← Throughline · holding view Deep analysis ↗ Q4 FY25
PERSISTENT Persistent Systems Ltd · IT services Q4 FY25 · concall
Pattern: growth split between fy26

Refused to commit on growth split between fy26.

1 deflection · 2 weak · 4 clean — pushback across 3 of 7 Q&A turns

Focused evidence 3 of 7

Abhishek Pathak · deflection

Yeah, hi, am I audible? Hi, Sandeep. Congrats again on a consistent quarter. So, I had a couple of questions. Firstly, you know as you say you are still on track to hit that 2 billion dollars revenue run rate by FY27. How shall we think about the growth split between FY26 and '27 I mean in the context of the current macros should we expect a bit of short-term snags and then maybe an acceleration in '27. Or are you confident that your deal wins and your pipeline gives you probably an even split between now and let's say FY27, right, that's one. And the second question is on the healthcare deal, I understand that there could be offshoring that might come in from next quarter. Do you think this probably gives us an added benefit in terms of margins going forward and how do we model this particular event going ahead. And just a last question on the platform led revenues and SASVA. Do you think the current sort of development kind of pushes back the uptake of your platform services by let's say you know a few months and is there any way to quantify what percentage of our incremental revenues are coming from platform services and how they should let's say evolve going forward.

Abhishek, there is a bunch of questions in that, let me first address that. So, let's start with the basics, the quarter we delivered was 375.2 million. If we multiply that by 4 - we are at a run rate of 1.5 billion dollars. Now you take the growth rate on that if we were to deliver a certain growth rate over the quarters, I am not just looking at one quarter two quarters, the life we are living in right now the macroeconomic things changes on a day-to-day basis and we don't give forward looking guidance. So, it will be unfair for us to put out any number for this year versus next. All we are saying is we have eight quarters to reach the destination that we have aspirationally of 2 billion dollars and that's an aspiration, that's not a guidance but we can clearly see the path to that. Now the second part of it, the healthcare deals offshoring and so on, as I have repeatedly said over the last several quarters it is not one deal it is multiple deals, multiple parts of one customer plus multiple deals in other parts of the healthcare ecosystem. Does it give us a margin lever? Yes, it does. So if you look at it, you study our financials this quarter itself, our sub-contracting cost went up and that went up in this quarter because we basically did a vendor consolidation with a large BFSI deal win that we had announced last quarter. And that also gives us a lever. Now in terms of SASVA part of it, look SASVA is a good tool for anyone whether it is a enterprise software company or an enterprise - To look at doing the same with less and so I sincerely think if we are able to execute the way we are thinking the percolation should happen at the same pace as we would have thought and tough macro would actually give an incentive to companies whether they are PE portfolio companies having multiple products to adopt SASVA or enterprises to do that. [Follow-up on $5 billion FY31 acquisitions]: So, look, if there is an update we would clearly call it out, we may even do a call – if we do something. Now in terms of our acquisitions strategy just to remind everyone, there are 2 or 3 pivots there. First, we have very clearly said - we want to do a revenue diversification - so if we do a scaled acquisition, it may be in Europe or related areas. Second, we have said we will look at capability-led acquisitions in the US to basically further our journey in the AI space.

Dipesh Mehta · weak

Thanks for the opportunity. Just want to make sense about the macro uncertainty, whether there is some kind of delay in ramp ups, deal closure / decision making elongated as well as some cancellations. If you can give some sense in 3 months, how are we finding overall situation. You indicated some caution in the pipeline but if you can give some more detail on it and whether it could have an implication in terms of deal signing. We have seen very strong deal signing over the last few quarters, whether you expect some bearing on it because of overall condition. And second question I have is on SASVA. If you can give some sense about how SASVA contributes to the overall revenue - any quantified number or qualitative colour compared to let's say 4 quarters how SASVA is impacting overall deal pipeline, deal booking or revenue.

Okay, so lots of questions there, I will try and you know summarize it faster because we have 8 minutes on the call. So 2-3 things, in terms of the macroenvironment, when the US election results were announced there was a euphoria around the certainty being there, and people had started looking at a positive economic uptick and so on and so forth. So, the discussions had started becoming healthier and newer things were being thought about. But in the last month or six weeks the way the things have gone, there are fears in the customers' mind and they are really seeing an uncertain kind of environment and things are very kind of fluid if I may say so. Having said that, we have not seen any cancellations, let me put it straight - we have not seen any cancellations, we are seeing a certain amount of feet dragging in terms of deal closures. I do believe personally in our industry we will need more pipeline to be able to do the bookings whether it is Persistent or somebody else. And so we are at it, and we may do investments in sales and marketing and in our go-to-market accordingly. Now in terms of SASVA we have no intent of announcing SASVA revenues, etc., we are using SASVA two ways. We are using SASVA to enable deal wins at scale and implementation at scale, and a number of times when we pitch SASVA the customer may not necessarily buy SASVA but customers understand our capabilities, they may leverage our capabilities to help them build a SASVA-equivalent micro platform for their own business space or in their overall let's say data plumbing data engineering kind of a thing. To give you an example, right now if I look at the last 12 months our data practice has gone up to 56% against the company growth rate that we are seeing.

Nitin Padmanabhan · weak

So wanted your thoughts on the utilization - it is at an all-time high, how is that operationally changing for us, we have never operated at these levels. So, is there a new band that we can operate at? So that is number one. Number two, is this - wanted your thoughts on the GCC business that we have? How large is this and how has this sort of evolved since we have started.

I will try and quickly answer this, we have just two minutes left on the call. As far as the utilization is concerned we are comfortable in this band. So, there are two parts to it, one I can say with pride there are enough and more people who would love to join our company so we have come to a point where our ability to hire is not a question. Two, the market environment is such that there are only a handful of companies which are growing, so the war for talent at that footing that we need to have a big bench and so on and so forth. So, we are fairly comfortable where we area and these are things we will keep tuning in line with the macro-economic environment both from a cost and demand perspective, we will see where it goes. In terms of GCC, GCCs are a fair play for us for fairly long period of time, if you look at any of our top customers, we have co-existed, we have cooperated with there GCC and their parent, I can't quantify a percentage for you on this call, but maybe we can get back to you on this.

▸ Other Q&A (4)
Ravi Menon ·

Hi, thanks and congrats on a good quarter. So, wanted to ask you about the healthcare vertical in particular, there are concerns that providers and payers are under a lot of pressure because there are unexpected costs in Medicare customers and also lower payments from the US federal government. I know that you have literally small wallet share in these customers, but do you see this as an opportunity, or do you think there are possible headwinds in these accounts?

Thanks, Ravi. Very valid points. From our perspective if you look at it - we have continued to grow in the healthcare segment very nicely. There are puts and takes with DOGE attempts and the US AID attempts to cut costs in various departments and that is downstream also leading to certain amount of our customers getting impacted. But I am pretty sure in a bigger picture if we look at it this is going to emanate newer opportunities for us to help our customers optimize their costs and so on. So overall we are bullish on the healthcare sector and again as a company if you look at it last year healthcare grew very well and towards the last two quarters we saw the banking financial services as well as you know the tech sector come up very nicely for us. There maybe a few quarters here or there because of all these macroeconomic and DOGE and USAID impacts to our customers. But overall, both healthcare and the company should do well. [Follow-up on BFSI discretionary]: So, I think, Ravi, it has been many, many quarters we have clarified many times, you know, whether it is a good economy or a bad economy we have proven over the last several cycles - We are not dependent on discretionary spends. And if you look at it, in the last quarter when we announced a fairly large win from a financial services customer, it was a vendor consolidation among other things that we did with them. And so we are very well poised for cost optimization, vendor consolidation and the like. [Follow-up on SG&A leverage]: So, two parts to that. If you look at our margins, I will start with that. Our exit run rate is 15.6% from an EBIT perspective, our full year is at 14.7%, and our last to last year was 14.4%. If we invest in line with our revenue growth that we intend to have, growth will always be priority number one, margin improvement priority number two. But we are on a decent trajectory, at an entry run-rate of 15.6% for the year even if we were to keep it flat or tad bit lower we will still deliver a 100 basis points - aspirationally that is our goal, but we will let the market conditions and other things pan out.

Sandeep Shah ·

Yeah. Thanks for the opportunity and congrats on good execution in a difficult environment. Just wanted to understand, Sandeep, regarding one of your large accounts in the healthcare has given a profit walk just a few days back. So, did it create any uncertainty though you sounded optimistic about healthcare, may it result into some large clients' specific issue in this account. And also in terms of your view in the sector vertical-wise growth in the coming year, given the macro uncertainty being higher on. Then I have a couple of questions for Vinit.

Sure. So, at a high level if you look at it, yeah I understand what you are talking about the large customer. But our healthcare vertical obviously the large customer is there and then there are many others. And within the large customers that we have we have multiple different programs that we are engaged on. Some of these are long range programs which are spanning multiple years. So as at this point in time we don't see a reason for us to be worried on that, we are working very closely with our customers large or small in understanding how we need to help them in their challenges. Now, outside of that if you look at it, if I was to peck the order, Persistent is a sum of parts of these three industry verticals – healthcare, life sciences on one side and BFSI and tech. In my mind, BFSI and tech should lead the growth in this year followed by healthcare and lifesciences. And healthcare lifesciences has led the growth for the last six quarters so it is in fairly good shape but I do believe that BFSI and Tech should lead the growth for the coming year. [Follow-up to Vinit on intangibles and OCF]: [Vinit Teredesai]: Sandeep, in terms of intangible assets it is on two counts, one we did acquisitions during the year as a result of which there is an addition to the intangible assets. Second, as Sandeep mentioned in his opening comments we will continue to invest on SASVA our AI platform and as a result of that there are many patents that have been filed. So, there is a lot of intellectual property that also is getting developed as part and parcel of the overall organization, and as a result of that there is some increase there. The second part in terms of your OCF, operational cashflow, if you look at this quarter it has improved to 108.9% and this seems to be our range, we want to be on the 100 to 120% range. Our aspiration continues to remain that OCF should continue to be above 100% and we are working on that.

Manik Taneja ·

Thank you for the opportunity. Congratulations once again for a steady performance. This question was with regards to our healthcare vertical once again, when I look at the revenue split up by customers it appears that the top single customer has once again grown while we have seen a sharp decline in rest of the healthcare portfolio. If you could talk about that as well as the potential margin implications of some of the onetime deals that we saw in FY25 not being there, in that context what will be the levers to drive margin expansion in line with our three year strategy.

So, if you look at the healthcare vertical as we said before there are multiple factors happening there. On one side there is DOGE impact on the Department of Health Human Services and so on. The other side is that USAID funding is getting cut for various folks across the globe including the US and others, so as a part of that if you talk to many of the stakeholders in the healthcare ecosystem anyone who was doing research and was funded by the government, all that funding has vanished overnight. And similarly if you look at it that funding was used to buy software equipment, services for clinical trials, many other things from the various parts of the ecosystem. That's putting a little bit of a stress on the system and that also is putting stress on government funded healthcare plans. So, one of our customers did have a little bit of a rampdown and adjusted for that also healthcare vertical for us grew. Healthcare - we have a very decent pipeline outside of our bigger customers and any of those impacted customers by whatever I said. So, we are reasonably confident and we live in a bigger macro we will let it pan out but we are confident that the company will grow. [Vinit on margin levers]: And at the end of the day if you look at it, you know, even if healthcare doesn't grow as much as what it has grown in FY25, there are other verticals which are growing and they are growing at a pretty decent pace and they are generating enough margin. There are many levers at this point of time as I said, our utilization is high. There are pricing levers that we work on very, very diligently to improve and get incremental benefit on our revenue. So, net-net we are pretty much confident and we are pretty much on track in terms of delivering our aspirational target of improving our margins by 200-300 basis points as we hit the 2 billion dollar revenue target by FY27.

Vibhor Singhal ·

Yeah. Hi. I hope I'm audible. Thanks for the opportunity and congrats Sandeep and team for a very rock solid quarter yet again. Sandeep, my question was related to the macro and I know you have answered it in multiple parts before but if we hear the commentary of the players up till now. I think manufacturing and retail verticals are the two verticals that seem to be hit the most because of the tariff uncertainty and because of the input costs that we are looking at. Now these are the two verticals which of course we don't have much of a presence and that kind of insulates us from being impacted to a large extent. But given our target of 2 billion dollars and 5 billion dollars and our plans to maybe incubate new verticals, where are we on the plans to basically look at these verticals and how are we looking at this and how do you see them playing out. Any I mean let's say milestones that we could see on these in the next one or two years?

Okay. So, two parts to it, first the key pivot for us going to 2 billion and beyond to 5, is going into micro vertical in the existing verticals that we have. I have said it multiple times, in any economy, in any GDP if you were to dissect it, BFSI and healthcare are the largest sectors and we have a fairly good business but a small business as compared to many of our players, so we believe whether it is that or the capability that we have historically on our product engineering side gives us enough addressable market to be able to grow at a significant pace. So, that is the thing first and from an organic perspective and even tuck-in perspective we will do this. Second, if we want to go into the newer verticals whether it is manufacturing or others we may do as we go along acquisitions so that we enter it with a dominant force rather than incubate and be a weaker player in that. [Follow-up on whether 3 verticals get to $5b]: So, these verticals have enough addressable market for us to keep going for the next several years. And between now, if you look at it we are at FY25, we are talking about FY31, we have time to take decisions on adding a vertical or multiple verticals as we go along. For now, we are heads down in execution, we have rolled out a sub-vertical strategy within the company, we have hired the leadership for sub-verticals in many places and we are on that path to execute on that.

▸ Prepared remarks (5 blocks)
This year marks the 35th anniversary of Persistent Systems, a journey that we began in 1990 with a simple but ambitious vision to build a technology company from India that delivers global impact. Within that larger journey, this month we celebrate a special milestone, 15th year since our listing on the National Stock Exchange on April 6, 2010. To give you a sense of what we have collectively achieved, Rs. 1 lakh invested in Persistent shares at the time of IPO would be worth over 70 lakhs today, excluding dividends.
Coming to Q4 FY25 first, we delivered revenues of <strong>USD 375.2 million</strong>. This translates to a growth of 4.2% quarter-on-quarter and 20.7% year-on-year. In rupee terms, the growth for the quarter came in at 5.9% quarter-on-quarter and 25.2% year-on-year. In constant currency terms, this translates into a quarterly growth of 4.5% quarter-on-quarter. This quarter marks our 20th sequential quarter of revenue growth. The EBIT margin for the quarter came in at 15.6%, translating into an EBIT growth of 10.9% quarter-on-quarter and 34.9% year-on-year. The profit after tax for the quarter came in at 12.2%. Coming to the full year financial year 25: We achieved revenues of USD 1,409.1 million, giving us 18.8% year-on-year growth. The EBIT margin for FY25 came in at 14.7%, compared to 14.4% for FY24. The total contract value for Q4 came in at USD 517.5 million, with TCV of new bookings coming in at USD 329 million. The annual contract value of this TCV is USD 350.2 million. The total contract value for full financial year came in at USD 2.1 billion, while the corresponding ACV was USD 1.5 billion. This quarter, we witnessed healthy year-on-year growth among our client buckets, with our top five customer revenue growing by 35.3%, top 10 by 27.3%, top 20 by 25.1%, and top 50 by 23.3%. In terms of year-on-year growth this quarter, in USD terms, North America revenue grew 21.3%, Europe grew 30.6%, India grew 10.6% and the rest of the world grew 8.6%. Compared to the same quarter last year, healthcare, life sciences and banking financial services industry verticals grew by 33.6% and 26.6% respectively on a year-on-year basis. Our software, high-tech and emerging vertical registered a growth of 9.7% year-on-year. For the full year FY25, healthcare and life sciences vertical grew 54%, banking & financial services grew 17.8%, while software and high-tech vertical grew 3.7%. Our board of directors recommended a final dividend of Rs.
15 per share. This is in addition to the interim dividend of Rs. 20 per share that was declared in January 2025. Coming to the progress we have made on our AI roadmap across the two key pillars, AI for technology and AI for business. As previously discussed, our AI strategy is anchored around four pillars: First, coming to AI for technology. Here we are pivoting on two sides. On one hand, we are working with leading technology companies and hyperscalers in helping them engineer their platforms. Another paradigm of this AI for tech pivot includes building our GenAI-enabled platform, SASVA, to accelerate software development for technology companies as well as application development for our enterprise customers. Our second anchor is with respect to AI for business, as a part of which we are incorporating an Agentic Reasoning Layer to transform traditional backend business logic into dynamic agent-driven workflows. Our investments in Gen AI Hub and iAURA platforms are accelerating our agentic AI roadmap with our enterprise customers. The third pillar of our AI strategy is undertaking inorganic investments to enhance our capabilities. The acquisition of Starfish has given us the ability to disrupt the contact center domain. Adding on to that was our acquisition of Arrka that enables us to add important capabilities with respect to data privacy and governance. Finally, the fourth pillar is to use all our AI-related investments and capabilities to transform business models in which we engage with our customers. In terms of SASVA, we have filed 15 new patents this quarter, taking the total patent count to 35, covering innovations like backlog prioritization, LLM driven security simulations, and dynamic data pipeline orchestration.
Let me conclude my prepared remarks by saying that we will continue to strengthen our capabilities in the upcoming areas such as AI as well as in our sales channels and proactively engage with our customers while striving for top quartile growth in our sector. During the recent developments in geopolitics and macroeconomic factors around that, we see an increased level of caution in decision making from our customers and prospects. We remain committed to our goal of reaching <strong>2 billion</strong> dollars by end of FY27 and are well on that trajectory.
Q4 of FY25 revenue stood at <strong>375.2 million</strong> US dollars, registering a year-on-year growth of 20.7 percent. In rupee terms, it translates to Rupees 32,421.1 million, a growth of 25.2 percent year-on-year. Revenue for the full year FY25 was 1,409.1 million US dollars with a growth of 18.8 percent year-on-year. EBIT margin for Q4 FY25 came in at 15.6 percent, 70 basis point improvement sequentially and 110 basis point improvement year-on-year. EBIT for the full year FY25 stood at 14.7 percent as against 14.4 percent in FY24. Let me now give you a quarter-on-quarter EBIT margin walkthrough. Starting with the tailwinds this quarter, Improved utilization helped margins improve by 20 basis points. Reduction in sales, general administration cost has helped us for margins with 30 basis points. A marginally higher earn-out credit versus the previous quarter helped margin improve by 20 basis points. Finally, favorable currency moment helped margin improve by 40 basis points. Certain multi-year managed services deals which include lab setup for the customer along with procuring third-party tools and licenses have increased the component of IP revenues this quarter, some of which contributed to lower margins leading to a headwind of 40 basis points. All these headwinds and tailwinds put together resulted in a net increase of 70 basis points in our EBIT margin sequentially. Other income net of finance costs stood at 153.5 million rupees against 118.4 million last quarter. There was a foreign exchange loss of 154.3 million rupees as against a gain of 144.7 million rupees in Q3, primarily on account of rupee appreciation towards the end of the quarter. Effective tax rate for the quarter came in at 21.7% compared to 22.6% in Q3.
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