Q1 19/20

Jul 26, 2019

Ladies and gentlemen, good day, and welcome to the Persistent Systems earnings conference call for the first quarter of FY 'twenty ended June 3039. 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. Should you need assistance during the conference call, please signal an operator by pressing then 0 on your touch tone phone. Please note that this conference is being recorded. We have with us on the call today, doctor Anandesh Bande, chairman and managing director, mister Christopher O'Connor, executive director and chief executive officer, mister Sandeep Kalra, executive director and president, technology services, mister Mark Simpson, president, IBM Alliance Business mister Sunil Sappre, executive director and chief financial officer mister Mukesh Agrawal, chief planning officer and mister Amit Atre, company secretary. I would now like to hand the conference over to doctor Arandesh Pandey. Thank you, and over to you, sir. Thank you, Raymond. And it's my pleasure to welcome all of you to this first quarter analyst call. Thank you all for joining us today. Very briefly, we had the annual general meeting of your company yesterday, Wednesday, twenty fourth July. And happy to announce that all the items that were listed were approved unanimously. We've had withdrawn the item regarding device which Sunil will explain later in this conversation. It is my pleasure to welcome the new team that has taken over the range of most of the company's operations. We have Chris O'Connor here in person in Pune today for this call. And we also have Sandeep Kalra on the call today in person in Pune, and also Max Simpson, all of us are here in Pune. So I'm gonna hand this off to Chris to share the details of the performance of the company for the quarter. Over to you, Chris. Thanks, Anand, and thank you all on the call for joining. And as you may know, this is my first full quarter in the company in which I was able to fully see and understand and go through the operations. From a performance point of view in the first quarter, our revenues came in at $119,630,000 Other significant numbers are PAT, which is $8.24 plus. And that kind of gives you some highlights of where we are. Think you all have our details. For this, we'll do the rest of the call. Some things that took place in the quarter, just to kind of highlight that also a part of the press release. We completed our share buyback program. That has been going on for some time. That program completed in June, and is now over. And that is part of the substantive process, the standard thing that we have been working for some time. In terms of thesis awards and highlights, we in this quarter, currently, announced the acquisition of the experience of Salesforce practice, which is based in Germany with a component in The UK as well. Which highlights other things that we see taking place in our sales force as a growth mechanism for the future. We continue to be right well in other industry standards and in participating events that we play in, in the industry. And you can see several hackathons and gladiator events that we participate in from a technology point of view in terms of who we are. I think a key point from a business syndication point of view that I would like to celebrate is during the quarter, we likewise crossed the 10,000 employee milestone, and we'll be celebrating that this coming weekend, planting 10,000 trees once for every employee in the company that we have today. Crossing the 10,040 milestone is certainly an indication of health in terms of our ability to grow our hourly rates, which is at 1.2%, as well as our ability to continue to manage employment needs using a global team, balancing between onshore officer capabilities that we have. And so it's an indication of strength that we see. If I look at the quarter itself, I'm going let Sandeep and Mark talk about their areas effectively. But at my level, I see areas of strength emerging. Salesforce takes our footprint across multiple times in our quarter as an area that is growth for us as well as our acquisition adds fundamental strength in Europe, a delivery capability in Europe that we didn't have before, particularly in Germany, and the ability to take different concepts of how to collaborate and to advocate Salesforce and practice to our customers beyond just straight install time and materials. And so we gained rich faith from that, and you'll see also in our key wins in the quarter that we have multiple sales force wins called out there. Second thing I'd like to highlight, which Mark has talked to as well, will be our industrial sector, catching on as a category that balances our traditional work with just our largest client. And the reason why this is important and the reasons they're important is they are the persistent brand, leading out at the top line, the purchase of software from not only our largest client, but some of their collaborators in the industrial sector area as well. And this is a key trend that we intend to highlight and further advance around the idea of value added, value added reselling. So these are kind of key indicators for me at the quarter that we can talk on. And as we get to the question and answer section, we'll obviously go any place if you guys want to. For the next section of this, I'm going to turn it over to Sandeep, our President and Executive Director of TSU, followed by Mark and followed by Sunil, our CFO, who you know. So Sandeep, let's go ahead and take everybody through the TSU unit and your families as a new member of the company. Thank you, Chris. Good afternoon to you all, and good morning to those of you from the regular side of the house. If this is my first interaction with you all, I would want to give you a little bit of background of what I've done in the past. I graduated from IIM Calcutta in 1995 and started the domain in software services with HCL Technologies in The US in 1999 as a part of their product and domain services. And I took on additional responsibilities over time, establishing new geographies first within The US, then followed by Latin America and Canada. My last role within external technology was leading pharma vertical in Americas. Subsequently, I joined a private equity company with a business very similar to Persistent and that business is acquired by Harman and subsequently by Samsung Electronics. I'm very excited to be a part of Persistent, and I'm looking forward to working with my colleagues to take our complete product. Now to give you an update, I'll cover two areas. First, I'll talk about our Q1 business, then I'll talk about the initial observations, having completed my first three months in the company. First, on the Q1 side, we saw a number of significant deals. As Chris alluded to the sales force practice, I'll give you a color on some of the reasons we've done in banking financial services on Salesforce and other value. In India, we've done with one of the largest banking financial services company, a Salesforce implementation, which is an end to end outside of core banking, and we will be involved in doing non core banking applications migration over to Salesforce and also launching new products within over the next three to five years. Another significant deal that we won in financial services was with a leading global investment firm based out of The US. This is a $90,000,000 multi year deal encompassing the remuneration of multiple critical applications related to different functions within the business, right from encompassing them, entity lifecycle, capital call, compliance and many more. Moving on to the healthcare and life sciences segment, which is another large segment for us at Persistent. We continue to make progress, winning multiple deals, including the deal with the managed service provider, a leading healthcare cloud computing company where we will be working with them to provide managed services to them as a the leading medical devices firm. On customer relationship analytics, this is a Salesforce based deal, a main entity ID, the core sales marketing and services. Coming to the last segment within technology services, which is a technology company. We signed a product engineering deal with the leading encryption hardware based on that side in the area of both trust and security, IT, and blockchain deployments. Has been my three months for the company. And, you know, over the last three months, I have, you know, entered customers, prospects, most of our team members in sales and delivery. And I'm pretty encouraged with the basic foundation that we as a company have and the kind of customer base that we have. As a part of the changes going ahead, it is not last from us that we have to accelerate revenue. And most of these changes that we are building in are building on our foundation and leading towards trying to get not just product business but large entity based business. We are also forming a bad deal team, which will be working on existing advisers and trying to get more RFPs from there and also working with team firms on their portfolio opportunities. In addition to this, we'll double down on our growth and also the service offering through our growth solution organizations in our chosen market segments. All these initiatives we believe over the quarters will lead to larger deals and annuity deals, which hopefully should exceed the acceleration that we all aspire for. With this, I hand over to my colleague, Mark Simpson. Mark, take your seat. Thank you, Steve. I'd also like to hand the pleasure of welcoming you the conference. And good afternoon, good morning to everyone on the phone. Although I'm not new to persistent, this is my first interaction with you on an earnings call, so I thought I'd take a quick second to introduce myself as well. I graduated from a small university in Texas in The United States, called San Francisco State University, 1984 with a degree in computer science, and I immediately started my professional career at IBM in software development as a new chair. I had many technical managerial executive roles at IBM over thirty three years. I retired in 2016. In my last four years at IBM, I was actually customer persistent. I didn't have to look far when I decided to retire. I ended up at persistent literally on the next day as part of the IBM Alliance unit. And now, as of April 1, became the president of that unit. Just as Sandeep summarized for the technology service unit, also give you an update on two aspects of my organization, both the summary of Q1, just a bit of a strategic look moving forward. In Q1, we saw an increase in both the volume, the diversity of our pipeline as well as our wins, which I'll talk about in a second. We acquired twice as many new logos in this past quarter than we've had any quarter since we started selling directly to the market in the ecosystem. There are a number of significant deals worth highlighting. In our continuous engineering practice, started less than eighteen months ago. We had our first significant SaaS renewal direct to the market. And we've done the first deal twelve months ago and we had a renewal. These are the types of deals that will start a foundation of growing annuity through indirect with the clients of our partners. Also in continuous engineering, we had another $1,000,000 plus deal with a customer in the automotive industry. This is going to help us execute on our objective of kind of consistent revenue quarter on quarter. In our PMM practice, also in the industrial sector, we acquired two net new logos. This is a part of our business that's been a bit flat. So this is a good shot in the arm and given us some growth that we need. And finally, in IBM, with the IBM unit, in partnership with IBM, closed a 2 over $2,000,000 deal with the major one of the largest health care companies in The United States. Briefly looking forward, strategic direction, two things to highlight. IBM is our biggest client and they've just completed the acquisition of Red Hat. That was significant for them. They feel significant for us. Our investments are tightly aligned. If you're persistent with IBM's strategy, that includes helping them succeed with this acquisition, both them and their clients. And then the second thing that I like to highlight is that it really supports our kind of corporate direction just over a year ago on growth in solutions. And the unit that I run is tightly aligned with the industrial sector. So we'll take the software reselling that we do and our own some of our own assets and align it tightly to the industrial sector to establish growth in that particular market. And with that, I'll turn it over to Sunil. Yeah. Hi. Thank you, Mark, and good afternoon and good morning to everyone in the call. So Chris has given you a brief idea about the market update and how you see the opportunity for Persistent. Then you heard Sandeep and Mark share their perspective and understanding on the Persistent business. Let me now take you through the financial information for the quarter end of twenty eighteen. So on the top line, we had the revenue of $119,600,000 growth of 1.1% Q o Q and decline of 3.2% Y o Y. The IP revenue this quarter was soft as compared to our internal expectation. In terms of Y o Y, there was a large reseller deal in last year's first quarter, which is the reason for the variation in IP revenue and it is also reflecting the purchase royalty cost that you see on Y o Y basis. The services revenue as a portfolio grew by 1.2% quarter on quarter and 4.5% on Y o Y basis. And in terms of INR, the revenue was INR8321 million, which was flat on Q o Q basis. Coming to the composition of revenue, the linear revenue grew by 1.2% quarter on quarter, while the IP revenue grew by 0.8%. In terms of linear revenue, there was an increase in volume by 1.8%, while billing rate declined by 0.5%. The Offshore linear revenue grew by 3.2% comprised of a growth in volume by 2.3 and increase in billing rate by 0.9%. Downside linear revenue declined by 1.8% constituted by a decline of 1.2% in volume and 0.6% in the billing rate. Overall, the gross margin came in at 34.7 as of 36.8% in the previous quarter. The key reason for the lower gross margin is the softness in IT revenue coupled with the fact that there has been increasing headcount and slightly lower utilization at 77.9% as against 79.7% in the earlier quarter. So this utilization has an impact of 50 basis points of margin. We also had the seasonality in terms of the visa costs for H1B filings this quarter, which had an impact of 70 basis points. And on the dollar rupee, the currency softness impacted margin by 30 basis points. With this, the EBITDA for the quarter was million at 14.2% as against 15.2% in the previous quarter. As you would have seen, we have made a provision of INR1500 million for the exposure towards the LNFS and the cumulative provision now stands at INR282.5 million, which is 66% of the exposure. Depreciation and amortization was 4.6% of revenue as against 4.5% in the previous quarter. The EBIT was Rs. 8,600,000.0 at 9.8 of revenue as against 10.7% in the previous quarter. The treasury income for the quarter was with this $2.00 $2,000,000 as against with this $283,000,000 during the previous quarter. The income in the previous quarter was higher on account of the higher mark to market gain on certain treasury investments. The other part of the reason for lower other income was the fact that we utilized this $1,670,000,000 dollars towards share buyback in Q1, thereby reducing the treasury sales. The buyback was completed on twenty seven June and we have bought back 3,575,000.000 shares and exchange the same by thirty eight June. On the foreign exchange side, the gain was INR 80,000,000 as against a loss of INR 9,000,000 in the previous quarter. The PDP came in at INR $1,098,000,000 at a margin of 13.2% as against 13.4% in the previous quarter. The effective tax rate for the quarter was at 24.9% as against 24.1% in the previous quarter. We expect the EPS for the whole year to be in the range of 26% to 27%. EAT for the quarter was Rs. $825,000,000 at 9.9% as against 10.2% in the previous quarter. The operational CapEx for the quarter was $172,000,000 Cash on books amounted to $401,013,000 as of thirtieth June as compared to $129,500,000 at the March. The product contact outstanding at the end of thirtieth June was $105,000,000 at an average rate of 73.36 per dollar. Turning to the point Alan mentioned in the brief initial comment with respect to Deloitte. We had proposed the reappointment of Deloitte as King James sells LLP in our annual general meeting for a term of two years. Deloitte informed us on twenty third July that if the appointment is approved by the shareholders for a term of two years and not for five years, they will not be able to accept the same. So the shareholders, while they have approved the appointment in the AGM through the process of rerating, in view of the communications in July, the same will not be effective. We have started the search for suitable audit forms and then shortly set up to you and we hope to make a decision in the next few days. We will approve the shareholders by working extraordinary general meeting to appoint the strategic auditor. And as per the relevant provisions, Beloit will continue to be the auditor till appointment of new statutory auditors. So that's the update on the finance front end. Thanks everyone again and I hand it back to Chris. Thanks, Sunil, and thank you Sandeep. Thank you, Mark. Observations as my first quarterly churn closes out. It's been a fascinating quarter to watch the business run. If I look back to the quarter, I took the opportunity to meet many of the clients. I embarked on meeting all of the CEOs of all of our partners, all of the significant leadership teams and used that as a word against the model of the business. I think that for me, I mentioned we had a first quarter twenty nineteen large customer deal. But if you factor through that, what you'll see is a very consistently growing business that has upward trajectory that continues to advance our employee billing, our account and our ability to do business in the world. And this, by my own measure and my own experience, a healthy, stable business by the satisfaction of the clients, the returning clients and nature of how that work takes place and our ability to virtually engage with it. If you ask me for, you know, where I would understand further work that we can do, our work has a nature of being very project oriented, in its completeness, whether we're selling software or whether we're doing work with services. We are project oriented in nature, which means that it has short durability or limited durability, and it must be removed. And in that, you see some of our business lumpiness. I think as Sandeep and Mark have endeavored to point out, we see elements of work going on inside the company today where we are building longer running business models and we believe there's more significant transactions, both in the way that we are building our industrial sector business, with the highlights that Sandeep gave around Salesforce, BSSI and health care life sciences as core industries where we emerge more as a leader than just the provider of work. We intend to capitalize on this and focus on how to ramp this up. We've executed our structural changes in terms of the management team as well as our management style and lead it through that process, as well as we have aligned process and procedures for how we will treat our segment oriented businesses, just mentioned, how we will reconstitute marketing to tell the stories of who we are and the types of things we can do for our clients. And we have doubled down and restructured our sales focus inside of these teams. And then that work, that organization and the structured sort of is carried out, and we enjoy the art of learning and teaching ourselves the new processes that are now in place. And that is the work that's in front of us. And we believe that work is the positive trajectory for Persistent as we look forward, and we're in the middle of that cycle right now. So, so those give you some of my observations, as well. And, with that, I believe we're gonna enter into question and answer period, and, I'm gonna go ahead and open up the phone for those questions to come forth. Sure. Thank you very much. We will now begin with the question and answer session. If you wish to remove yourself from the question queue, you may press and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press and 1. The first question is from the line of Manik Taneja from MK Global. Just wanted to get some sense on the services side of the business. Apologies that I've not been following the fortune of this company for for some time, but I from what I understand, the servicing business was both composition of the business that we're doing with the technology companies, the software product companies. And and over the last few years, we have focused on the enterprise side of the market. So, Sanjay, in that respect, now could you essentially help us understand from a go forward strategy where is our focus? That's number one. And the other question was for Sunil in terms of medium to longer term outlook on margins given the transition of the business side. Okay. Thank you. So I'll let him know if this is Sandeep and not Sandeep, but So on the No, that's fine. That's absolutely fine. And with respect to the strategy, look, we are persistent, have had a very rich history of doing product development and doing platform development for companies. And, you know, today, if you look at the level playing field that has been set with the direction of product development, it's very similar to modern application development and our investment in even modern application development platforms, whether it is Appian, our systems, coupled with the IT platforms and so on, our investments in SFDC, both on a CRM and the platform side. So today, those tenants are equally vibrant in the enterprise market space. And that basically opens up a huge amount of addressable market for us, where we can compete with our biggest peers, whether they are Indian origin or they are global origin. So from our perspective, we are using our, you know, as we talk about growth and solutions in the team, we are telling them to put together solutions which can be long range with the partners that we have at scale. And if you look at even the smaller acquisitions that we have done, they are basically on a scale of string of pearls where we are reinforcing our capability. We were in the strategic space. If you look at it, we have the sales cloud, we have the service cloud, the company we acquired, brings in the market cloud marketing cloud. So overall, our story is very relevant, both from the both from product and the enterprise market, which we are increasingly going to see at scale. And that's why if you look at our segmental reporting, we've also started to report the segment in terms of the FSI, health care technology side of it and emerging verticals. Hopefully, the answer is good. So we are bullish on it. Obviously, we have our work that out, but that's where our energies are going to be going forward. Sunil? Yes. On the question on margins, so this quarter, the softness that you on the EBITDA margin, which came in at 13.4. So, primarily, this was on the back of your IP revenues. As you know, both in the Acceleride portfolio as well as in the IBM portfolio, the IP revenue has got more than proportionate impact on the margin. So structurally, we are keeping a very close control on cost. While we have onboarded certain people, that utilization will come back, and we believe that if the IP revenues play out well, we will do fairly well on the margin trend. As far as H1, H2 of the party is concerned, as you know, the quarter coming is the quarter when we have the pay hikes. So obviously, you will find certain impact of the pay hikes. Typically, has an impact of about two fifty, two seventy five basis points on margin. But it is expected that some of it is received through the growth in revenue line, of course, the fact that we have certain benefit coming in from the hedges that we hold for this period, which were taken at good rates in the earlier year. So overall, if you look at the investments that we are making, the kind of approach to the market in terms of deepening client relationships, as it plays out over a period of next few quarters, we should be having, you know, that conversion happening into the margin. Thank you, sir. If I can just give you one more question. Just wanted to understand if the usual seasonality of business on the IT side is expected to continue? And would we and in terms of your strategy on IP side, do you think we'll have to once again focus on some new IP acquisitions to drive growth? Or probably it will be more by selling the existing portfolio of IPs in this case? So just address the last question first, which is our acquisitions are done as a part of strategy to grow in categories we think are rich and growth on their own. And we add capability, we add people, and we add the geography reach, through those. So our acquisitions are augment. But they're not a primary mechanism for stabilization of people or stabilization of growth. We believe that they're part of the strategy we already see emerging in the market around how to create value with our customers, both in many of our technology solution areas, such as either security or data or cloud, and virtually in the industry verticals that we invest a lot of expertise in, which would be BFSI, Healthcare Life Sciences and Industrial sector at the same time. So that is our strategy, and I suspect you'll see us continue to look for the right value, the right place that provides us extension of our current strategy and really accelerates growth that we think in the market ready to be taken. Yeah, Manish, you can I think you probably have not been in touch with us? You can reach out to us separately because we have a lot of questions from other, you know, callers. Sure. Thank you and all the best. Thank you. Thank you. The next question is from the line of Apuroprasad from HDFC Securities. Please go ahead. Thanks for taking my question. And so my question is more on the growth aspect. And you talked about focusing more on large annuity deals as well as focus on large deals. Any milestones or targets that you can talk about? How should we be tracking it for this year? Or do you expect this to play out over a more long haul? So we expect it to play out over time, without a doubt. We look at both the composition of IP led and services revenue as part of that discussion. We likewise are looking at the major industry verticals we expect those deals to come from. And you'll find in our fact sheet, for the first time, some additional information on how those verticals have been represented in the area see areas that such as DFSI continuing to uptick. So we'll use those as milestones, certainly that you'll see as well as deal composition and deals that are synergistic of IP software and services are also great things that we'll be watching as well. So that gives you an idea of how we feel about that. I think Sandeep, let's talk a little bit about large scale machines. Sure. So Abhudar, just switching from your side. So two things, when we announced the deal wins for this quarter as well, we talked of multimillion dollar multiyear deals. Both of these that we talked about in financial services, the one with the Indian bank, the one with the private equity global firminvesting firm, both of them are few five year deals and they are decent sized deals. So our journey has started. If you look at the things that I talked about, setting up an RG team, setting up a team to go after sourcing advisors, private equity firm, all these are initiatives in that direction. As we just out, you know, these are early days of these investments, these teams coming together. So we are hopeful this time, we will progress and we will progress report all these to you, and we'll also see these for three months in the quarters to come. As Mark said, I guess it's been pulling off, so that's another indicator that we watch, which is we've pivoted around our largest customer to also be selling their software. Our very interesting point is that I want to make sure it's all delighted to why we made it, which is we've engaged a sister company of our largest customer to also begin selling their software as well as the industrial sector. This positions us in the category of industrial sector as a VAR, which is different than working for work, and it's different than just being a reseller or pass through mechanism on software by itself. We brought these points up as well, as Mark mentioned, that we've been doubling the number of transactions we've been doing out of industrial sector. These are all indicators of our ability to reach the customer in a bigger value way and also position ourselves as the primary paper for the value of software that they're starting to implement, both to do the services as well as to do the software that our partners provide as well as to provide our own IP only with the drivers at the same time. And so we intend to feed this model across the company. Sure. That's helpful, Chris. And Pradeep, just another follow-up on the IBNP. So you see any opportunities coming out of especially as Red Hat is complete now, any opportunities for Persistent coming out of that transaction there? And also, was a decline in the top six to 10 accounts. So if you can explain that to me. Yeah. Mark here. Absolutely. If if I look at, you know, moving forward over the next year or so, our our largest opportunity with our biggest customer is definitely helping them with that integration of Red Hat into IBM, obviously, but also, and maybe even more importantly, is helping their clients. This is a very large market. It's it's gonna be something that perhaps could be disruptive, but at the same time, there's going to be tremendous opportunities. So outside of the push we have on the industrial sector, this is the second most important thing that we'll be doing with this. Thank you. Can you go ahead with the next question? Yes. The next question is from the line of Madhu Babu from Centrum Broking. Please go ahead. Yes, sir. Hiring has been strong over the last four quarters, though our growth has not been that much. So what is the profile of the hiring? Is it more of freshers? And so just just wanted to view on the hiring momentum, which has been strong. One more time. So then on the hiring front, so last particularly last few quarters, you would have seen that we have added fair amount of strength both on the offshore side in terms of pressure and very selective on the lateral front. We are also taking active, you can say, help us with position to invest in the internal learning and development academy that we have. Wherein now that we have a we can say focus on both technology as well as the verticals, we are training people internally so that we can reduce the dependence on that and higher. So while we may have added people, we in terms of the actual cost and, you know, actually, sounds this is not a very phenomenal number. On The US side, the hiring has been very selective to meet the gaps in terms of skills and the locations that these people are required to deliver to clients. Oh, and secondly, on the adviser led deals which we plan to target. So I understand we are strong on the, like, sales for an APM kind of implementation solution kind of. So in the adviser led deals, would it be like a end to end stack, which would which would include traditional services as well as a part of the deal? We would go selectively after the adviser led deals. And nowadays, if you look at the trends, the adviser that deals earlier used to be massive, like, 100,000,000, 200,000,000, 500,000,000, single deals, kind of encompassing all the different parts of the stock. Nowadays, what we have seen is people are looking for niche providers, the defectors, if I may call so. And we are looking at, you know, decoupling application development, which looks like feels like product development, analytics, platform development, but every company today is trying to become a platform slash, you software driven company. So we have seen enough appetite for the services that we have to offer with the sourcing of every channel to be able to go and sell them to our strength. So we'll go selectively, but we do see enough good amount of market on those fronts. Okay, sir. Thanks. Welcome for the follow-up. Thank you. The next question is from the line of Rajiv Agarwal from Doordashi Advisors. Please go ahead. Yes. Hi. Thanks for taking my question. My question firstly is in the past, company has talked about the growth rate, especially with the stack of around 15% to 20%. While in this call, we have not talked anything about the growth rate. So can we get some sense of what is it that we should be expecting in financial 'twenty and maybe if you want to look even further than that? Just give a sense of what you, your assessment of the new management team's assessment is and what you think is possible. Hi, Chris. If you look at if you look at Persistent's performance through 'nineteen into our first quarter here, we clearly have a healthy running business, and we have a healthy set of clients. We've enjoyed selling to our clients in different capabilities, separate services, separate software, and working with our largest client. We have taken a deliberate strategy to work the integration of those capabilities towards the larger deals and towards the total value discussion that we can have either in our horizontal technology areas or to, our larger vertical areas. And and we're teaming accordingly to go with that. That's that's involved some of the people you hear with me on the phone today as well as some of the structural elements that I talked to you about around what we've done with our business leadership, our marketing focus and inside of sales. With those changes cut through, we're in the quarters now of getting those changes to take hold. And, it's early to tell you what our immediate growth rate is going to be for this quarter or for the next quarter. And it is probably early to tell you what a year would look like at this point in time. We've got a good measure of our client success. We've got a good measure of our client, traction. We've got a great set of clients that continue to repeat business with us. We have a stronghold inside of our largest customer, and they're now settled down to go do work on their own, which was a distraction. And and that has us optimistic that the business is there. It also has us working hard to build patterns and structures around how we can sell and do repeat sell in these in these segments that we've described to you. So so we're doing that work, but it's early for us to give you numbers. Got it. And is the is the expectation that over the next few quarters you won't be able to, or is it where you would not be guiding forward? If there's absolutely, our expectation will be with clarity on how we're progressing. Got it. Also, we have been acquiring quite a few smallish companies around the Citrix stores, the APM and so on. So is your can you talk a little bit around the strategy around how those acquisitions has brought in our offering and how, you know, that fits in with the broader team? I mean, obviously, there is one big client, and it seems like we are putting a lot of effort around that. But then on the on the side or on the, you know, separate trajectory, we are now building up these channel partners and trying to work with some of big vendors. So just talk a little bit about how you think that strategy plays in with a big client on the other side. I think you got two questions in there. If I missed one, just please clarify with me. But I heard one question around the acquisitions, and the second question I heard was around channel partners. So first, I'll talk to the acquisitions. I'll be exemplary in my description. We just picked up, over in Germany, a company named Eperience, a Salesforce practice, a boutique, well known inside of Germany, well known by Salesforce themselves, seen as a trend setting leader of being able to work the business of the implementation of Marketing Cloud as well as to do the implementation of Marketing Cloud. This is a consultative capability that they've developed as well as the ability to technically install Marketing Cloud at the same time. So why is that interesting to us? It's interesting because it complements our acquisition of Parks, which we did a year earlier and provides us a significant hold of sales force in Germany, which is a significant growth area for sales force itself. It secondarily complements our hold in Europe, which is small, but we intend to continue to progress forward on and gives us an in country delivery capability, that's already established, and it brings us a selling team that speaks the natural language that knows how to progress inside of one of the largest economies in the world. Third, it brings us the ability to take consultative capabilities and teach the rest of our Salesforce practice that we have, which is a top 20 practice as accounted for by Salesforce, and be able to teach them how to do consultative capabilities worldwide. So teach our teams that are doing Salesforce today in Australia, in India, in The United States, how to do that at the same time. This is a great looking boutique for us because it brings so much richness to the table in terms of progressing so many of our agendas and these are the types of things that we look for when we do this. I think the second question you asked was around partnering with our channel partners and and what we see that's slightly different. When you when you move from looking at the channel partner who built software, somebody that you can find on one of our partner web pages, to asking them for work, to trying to build value around them, you you focus on category expertise where they're also trying to apply expertise. So many of the companies, Sandeep Method, for example, are applying themselves in health care or in banking or applying themselves in industrial sector, as Markov is one of them. And they want to advance their business for you to advance yours. You construct the right value solution and you gain the attributes on being willing to take you to market. You gain the attribute of them seeing you different than somebody that just does work around install. And you gain the attribute of them providing marketing and and and and list to you at the same time. This is something that I've enjoyed in my career of working with channel partners on Deepgram. I have the same experience in marketing as well. And it's part of what we've learned to the table as a management team in terms of how we would like to see the value progression take place in Persistent, which is to provide lift for our partners so they provide it back. And it's a little bit of a different focus than just doing typical time and materials from the way that we apply this pressure in the market. And so I hope to give you a picture of both of those two. I think I got you two questions. And if I missed something, let me know. Okay. Thank you very much. Thank you. Thank you. Before we take the next question, we'd like to inform participants that in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from the line of Ravi Mehta from Elara Securities. Go ahead. Hi, thank you for the opportunity. Chris, if you look at the IP revenue, it's been a little soft this quarter and that has a significant impact on the margins. And Q1 is typically a very seasonally strong quarter for IBM revenues as of Q3. So is it the IBM IP portfolio that was weak this quarter? Or was it is it an actual right? And if it is IBM, how do you see that? Is this just a one off It's got or should we expect that, you know, this is kind of where the revenues will trend from now on? We we have IT revenue in a couple of places. The the specific area that was a weak point was our Accelerate business in IP revenue. Okay. So then could we expect that in Q3, given the double seasonality for IBM should come through and we should see a bump up in revenue by then? I think the IBM business will continue to run-in its normal seasonality that we've already talked about and talked about in prior sessions. I believe the Accelerate business will continue to be one where we'll be gaining the capability with that software and combining it more with our services going forward. And we'll talk to you about that strategy as it evolves. Acceleride, to us, is selling software as a stand alone brand. And our focus as we go forward, as we talked about, is to build, I'll call it, combinational packages. And whether that's doing large, which asset associated services deals or deals that are designed around creating value in a certain industry, you'll find a supply and accelerate more to that than as a stand alone software company. And so we're expecting the growth that we project to come both from the work that Sandeep is doing and the work that Mark is doing. The next question is from the line of Rahul Jain from Golub Capital. Yes. Hi. First of all, if you could say what are the current challenges and action plans to revive the digital business revenue? And secondly, if, Chris or Mark, you could share your perspective in terms of how we could leverage a deep reach into IBM ecosystem to drive various business opportunity for Persistent going forward? Okay. If could get a clarification on the first question, what's your Persistent? So, if you look at the current digital number that we've got there, this to me has not yet, as the way we track that number emerged as as an indicator that's giving me a positive or a negative. I understand the way the number looks today, but I found the deodorant in all of the business that we're doing. And I I found that we're advancing the cloud storage or the cloud progression in the march to SaaS in nearly every facet of our business. And so I don't put a negative, into Persistent, in a digital business context or in a SaaS context. I actually see a switch from Gates as we are offering that going out across the board, whether that's in industrial sector, the banking and finance, data, the cloud, all working with partners that are wanting to advance digital business and also the prime provider of that. I'm bullish on our digital capabilities along the total digital approach that I see. In fact, I see it in nearly every sector. And I I am not disclosing this company and not paying any guidance one way or the other to that number that you may see on paper. It's just not current education of where I am, and we can talk more on that as we talk. With relationship to IBM, Mark, perhaps you want to talk about maybe two items, which is how we interact with IBM in terms of their internal business and then second, how we interact with who we want to sell to from our own perspective. Yeah. Sure, Chris. So from our kind of, I'll call it, traditional business, working directly with the IBM teams, the big opportunity is right that we talked about that before. That's gonna be something that we think we can do quite well in. And the second area, which is around more the ecosystem, if you think of the long success we've had with IBM starting with time and materials, innovative business models, we've innovated again and we're selling directly to their ecosystem in the market in kind of three or four ways. And we deal on the back of where we already have a relationship and do work for them, especially our IP arrangements around loyalty. But we have three significant elements to that. We resell their software, which gives us top line revenue growth. We have kind of top line professional services revenue on top of that. And then finally, we're developing our own IP that's very complementary in that ecosystem. So Chris likes to call that stacked revenue, where we get the product revenue from the royalty, we resell their software, we have world class professional services and very relevant IP. And this is Gary. You talked about that. It was probably the number of files for the software. That's exactly right, Chris. Hope that helps. Yes. Thank you so much. Thank you. The next question is from the line of Sandeep Agarwal from Eagle Weiss. Please go ahead. Hi. Sandeep here, and thanks to the management to give me an opportunity to ask a question. So a couple of things. One, Christopher, you are already there for last few months, and I am sure that you would have met most of the client. So what is the sales which you get when you meet the client? What is leading to, you know, we remaining little behind in the growth path compared to industry and in spite of our robust capability, number one. Number two, how long do you see this pain to continue? I'm not asking for a specific guidance on outlook, but I just want to try to understand that how much more time it will take before, you know, we return to our growth commensurate with our capability? Good question. So I've met with multiple clients. Be observational in this and then I'll be somewhat somewhat quantitative at the same time. As as I've met with the clients, having embedded this career around software and software projects, you you learned how to listen for key indicators of success, and also lack of success. I was yet to have a lack of success call with any client, nor have I yet to have one of my teams come in the room and use the CEO as the backstop to save a client deal. While it's anecdotal in its nature, it is an expectation in the software industry that you will have work that you'll have to do around key projects and clients to to make sure that they're satisfied. And, and some of those are normal business unit, as usual, well measured, corrective actions, and some of those are emergency procedures done, in the urgency of dark at night. We we are amazingly in control of our clients and our projects and the satisfaction that they have. And numerically, as I checked against that from my first visits, I found that our client base is rich and returning at a project level. And this is a key phrase to use because they're coming back to us repeatedly for the next project and the next project, and we have, along with the clients that do repeat business with us and generally, it's underregardless as their provider of help of choice. We to move to growth, going to your second question, we need to progress into understanding their total business more and building total value for them more on how we can help them. Often, we see the total scope of where they're heading. We let them go to the point of telling us which projects they then want us to employ on. Well, we could get in often and consult and advise on appropriateness of how to go all the way through a total program or a total architecture or a total initiative. And this is the category expertise that you've heard myself, Mark, and Sandeep talking about developing and applying more applicable services. So we've hired business leaders who inside of each of our traditional technology categories and our market industry categories who are now addressing those areas we think are significant areas that we should be applying domain value and going to larger segments of the client's business as well as more leadership as well as more clients. So as I mentioned, we've done the tooling for this in the past quarter. We're in what one of our colleagues will trade as the stitching change, which is now getting it to work and bringing up examples. We have examples in banking. We have examples in industrial sector. We have examples in Salesforce where we see this taking hold today. It's getting it to scale. That is the time that we're putting in. I anticipate that over the coming quarters, you will see us bringing more incremental progress, more incremental examples, and those will affect our results as we go through the next several quarters as well. The next question is from the line of Nitin Paffunathan from Investec. Please go ahead. Yeah. Hi. Thanks for taking my question. Just wanted your thoughts on the margin profile, considering that the IP revenues have actually, you know, come down quite a bit as a percentage of revenue. So compared to what it was before, I think it's down 24%. In that context, do you think that the margin profile is will sustainably be at a lower level than what it was in the past? Or do you think that there's significant room for IP revenue to grow from where it is today? Yeah. Hi, Nitin. So, you know, so far as the IP revenue stream is concerned, there are multiple nature of IP deals. So one is the deal that we do on our own products where we have initiative of these products in the accelerate pack. That has got a very significant impact on the margin because our costs are already, you know, built in there. The second element is what we sell in terms of licenses with our partners. So all the sales with business, whether it is on the IBM retailer ecosystem or with players like IBM systems and so on, there is a license cost that is involved in the purchase. So then there is a so currently, what we find in terms of the Y o Y dip in IP revenue is because of the fact that last year in the first quarter, we had a significant reseller deal. So it was of the tune of almost $67,000,000 which was one lumpy deal that we had in the last year first quarter. What actually impacts margin is the business that we do on the non retailer side where it has got disproportionate impact on the margin. So your question is right, but yes, if the overall IP revenues are less, will it impact margin significantly? The answer to that is not significantly. It will only impact to the extent that reduction is on the significant margin conversion kind of IP business. This is not significant, but yes, we have to package the whole Xperi portfolio in a better manner along with services and utilize those IPs in a little more, you can say, comprehensive deals than rather selling just the licenses on Xperi portfolio. Thank you. Thank you. Let's do let's do maybe a couple more. It's probably the question. Go ahead. The next question is from Neera Bilal from Maybank. Please go ahead. Thanks for the opportunity. A couple of questions. One is that there was a decline in the top six to 10 clients, the revenues. So any could you cite reasons for the same? And second is if we if we could reconcile the IBM piece in a sense that the as a client, IBM has increased. So non IBM has has seen a decline. So I just wanted your your thoughts on that. In first sorry. First of all, Yeah. Five to six decline. Yeah. Top six Yeah. Ask you a number there. We'll take it offline. Sure. Sure. Sure. And the the other part is in terms of Acceleride, should we now expect further decline in the Acceleride portfolio, the thing the searching that we've seen in this quarter? I I think Acceleride is How about that? Yeah. Acceleride enjoys a stable set of clients. And and and those types of and the numbers that you see are reflective of the stability of those clients. I think it's a new message and I certainly mentioned earlier. Accelerate tends to provide, and we've noticed this when we look at the patterns of when we've included it with our services. The accelerated products that included with our services team tend to provide a rich value, a more expensive value to our clients as a total package of software and services combined together than by themselves. So the current number should be representative of the clients that we have, and we anticipate maintaining that base. The future trajectory will be to enjoy Celeraire as an asset combined with their services to provide what we think is a greater value to our clients. And and that's a little bit of a pivot we're making, but it's not a projection of us today as a Accelerate member. Right. So because where I'm coming from is that the top line has increased. You've seen I ISB business revenue being flat and the I IT revenue being flat. So this would mean that Exercise has actually seen a 2 to 2 to $3,000,000 decline in revenues. So that is where I was coming from. Understood. Well, folks, I think we're at the end. I want to thank you for the quarterly call. You know how to reach us should you have questions that you want to reach out and further gain advice or input on. We remain available to you in all those forms, and thank you very much. Can reach out to Saurabh. We have a weekly note, and we will help collect the debt collect any debt that you have. With that, we're going to close the call. Alan, thank you very much for kicking us off. Sandeep and Mark, thank you for joining us. Sunil, as always, thank you for all of the financial input. And with that, we're signing off. Thank you. Sure. 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.