Summary of earnings call for Persistent Systems Ltd published on 29 Jul, 2025

Persistent Systems Limited
Q1 FY26
Call date · July 23, 2025

1 · Management Commentary

Key Positives

• Revenue of US$389.7 million, up 3.9% QoQ and 18.8% YoY; 21st consecutive quarter of growth.
• EBIT margin at 15.5%, with EBIT up 2.5% QoQ and 34.8% YoY; PAT margin at 12.7%, PAT up 7.4% QoQ and 38.7% YoY.
• Strong client metrics: top 5–100 customers grew 20–23% YoY; significant expansion in $1M+, $5M+, $10M+, and $20M+ client buckets.
• BFSI vertical led growth at 30.7% YoY, followed by Software/Hi-Tech (14.1%) and Healthcare/Life Sciences (12.4%).
• Robust order book: TCV at US$520.8 million, new bookings at US$337.0 million.
• Continued AI-led platform innovation, including launch of SASVA 3.0 and 55+ patents (up from 35 in Q4 FY25).
• Strong cash generation and improved RoCE (43.8%).

Key Negatives

• Sequential growth moderated to 3.3% in constant currency (vs. 4.5% average in prior quarters).
• Healthcare/Life Sciences vertical declined 2.1% QoQ due to planned onsite-to-offshore transitions and delayed ramp-ups.
• Attrition increased to 13.9% (from 11.9% YoY).
• EBIT margin declined 10bps QoQ due to delayed ramp-ups, retention of onsite resources, higher amortization, and adverse currency movement.
• Wage hikes postponed by a quarter amid macro uncertainty.

Forward Guidance

• Capex plans: Not disclosed.
• New products/segments: Continued investment in AI platforms (SASVA, iAURA, GenAI Hub); focus on Digital Trust Layer and Responsible AI.
• Expected client wins/losses: Healthy pipeline and order book; larger deals in BFSI and Hi-Tech; proactive deal sourcing in BFSI and Healthcare.
• Revenue/margin outlook: No explicit guidance; management confident of maintaining margin trajectory and achieving 200–300bps improvement by FY27; expect all three verticals to grow in FY26.
• Other strategic initiatives: Targeting US$2 billion revenue by FY27; focus on deepening verticals, especially BFSI and Europe (potential for scaled acquisition); continued investments in AI, talent, and operational efficiency.

2 · Q&A Highlights

Q 1 (Growth Trajectory & Macro): How should we interpret the slower sequential growth and what is the outlook given macro uncertainties?
A (Management):
• Growth moderated due to cautious client environment and slower decision-making; order book and pipeline remain healthy; confident of growth as macro improves, but no specific guidance provided.

Q 2 (Healthcare Vertical): What is the outlook for Healthcare/Life Sciences after the recent decline and delayed ramp-ups?
A (Management):
• No further degrowth expected; vertical should return to growth in FY26, though not at last year’s high rates; pipeline remains strong, with growth led by BFSI, then Hi-Tech, then Healthcare.

Q 3 (Margins & ESOP Costs): What is the margin outlook, especially with ESOP cost reduction and delayed wage hikes?
A (Management):
• Margin trajectory on track for 200–300bps improvement by FY27; ESOP cost reduction already realized and will remain flat for next few quarters; wage hike delayed as a prudent measure, with future compensation decisions pending.

Q 4 (Order Book & Book-to-Bill): Is the lower book-to-bill ratio a concern for near-term growth?
A (Management):
• Book-to-bill has moderated but executable order book and pipeline are healthy; confident of growth and larger deals; aim to improve TCV/ACV ratio.

Q 5 (Attrition & Wage Hike Impact): Will delayed wage hikes impact attrition or business?
A (Management):
• No direct correlation seen; attrition uptick is industry-wide, driven by GCCs and product companies; no significant challenges anticipated.

Q 6 (AI/SASVA Impact): How is SASVA influencing deal wins, revenue, and client engagement?
A (Management):
• SASVA is a key differentiator, enabling productivity gains, new opportunities, and deeper client engagement; no specific revenue disclosure, but strong traction across verticals.

Q 7 (Verticals & Client Concentration): What is driving BFSI growth and are there plans to expand into new verticals?
A (Management):
• BFSI growth driven by larger deals and AI-led transformation; focus remains on deepening existing verticals (BFSI, Hi-Tech, Healthcare); new verticals may be explored in future, especially inorganically in Europe.

Q 8 (Inorganic Growth & $2B Target): What is the organic/inorganic mix for the US$2B revenue aspiration?
A (Management):
• Targeting 19–20% CAGR to reach US$2B by FY27; plan includes tuck-in and potential scaled acquisitions (especially in Europe); focus on profitable, sustainable growth.

3 · Other Key Numbers

• Revenue: US$389.7 million (₹33,335.9 million)
• EBIT: ₹5,178.1 million (15.5% margin)
• PAT: ₹4,249.4 million (12.7% margin)
• EPS: ₹27.4 (Q1 FY26), up 36.5% YoY
• TCV: US$520.8 million; new bookings: US$337.0 million
• ACV: US$385.3 million; new bookings ACV: US$211.8 million
• RoCE (ex-cash): 43.8% (up 510bps YoY)
• Operating cash flow to PAT: 98.6%
• Cash & investments: ₹307.8 million (as of June 30, 2025)
• Billed DSO: 56 days (improved by 2 days QoQ)
• Unbilled DSO: 20 days (improved by 3 days QoQ)
• Forward contracts: US$440 million at ₹86.90/USD
• Headcount: 25,314 (up 1,821 YoY, 746 QoQ)
• Attrition (TTM): 13.9%
• Geography growth (YoY, USD): North America 17.4%, Europe 37.5%, India 18.3%, RoW -1.7%
• Client buckets (YoY):

• $75M: 4 (from 3)

• $50M: 4 (flat)

• $20M: 12 (from 10)

• $10M: 22 (from 19)

• $5M: 56 (from 41)

• $1M: 190 (from 178)

• ESG: Released 4th Sustainability EHG Report; received Climate Action Award (BCIC) and Best Employer (CII)
• Awards: Dr. Anand Deshpande—Eminent Engineer’s Award 2024; Persistent named ‘Leader’ in ISG Provider LensTM 2025 and Everest Group Talent Readiness PEAK Matrix® 2025; ‘Most Honored Company’ in 2025 Asia Executive Team Survey (Extel); ‘Next Leader’ by IiAS

All figures and statements are as disclosed in the call transcript.

Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.