Capital Markets. Please go ahead. Yes. Thanks for the opportunity. So a couple of questions. First, about the case in recent when you look at nine month case in recent, it seems to be weak. If you can forward some perspective, how one should look a case in this and improvement going forward? Second question about the vertical wide, if you can forward the difference you touch upon, but if you can provide some outlook about how one should look vertical growth rate and if you can provide some perspective, deal intake. If you can tell us a number, how it has changed just in last couple of quarters, what And deal pipeline, how it is tracking for us? And on the IBM top client side, how one should look trajectory of business stability returning there, and what is the question we are seeing on recent impact? Thank you. Cash generation, you want to comment first? Yes. So let me take the question on cash generation. So if you look at the cash generation in the first half of the year, that was particularly very weak on the map of lower operational profit and couple of other items that we explained in the last quarter, which was one relating to the fact that we are advanced we made advanced payments to suppliers and the other which was with respect to certain payments that had to be made which affected the cash flow at an operational level. These are in the nature of certain incentives that the government has contested and which are disclosed as contingent liability at the moment. The other item that affected the cash flow to the extent that we had certain reversal of employee benefits. Now these employee benefit reversals would have helped the VAT or the margin, but it will take a while for us to get back the excess contribution deposited with the license where we manage the free trial liabilities. Now coming to the cash flow for this quarter, the cash flow is better than the profit generation for the quarter, partly for the reason that the supplier payment would get in, you know, adjusted when we move to the normal operation quarter, and that's no longer the reason. However, having said that, there is an increase in the DSO from 64 to sixty eight days. And the reason for that are partly the fact that being holiday season, we had increase in DSO by couple of days because collections spilling over to Jan, and partly because of the fact that couple of customers have increased the payment terms from 50 to ninety days impacting DSO by about three days. So that is what I would say. And if you have any more details, I think, once once you look at the so what we have done is while your accounts have been subjected to limited release, we will be putting all the financials on the website and we can talk on that later. So on the vertical side, if you look at it, we talked about the banking financial services already. On the health care life sciences, if you look at the split of the vertical, there is the pharma side of it, the payer and the provider side of it. Those are the three broad categories of issues. In the pharma such instrumentation space, we continue to be a very strong player, where we are very much the leading, you know, instrumentation companies in the pharma space of our customers for many, many years, and we're telling you to add those, and we're you to mine those. The other side of it, if you look at the payer side of it, we have a pretty strong story on the Salesforce platform where we enable the medical parts of the patient enrollment only for a provider. In the payer side of the house, we've been working predominantly on doing platforms. This can be AI machine learning with cloud native platforms for doing their in house analytics or providing customer, you know, services and so on and so forth. We also see a lot of traction on the local network platform on both the provider and the peer side. On the ISM and emerging verticals, you know, we are seeing traditionally as kind of the ES cloud then, and we are working with them as they become more and more, you know, cloud oriented. And we have a fairly the last question that you had was on the deal pipeline. The deal pipeline continues to be healthy and part of it is what is reflecting in the strong growth that we had in the services segment. We don't disclose that we will win values with time we look at that. But overall, our business pipeline looks healthy. The market demand continues to be healthy. And that's where I hope I've answered your question. And with that, I'll hand over to Chris for the ID and P. So Adrian, you asked about trajectory and forward vision there. It would be inappropriate to kind of give something that sounds like an exact forward trajectory. I think the right thing to say is at this point in time, we don't see anything substantially different in the way that the work of our largest client takes place. As I mentioned, in adding to that top line, there's opportunity as they convert and their investment in Red Hat pays out and studies out, which seems to have very reasonable traction in the market by all indications, not just our dealer ends, but our indications as well. We'll enjoy our position as being a significant supplier, provider and dozens of products that they have, and we saw evidence of that this past quarter. Likewise, in the work that we're doing to grow industrial sectors to be of significance in size equal to DSSI and healthcare, we enjoyed healthy double digit growth, with just pushing a smaller number to be a bigger number. And then the last part is the royalty cycle, which has to do with the complexity of IBM sales. And then that is where we see some variance. We will be with Gianni introducing a set of capabilities or set of interactions with IBM to get more accurate on that, But that doesn't change our belief in the business in trajectory statements and our confidence in the investment that we're making around this. We will need to match cost to go along with that, and we active in making sure that that happens. So and lastly, about the reseller, the business which we added in last few quarters. If you can forward, how that business is breaking for us? Reseller is the industrial sector business, so one and the same. And and that's the business that I mentioned grew nearly 20%. Thank you. Thank you. The next question is from the line of Madhu Babu from Centric Broking. Please go ahead. Yeah. Hi, sir. On the exit moment term, mean, assuming that 4 crores would be steady, so we would exit at a good rate for next year. So would that put us back to the 10% kind of organic growth, I mean, on the overall revenue perspective? And second, on the margins, almost on the five fifty basis points, why you were dropping margins? Obviously, the IP revenues have been weak this quarter, but trajectory margins have been weak. So would we see the margins also swing back maybe from like 1Q FY 'twenty one as the growth leverage and all kicks in? Yes. On the margin trajectory, Madhu, basically, the issue has been with respect to this quarter, the lower royalty revenue that came in. On the gross margin side, our idea is to get back to the trajectory of 35 plus percent, which we were maintaining. A part of that is also attributed to the business portfolio that we run with the largest client and some of the work that we would do in that area to improve that profile. On the agenda side, most of the investments that, you know, have taken the front loaded kind of a nature, which we saw last quarter, we changed the marketing being at 11%, has now come down to 10.4. And we will optimize there by virtue of the revenues going up. So we are done with most of the addition to the sales team, the churn that made some of the overlap of costs remaining. So with that, on the gross margin side, the improvement of 1% to 1.5% and on the SG and A side, optimization of about 1% to 1.5% is what is our target. We get back the EBITDA margin to 15 plus level. And I think other question you So exit revenue run rate is clear how the momentum is going to play out with the kind of pipeline we are seeing? I think it's little early at this juncture. We are just in the first month after the end of quarter getting back with the updates and clients on their annual plan, and we will come back to you as we get better clarity on that. The idea is, of course, we are seeing significant momentum on the services portfolio. We have to fix something on the alliance with the largest unit, I mean, largest client portfolio. And we'll share more details. The idea is definitely to grow at three, three and a half percent kind of run rate on a single business. If I may ask one more. On the enterprise side, obviously, BFS and health care has been a forte for us. So with the success we have seen there, any sub verticals in the new areas are we trying to focus on investment? Any views on that? So essentially, if you look at it, so far our growth has come from these verticals. Underneath, we are seeing some good traction in travel, transportation and so on. But are we there yet in terms of announcing that? Not yet. That's why we classified that as well as industrial as emerging verticals. So industrial and travel transportation, etcetera, would be things. We'll look to see how the trends emerge. Industrial definitely, we are seeing more light. So hopefully, with time, we will call out more verticals as they emerge. Okay, sir. Thanks. That's perfect. Thank you. Before we take the next question, a reminder once again to participants that you may press star and one to join the question queue. The next question is from the line of Mayul Prakaria from Wealth Management. Please go ahead. Good evening, sir, and thank you for taking my questions. Sir, if I understand the commentary now what you mentioned about this is particular to the Alliance segment. You know, in terms of the impact which has happened, does it gives a picture that, you know, this is just not one quarter issue or it's not gonna come back in a, in the next quarter or in a shorter period of time. So are we looking at a situation where the kind of work which we plan to do and not only on the top line and hence improvement on the bottom line, This is a little bit medium term in nature in terms of three, four, five quarters? Or is it just the fact that we'll be able to get back some of the revenues and margins in the next two quarters? I know it's not a quarterly understanding, but I just want to directionally, is it a little bit, larger time frame we are looking at to get back to that? Or is it a more near term? Oh, great question. In the Alliance segment, we we exercise three different primary business models. One is we sell to our largest client, and that model is where we do work for them. The second is we have a royalty oriented business that's composed of several products that add up to that royalty business. And then third, we have the reseller business where the work that's been described as industrial sector. So in terms of alignment, in the sell through IBM, we see lots of opportunity quarter on quarter. We remain very bullish in the fact that IBM has made this investment commitment to Red Hat, and we will play a part in that. And we saw evidence of that last quarter, and the evidence looks strong as we look forward as well. In the reseller or industrial sector business, as I mentioned, that enjoyed 20% growth on the back of 20% before that, on the back of 20% before that. So we continue to show healthy growth there, adding both volume of new clients, key clients, such as the world's largest aircraft manufacturing, which now has approved Persistent as a vendor as a part of this process and flat out growth. And this is a healthy business that then we must expand, conscious of the bottom line to bring more of all of Persistent into these clients and expand out our base, not just in the Gulf Of Easton alone, and we're executing that strategy. So that remains very bullish in our thoughts as well. So that's two of the three numbers that we add up to the Alliance number that you see. The alliance number then has a royalty component. The royalty component is very profitable component. It's a large component. It also has cyclical variance or unit wise variance. And we have mapped out historically all the data we have on each of the royalty components. We are not out of cycle with any of the components as we've seen in any previous year. However, it wasn't the growth that we were expecting. And so in that, we don't have a forward view that says there's going to be a significant long term gap. It is consistent with previous quarters that we've had. The predictability is something we have to work on. Commensurate with that is obviously the expense portion that goes with that. And we have Gianni now keenly focused on getting us to a more managed average as we look forward. So our our view remains consistent that this is a healthy place to be, so we have new opportunity as well as our largest client there has us in a primary position for much of the work to do. Okay. No. Trailing, this is out of $150,000,000 of alliance revenue. How much would be this royalty part? And and and and doesn't I feel like revenues of the portfolio. We don't disclose it at a unit level. Okay. So definitely, will it be, I mean, a substantial 50% kind of situation, or will it No. Unfortunately, we are not allowed to share because of the confidentiality arrangement with the new customer. If you look at the IP like portfolio, we have IP across units, whether it is new to you or actually can again. So it is all bundled into the IP led. So we disclose IP led and services. So you know what is the linear revenue and what is the non linear revenue. So Chris, just one more just one further understanding on this, if I may just so does it does this loyalty business impact is more to do with the fact that they are end of cycle products and, you know, unable to select new license no new prod new customers and hence, it's impacted? Or is it more to do with, you know, the environment or no. So just some add some some color if you can add on that, sir. So the largest component of how that's put together is a leading edge product in the industry enjoyed by multiple industrial sector accounts that that use this and their business relies on and their business would stop if this product was not maintained or did not continue forward. And it continues to provide growth to us as well as to our largest client in terms of number of clients. So there's not in this component of an aged product syndrome. I believe, you know, your words of environmental is more of the right way to go with this whole discussion. Okay. You very much and wish you all the best. Thank you. The next question is from the line of Rahul Jain from Dollar Capital. Please go ahead. Yeah. Hi. Thanks for the opportunity. Sorry to bit you know, the same issue. I wanted to ask the change in the leadership in Alliance business was is it is it involuntary? I I think the best way to characterize this is is Mark and I enjoyed a significant difference in business beliefs. And as a result, we parted voice. Okay. And to continue on the same thoughts, see, from the profitability of the Align segment, do we see this to be varying now given that the growth is more pronounced in the reseller business with this possibly lower margin than the other piece within the Alliance portfolio? What is the first part of that question? Can you repeat the first part of question again? So I'm saying, is it is it just that profitability within the large client would go down given that our traction is more on the reseller business rather than the other two pieces? We the answer is it could, but we have to remain focused on not just the reseller component of this, but also the services component that we have the ability to sell as well. And so we have to focus on making a complete discussion in terms of how we do this to just be resell 100% by itself could have an impact. We are focused, and we do have both the selling team and the delivery team focused on delivery of services and then linear business oriented model that goes along with that. And there is continued focus as well as the capabilities that are in technology services unit are set to be exploited for the first time in these customers. And we've put together a scheme to start to cross sell ESG services into these clients as we grow the client list. So we started off projecting that theoretically by math, it could. Our work has to be to make sure it's complete and consistent, especially when we work with new clients in addition to just a reseller discussion. Right. And when we say that the pipeline is pretty strong in that segment, can you say that the past growth would have been more impacted because of the, like, acquisition and the way things would have changed at their end in terms of what they want to work upon and not more to do the demand side of things, or is it more of a competitive factor which is impacting our performance? So the component that's royalty based is in large part led by the the IBM or our largest client's sale of the product. While we play a role in selling that and we are the largest reseller, we're a fraction of the total sales effort that goes in and around us. And so it's that focus that has different cycles and as our largest client shifts quarterly their own focus, which our data would say is a normal occurrence to them, It provides us the opportunity to play catch up in some of the quarters where their focus is elsewhere. Thank you. The next question is from the line of Neera Bilal from Maybank. Please go ahead. Thank you for the opportunity. I wanted to understand in terms of the deal sizes that you're looking at at the moment and how this has changed. For example, impact deal that you've run or the general funds deal or the entire deal, how what are the deal sizes and duration of these deals? And how has this changed over the last year to this year? Right. So if you look at the technology services part of it, which is the biggest services, you know, business that we have, the deal sizes, I would say, the size has increased over the last, you know, eight, nine months that we have been focusing on effective mining of the customer base. And more and more, we are orienting our sales teams to go after multiyear kind of deals in our work. Even if they are doing, let's say, for the sake of argumentative sales force implementation, we are trying to, you know, bundle our support services along with it because when we do an application development, product engineering, or sales force related work or any of these, there's always a way to keep your, leg in by an abundant support or so on support. So those are the things that have effectively helped us along with the fact that we have focused on, you know, investment in our service lines as well as the verticals. If you look at it in terms of quantifying, look at our deal wins, most of the deal wins at the higher level that we are talking about are multi year multi million kind of a deal set. I will not be able to disclose exactly in terms of, but that is where I would say we have seen a healthy uptick in the details. And that reflected in our growth. If you look at the growth, our quarter one was 81.8%, our quarter three is 90.3%. Got that. Got that. And in terms of the reseller, how does one look at the similar thing? So the business that we do in our industrial sector, deal sizes continue to increase. We landed in this quarter seven figure deals as well as many deals that were just shy of that or in the middle of that. So we do see deal size as something that can vary, but it is from the evidence we saw this quarter on the increase in terms of the size with larger deals occurring. Okay. Thank you. Thank you. Participants who wish to ask questions, please press star and one. The next question is from the line of Girish Pride from Nirvalbam. Please go ahead. Chris, in the analyst meet, many months back, you had mentioned revenue stacking as one of you used the phrase revenue stacking as one of your key strategies going forward. Have you been able to implement this? And can you just illustrate using an example? Sure. So if I pull out one of the pieces of work that we did in our reseller business, in this piece of work, we enjoyed the reseller capability as well as we landed on a services contract to do the implementation, so that gives us that. And in that reseller the same product, we collect the royalty because we advanced the overall number that adds into the royalty share at the same time. So that's a three stack. It's a services component. It's a resell component that we enjoy, and we advanced our own royalty payment because we sold the product there. We enjoy the royalty at the same time. And so that was one of our larger deals in the reseller or industrial sector group. Likewise, if you look at some of the work that we're doing around digital banking, we have partnered up and digital banking is a persistent solution composed of partner software and our own accelerators at the same time. Those solutions include time and material, they include partner software in cases where we are the reseller and it includes, in some cases, persistent IP adapters and connectors as well. We have multiple advances in digital banking, we've got two stack and three stack certainty evidence there as well. We continue to believe in the digital investment that's taken the entire industry. We see this as a leadership opportunity for Persistent, which is to compose solutions based on partner software and our own capabilities. Our own capabilities come in the form of accelerated linear work as well as engendering our partners to be our advocates for the movement of their self at the same time and collectively sell a margin. We will push on that strategy throughout the entire business. Second question is regarding the C E PLM product. Unless you're supposed to get royalties where IDM is supposed sell. I thought that's what didn't work out in Q3. I'm delivering on this. Would this now appear in Q4? Or will this be delayed into FY 'twenty one? And you were cracking for a minute there. Can you repeat the front part of the question? Heard CVC alarm. Could you repeat the rest? Yes. So this was supposed to come through in a big way in the December, which is not from what I can see. So is this now going to come through in the March? Or will it kind of get pushed back into FY 'twenty one? So I think the best way to characterize that is we recognize that product as having thousands of clients around the world. It's recognized by industry analysts publicly as the leading product in its space. It is complementary to our partnership with Dassault systems that we've struck up this past year. And we have no indication to believe it is on any negative trajectory at all. And I believe as we look forward, we will continue to sell healthily and continue on this trajectory as we've mapped the last four years of historical data. And the historical data we look at would indicate that we're within the parameters of what's normal for that product to operate. Okay. Lastly, Persistent in the past has had issues with talent. I think a year or so back, you had to drop some projects because you couldn't fill up the talent part on certain projects. So how is that kind of panning out now? I mean, are you finding it difficult to get talent in The U. S? As far as talent in The US is concerned, you know, we are obviously our business mostly in the forward looking technology. It's always going to be, you know, tough task getting talent in those technologies, but we are not seeing any incremental, you know, tightness and so on and so forth. We have already way of tracking our pipeline and coordinating that to our resource management, hiring proactively and so on and so forth. So we are really okay as of this point in time. I think I'd characterize it as a continual focus across the entire company. We put some dedicated leadership that we're quite happy with in terms of having that focus. And so I think in our tenure, we maintain the focus to manage the problem right now that the industry has. We don't see it in our top tier of problems that bothering us, but we must maintain the focus and then we must maintain the the the durability of how we manage the counter. And that's that's key in our brains and stuff that we watch every two days. Okay. Thank you. Thank you. Participants who wish to ask questions may press star and one. The next question is from the line of Mayur Pakeha from Wealth Managers. Please go ahead. You again for taking my question. Sandeep, this is for you. Earlier you had highlighted that we have opportunities of working with the PE players and their investee companies, given some of your background there. And so if you can add some how is that standing out and what kind of wins if we are seeing any and something on those that's it? Sure. So very good question. We are seeing a good traction with the team's only as of this time in time. We are involved with at least five different opportunities with our with different portfolios and leads from different teams. So these are in advanced service and obviously as we have become deal announces, but we are seeing a pretty healthy traction in that market. Is that something? Yes. Yes. Okay. And one Chris, something on the client side, like, you know, the commentary and the, you know, the qualitative comments are good. But if you look at the number of clients in the bucket of 3,000,001 or one to 3,000,000, which we disclosed, they have remained around 75,000,000 put together over the last seven, eight quarters. So are you tracking that number? And what because that remains a pretty constant number irrespective of that the fact that Q on Q we may have seen addition on the $3,000,000 But now when we look at that deal pipeline and now the client moving up the deal curve, that's not visible at least you know, when we look at both together and over a longer period. I think I think the comment is is accurate. It was sitting around the same number in total. It's it's consistent. It didn't express any alarm to us other than our mission is not to be to move that number up until we agree with you. It'd be that we are tracking it. We have a line on how that looks as we look forward. That is work that we're in progress on. Likewise, our top 10 clients remain very consistent and healthy to us as well as providing overall growth with significant deals in some of them, as we mentioned earlier. So this is absolutely a focus, and it is absolutely a focus given the past quarters we've taken you through as inorganic in nature that we do deal expansion as well as duration expansion at the same time. So I anticipate you'll see movement here. Nothing to predict at this point in time. Thank you. Thank you very much. That was the last question in queue. I would now like to hand the conference back to Sir Connor for closing comments. We've enjoyed your questions, and we are here, obviously, to take on more questions as you have them. You've got the vendors at your disposal. Should you have them, we remain available for you all. We've enjoyed this call, and thank you very much. Thank you very much. On behalf of Persistent Systems Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, You may now disconnect your lines.