Coforge Ltd
NSE:COFORGE
Earnings Call Analysis
Q3-2024 Analysis
Coforge Ltd
As the year 2024 unfolds, Coforge has managed to demonstrate a commendable performance despite the challenges faced in the third quarter. The company navigated through a tough quarter characterized by increased furloughs in the banking and insurance industries—key sectors for Coforge. A general climate of depressed demand added to the hurdles. Nonetheless, the company achieved a reputable organic Year-to-Date (YTD) growth of 14.7% in constant currency (CC) terms and a sequential growth of 1.8% CC during this period. Coforge locked in three substantial deals, bolstering its 12 months signed order book to roughly USD 1 billion. These achievements are underpinned by the company's adherence to its revenue guidance range set at the year's outset, marking it as one of the few IT firms maintaining such fiscal consistency.
Coforge continues to strengthen its position as an AI-first organization, attaining recognition as a recommended partner from Microsoft's AI Cloud Partner Program. This opens opportunities for shared client growth and dedicated funding. Sector-specific successes include enabling a leading global bank in the Banking and Financial Services (BFS) sector to transition to paper-free operations and undertaking significant legacy modernization for a Middle East commercial bank. In the insurance sector, Coforge has deployed competitive intelligence services using Gen AI technology.
The financial performance of Coforge saw a notable uplift, with profit after tax surging by 31.5% quarter-on-quarter and a 229 basis points improvement in profit margins. Reasons for this included increased gross margins due to efficiency gains, lower Employee Stock Ownership Plan (ESOP) costs, and a reduced Effective Tax Rate (ETR) due to higher profits in lower tax jurisdictions. Expectations are set for a normalized ETR of around 21% in Q4. Total cash and bank balances increased by USD 14 million to USD 57 million, with the third quarter (Q3) Operating Cash Flow (OCF) to EBITDA ratio reaching 70%, indicating a potential for a significant rise in the fourth quarter.
Despite a challenging demand environment, where global clients have not notably increased their budgets for 2024, Coforge anticipates continuing its robust growth trajectory. Supported by investments in sales, general, and administrative (SG&A) activities and capability enhancements, the company expects to sustain growth in the upcoming quarters. In Q4, an improvement in margins is projected, recovering from the impact of excessive furloughs faced in Q3. Coforge remains confident that it will close the year within the initially provided organic CC revenue guidance range, aiming at adjusted EBITDA margin levels consistent with the previous year.
Within its core verticals, Coforge anticipates Banking & Financial Services to see budget increases focused on transformation, with spending directed at software delivery agility, product innovation, and compliance. The insurance sector may see a modest rise in premiums, with heavy investment in modernization, cloud migration, and digital transformation initiatives within partnerships. The travel vertical presents a mixed outlook with spending led by airlines and airports, while lower demand is noted in logistics and hospitality. The focus here is on cost reductions, IT productization, and security, cloud, and data solutions. These insights guide Coforge's targeted growth strategies across its core business segments.
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Ladies and gentlemen, good day, and welcome to Coforge's earnings conference call for third quarter for FY '24. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to management for opening remarks. Thank you, and over to you, sir.
Thank you, Mandeep. Good evening, everybody. You will have received our Q3 FY '24 results by now. They have been filed with the stock exchanges and also available on our Investors section of the website. We have with us today our CEO, Mr. Sudhir Singh; our Chief Customer Success Officer, Mr. John Speight; and our CFO, Mr. Saurabh Goel.
We'll begin the call with opening remarks from the management team. And post that, we'll open the floor for questions. Before we begin, please note that some of the statements made in today's discussion relating to the future should be construed as forward-looking statements and may involve risks and uncertainties. Please refer to the disclaimer to this effect in Slide #2 of our Q3 results web presentation.
With that, now I hand over the call to our CEO, Mr. Sudhir Singh. Over to you, Sudhir.
Thank you, Vikas, and a very good evening, a very good morning, and a good afternoon to all of you across the world, folks. At the outset, I would like to wish your loved ones and you a very healthy, happy and successful 2024. Despite quarter 3 being a very tough quarter for the industry, Team Coforge has once again turned in a strong performance.
During the quarter under review, we faced higher than normal headwinds because of unusually high furloughs in the banking and the insurance industries. And you know these are core industries for us. We also confronted a depressed demand environment generally. Despite these challenges, I am pleased to report that at the end of quarter 3, Coforge has registered an organic YTD growth of 14.7% in CC terms. And we have locked a sequential growth of 1.8% CC during the quarter.
The firm closed 3 large deals during the quarter with our 12 months signed order book now hovering around the USD 1 billion mark. With an organic YTD CC growth rate of 14.7% at the end of this quarter in a tough year like this, we continue to remain one of the fastest organically growing IT firms. Finally, and importantly, before I delve into detailed numbers, I do wish to point out that Coforge this year is likely to be one of the very few firms that gave a clear growth guidance at the beginning of the year and shall deliver within that revenue guidance range.
Our ability to deliver on annual revenue guidance commitments in such a tough year is a testament to the tenacity of Team Coforge and in our ability to execute against plans. If anything, our performance this quarter reflects the exceptional execution capability of Team Coforge.
With that broad context, I shall now walk you through the quarterly performance and our assessment of the hour. Let's start with the quarterly revenue analysis. I'm pleased to report that during quarter 3, Coforge reported revenues of USD 282 million, registering a sequential growth of 1.8% in CC terms, 1.4% in U.S. dollar terms, and 2.1% in Indian rupee terms.
With a strong CC revenue growth of 1.8% in a seasonally weak quarter 3, a similar CC growth would suffice to meet the lower end of our annual CC revenue growth guidance. On a year-on-year basis, Q3 revenues were up by 12% in CC terms, 12% in USD terms, and 13% in INR terms. And mind you, these are organic numbers.
I shall now detail vertical-wise growth for the quarter under review. Despite very high, and I mean very high furloughs in the BFS vertical, it reported a sequential growth of 3.1% in CC terms and contributed 32.2% to the aggregate revenue mix of the organization. Reinsurance vertical was flat in CC terms, and it contributed 22% to the Q3 revenue mix. The Travel vertical grew 1% sequentially in CC terms and contributed 17.8% to the total revenue. Other emerging verticals saw a sequential growth of 2.5% in CC terms, and they contributed 28.1% to the total revenue mix.
During the quarter under review, top 5 clients contributed 22.7% to the revenues, while the top 10 contributed 34.3% to the revenues. As you know, a majority of our top 10 clients are from the banking and insurance sector, which was impacted by unusually higher furloughs during the quarter. Offshore revenue contribution continued to climb and it continues to climb and stood at 52.2% of the total revenues. Revenue from fixed price projects contributed 51% to the quarter's revenue.
And with that overall summary, I shall now move on to the margins and the operating profits discussion. During the quarter, we delivered an adjusted EBITDA of USD 50.6 million, which was INR 4,170 million. This reflects an adjusted EBITDA margin of 18% for the quarter, an expansion of 39 bps sequentially. The quarter saw unusually high furloughs, which had a higher-than-anticipated impact on margins.
SG&A as a percentage of our aggregate revenue is a space that we continue to invest, and it stood at 15.1% and saw an increase of 20 bps quarter-on-quarter. We continue to invest strongly in our sales and marketing capabilities to ensure continued and robust growth in the years ahead. We are investing very, very heavily in newer verticals and newer sub-geos like California and New York as stand-alone market regions, and in scaling up newer verticals beyond the banking, insurance, travel and public sectors, verticals that we have. The focus now of these investments continues to be on health care, retail and CMT verticals. Investments on scaling up the alliances, advisory and channels continues unabated. We expect SG&A moving forward to continue to stay in the 15% range on an ongoing basis.
Reported EBITDA margin stood at 17.3%, saw an expansion of 201 bps quarter-on-quarter. Reported margins have also expanded on account of ESOP costs getting normalized during the quarter. Consolidated PAT for Q3 stood at INR 2,380 million, and that was up quarter-on-quarter by 31.5%.
Moving on to order intake. We recorded an order intake of USD 354 million during the quarter under review. This is the eighth consecutive quarter where the firm has reported an order intake of more than USD 300 million. In terms of geographic regions, Americas contributed USD 110 million; EMEA, USD 172 million; and the rest of the world, USD 72 million to the Q3 quarter intake. While the macros and the IT spend environment continues to remain challenging, we signed 3 large deals, taking the number of large deals signed to 8 in the first 3 quarters of this fiscal. Our executable order book, which reflects the total value of locked orders over the next 12 months, now stands at USD 974 million, and is up 15.8% on a Y-o-Y basis. The firm also signed 7 new logos during the quarter.
Moving on to people metrics now. At the end of quarter 3, headcount stood at 24,607, and saw a marginal decline of 31 sequentially. We have added almost 1,400 employees until now in this fiscal. Utilization, including trainees, during the quarter stood at 79.4% compared to 80% in the last quarter. The last 12 months IT services attrition during the quarter now stands at 12.1%.
With that preamble, with those opening comments, I shall now request John Speight, Customer Success Officer, Coforge, to walk us through capability and delivery highlights. John, take it away.
Thank you, Sudhir. We continue to embrace our position as an AI-first organization. We recently cleared a [indiscernible] Microsoft AI Cloud Partner Program audit, which has positioned us as a recommended partner for shared clients and unlocked dedicated growth funding for us. I will now share a few examples of delivery execution in our key verticals. In BFS, we enabled a leading global bank to go green as part of their initiative to become paper-free in their retail banking operations.
We've also started successfully delivering AI-based solutions to our BFS clients. A good example being a global banking product organization, where Coforge is now a strategic partner in their AI acceleration hub program. For a leading Middle East commercial bank, we have executed a major legacy modernization transformation, encompassing their HR and financial processes. We're driving workflow processing efficiency and improving user experience. For a Tier 1 Australian bank, we are partnering on their strategic programs to reimagine and transform their financial crime, fraud, lending, corporate and institutional banking business processes.
Moving on to insurance. We recently built and deployed a Gen AI-based service for a major supplemental insurance provider to supply competitive intelligence for product and policy features, comparisons across client segments. We also added a major brokerage firm as a new logo, one of the world's largest managing engines. In Travel & Transport, we secured an enterprise testing contract with a globally recognized cruise liner firm. We executed a UI modernization program for a leading Middle East airport, enhancing customer experience across their websites. We've also created a new nearshore engineering capability for a prominent U.S. airline. In public sector, a growing business for Coforge, we secured a USD 27 million TCV deal to implement a unified data hub, providing a golden source of data to enable monitoring and provisioning of state welfare benefits assistance. In Europe, we collaborated with a major talent advisory customer to develop their career support system. Using Quasar, our AI platform, we have integrated over 20 LLMs across cloud platforms to help streamline processes and improve client reach.
I'll close with a couple of notable mentions. HFS positions us as an enterprise innovator in low-code services 2023, with a special designation of trailblazer, while IDC recognized Coforge as a major player in that 2023 worldwide managed public cloud services reports.
With that, I'll pass over to our CFO, Saurabh Goel, for further details on financials.
Thank you, John. Let me now provide some more detail on the financial statements. So profit after tax for quarter 3 witnessed a substantial increase of 31.5% quarter-on-quarter, reflecting 229 bps improvement in profit margin. So this was on account of 3 reasons: one, improvement efficiency resulting in increase in gross margin by 60 bps in a very tough quarter, which was impacted by very high furloughs. Number two, lower ESOP cost as compared to quarter 2. And number three, lower ETR of 17.5% on account of higher profits that got realized in the current quarter in the lower tax jurisdiction, although we expect the quarter 4 ETR to be normalized at levels of 21-odd percent.
As of quarter ended 31st December 2023, our total cash and bank balances stood at USD 57 million as compared to USD 43 million in the previous quarter, reflecting an increase of USD 14 million in the bank balances. Q3 OCF to EBITDA jumped to 70% or USD 33.5 million as compared to 50% in quarter 2. We expect to deliver 65% to 70% of OCF to EBITDA for the year, which also means that there is a significant ramp expected in Q4 and which is in line with the past trend of the organization. The debtors at the end of quarter stood at 63 days of sales outstanding compared to 64 days in Q2 of FY '24. CapEx during the quarter stood at USD 6.7 million.
With that, I will hand over the call back to Sudhir for his comments on the outlook.
Thanks a lot, Saurabh. As we look back at where we are at the end of the first 9 months of the current fiscal, we feel very satisfying. And we've ended the first 9 months of the current fiscal with an organic CC revenue growth of 14.7% Y-o-Y in a very difficult year.
We expect continued revenue growth in Q4 and a very sharp margin improvement as well during Q4. The margin improvement shall be on the back of the new business ramp-ups that we've called out recently and equally importantly from the reversal of the significant furloughs that we have seen. We gave, and I said this at the beginning of the call, we gave a very explicit annual organic CC revenue guidance range right at the beginning of the year, and we remain confident that we shall deliver within that band. That should make us one of the very few firms that have been able to deliver upon the yearly guidance commitment made at the beginning of the year. We also expect, given the very sharp uptick in Q4 margins, to be around the adjusted EBITDA margin range of last year.
With that, ladies and gentlemen, I conclude my prepared remarks, and I look forward to hearing your comments and addressing your questions along with my team. Thank you.
[Operator Instructions] The first question is from Sulabh Govila.
My first question is around the opening remarks that you made with respect to some of the additional environment issues, which we mentioned that it was depressed additionally in the December quarter. So just wanted to understand what has additionally come in? And if you could provide some context around which areas and which verticals and when would you expect this to reverse? Or would it be a headwind in the coming quarters? And the furloughs that you mentioned, are they reversing completely in the coming quarter?
Thank you, Sulabh. Let me answer the questions in a reverse order. Let me take furloughs. That's going to be a shorter answer, and then let me take up environment, which is likely to be a longer answer. Furloughs have stopped in our context, at least in the context of our clients. We have lost close to 40 to 50 bps by our estimate in Q3 margins because of higher-than-anticipated furloughs. We expect to recoup all of it back in quarter 4. That's answer 1 to question 2. Answer 2 to question 1, I think, is going to be slightly more involved. Your question was around how does the environment look? The demand environment continues to be tough. Clients have finished their budgeting cycle for calendar year '24. We finished our global sales workshop, a 5-day meeting in Princeton between Jan 8th to 12th. Everything that we picked up about budgets from clients globally does not reflect any significant uptick in budgets in CY '24 over CY '23.
Having said that, that's the broad macro environment, we have been investing very, very significantly on the SG&A side. We talked about the investments even in quarter 3. Given the SG&A increase, given the capability build, given the brand salience now, given the growth momentum, we feel confident that we can continue to eke out robust sustained growth next year and in the quarters to come because of where we stand.
More specifically, to your immediate question around how do things look across the 3 core verticals that we have. Banking & Financial Services, the tightening of expenses, mainly around run the bank continues. There's no change that's happened there. Some of the recent studies I talked about, IT budgets in banking go up by around 4% to 5%. The budgets increasingly are focused on the transformation space, and we believe we are well placed to capitalize on this. The top 3 drivers within BFSI, as we see in terms of budget spends going in, are going to be agility in software delivery, it's going to be new product proposition or innovation, and it's going to be compliance and regulatory. So those 3 areas we continue to focus on. Insurance is a little more nuanced. Most estimates around global insurance premiums have talked about them going up by about 2.2% annually, but it's spread over. U.S. maybe going up 2.2%. U.S. is expected to be flat. Asia Pacific, ANZ, et cetera, are expected to grow up by about 6%. And the focus there continues to be -- the spend continues to focus on legacy modernization across insurance, cloud migration, digital transformation, and also supplier consolidation. What we are doing there is we are continuing to invest in our core platform partnership capabilities with Duck Creek, with ONEPRO, with Origami Risk, and with OneShield. That's where we expect growth to come.
And finally, the third core vertical for us is travel. The demand in travel across the industry is mixed. Airlines, airports are leading the spend when it comes to travel and the kind of spends that are being seen right now. What we are seeing is relatively lower demand across logistics and hospitality. Within these sectors, these 4 subsectors, demand is driven by cost takeout initiatives, it's driven by IT productization, and it's driven by focus around security, cloud and data solutions. There is -- and this is important to note, we are seeing new interest sourcing activity from some of the travel mid-caps for global captive centers. And within the aviation sector, there are newer initiatives around one order and around digital retailing, which, again are areas that we're focused on. So that, Sulabh, was the answer to question 1 that you posed.
My second question is on the margin outlook for Q4. If I understand, your Q4 margin was close to 19.5% last year -- 19.6%. And if I take that as the exit margin, then our full year margin would be close to 17.8% on an adjusted EBITDA basis, which is 50 basis points lower than last year versus our initial expectation of a flattish year. So is that the correct understanding that we have for now?
Well, the intent is not just to replicate what we did last year Q4, because last year Q4, we were not coming up by, if we can call it, tailwinds, the margin loss that we had in quarter 3. But why don't I step away, Saurabh, would you like to answer that?
Yes. Thank you, Sudhir. So Sulabh, we are looking at, at least around 150 to 200 bps margin improvement. So as Sudhir pointed out, there was a 50 bps impact of furloughs in the current quarter. Not only that, the same accounts, we were ramping up and ramping up people for the demand that was there for Q4. So that put together, along with the furloughs that were there in the current quarter, we expect the margins to significantly go up from the current quarter and also higher than the levels of what we delivered last year. So if you go even 2 years before, so our exit rate that time was more than 20%. So over the last 2, 3 years, our exit rate has been an average of 20% in Q4. So it was 20.4% in FY '22. FY '23, it was 19.6%. I think we target to land somewhere between that.
The next questions is from Vibhor Singhal.
Congrats on a great solid performance yet again in a difficult quarter. So Sudhir, just wanted to pick your brain on the BFS vertical. I think that is 1 vertical which has been the most talked about. One of the larger peers mentioned in their commentary that they're seeing it bottoming out. Then we've had some weakness, not just for us, but for many of the players also because of the higher furloughs. Now as you said that of course furloughs are going to -- you expect furloughs to reverse in the next quarter, but from an overall demand perspective, are you seeing any kind of, let's say, conversations -- as you mentioned, there are no changes in budgets, but any kind of things coming back into the sector or, by your experience, when do you think we could see some green shoots in the banking segment down the year on this line.
Vibhor, thanks for the question. There are green shoots in the context of going for growth in the driving agility in software delivery, the new product proposition, innovation, whatever we call it, and in the compliance and regulatory requirement space. Overall, macros are depressed, but these 3 subsegments within the BFS space continue to see increase in spends. Banks, you and I both know this, do their budgets normally around the October to November time frame. Budgets for now seem to be locked and loaded. Aggregate budgets have not increased. We suspect that if there is going to be a reversal in that situation, it will take another 4 to 6 months. Somewhere around the middle of the year we'll know if in the second half there is more money to be released into tech projects. But for now, aggregate spends seem to be flattish. Agility in software delivery, innovation, compliance and reg seem to be spaces where money is getting prioritized.
Got it. As you mentioned that maybe 4 to 6 months down the line maybe you might see some pickup, but does it ever happen like that? I mean, at the beginning of the year, the budgets have been frozen and locked in, but if the situation improves, the client maybe enhances the spend or picks it up by a couple of percentage points or whatever the number is. Does it actually ever happen? Or is it like because the current scenario is such depressed that you are expecting that?
No, I'm not expecting it. It very rarely happens. And as we finished our planning for next year in Princeton in the week of January 8th, we had 268 of our leaders and we spent 5 working days just working numbers up, account by account, prospect by prospect. We are not baking in any improvement into our next year plans from where things are. I've always said this, it's always an outlier. Unless things change drastically, the macros we're looking at are the macros that we should be baking into our planning and we have baked into our plan.
I just have a second question for Saurabh, if I may. Saurabh, we've had good cash generation in this quarter and our cash balances also look to be quite robust. Any plans on reducing the debt that we have on the balance sheet that we had taken up, or maybe refinancing it in some manner to reduce interest cost?
Yes. So Vibhor, there is nonconvertible bonds which are there in the balance sheet of USD 41 million. And this is an offshore debt -- rupee debt and the average cost of the debt is 9.9 percentage points. It's an offshore debt. So we are looking at -- we will pay that off from the cash accruals. And in case, if needed, we will take a working capital, which will come at 300 bps lower than that -- 350 bps lower than that cost. So I think we are looking at restructuring the loan in quarter 1 of next financial year. So the payment is expected in April 2024.
So that should bring down our interest cost by almost...
The interest cost will come down and the working capital optimization anyways is happening. So we will have a significant cash OCF coming in, in quarter 4. So I think interest rates over next quarter, one, because of the structural changes that we're trying to do in the overall debt profile of the firm. Second, the better cash management will lead to lower interest costs next financial year.
The next question is from Dipesh Mehta.
A couple of questions. First, just want to get some clarity about the ESOP plan. I think ESOP 2005, again, we have raised some ceiling. So any implication on likely ESOP cost?
Second question is about earlier, let's say, during the year, we always used to maintain FY '25 likely to be better than '24 with anticipation of some recovery in demand. Considering where we are today, do you think it holds true? Or you think some recovery needs to play out for us to see that outcome?
And last question is about capital allocation. Now if I look, we have hardly any cash on balance sheet. And if next 2, 3 years, we intend to have some M&A also part of growth strategy, so if you want to tweak some of the capital allocation policy?
Dipesh, why don't I request Saurabh to take question #1 around ESOP and #3 around capital allocation. And after that, John and I will address FY '25 versus FY '24. Saurabh, all yours.
So Dipesh, currently, the ESOP plan, which was created 5 years ago, that's all exhausted. And there are very -- I mean, no material stocks left in the pool right now. So Board has now approved 3% of the pool to be created, which we will come for the shareholders' approval as part of the postal ballot. And after that, the grants will be given. It's for basically the leadership team for over 5 to 7 years. So that is where we are on the ESOP cost. Otherwise, without that, the cost will remain at where we are at the current levels. So once the new ESOP pool is created, grants are being issued, only then we'll be able to determine what the cost will be. So we'll come back on that once we are there. Number two, on capital allocation, at least the current intent is that we will continue to pay dividends and we discussed that within our Board today. But with a formal plan for next financial year, we will come back end of quarter 4, but as of now, the plan is to continue to pay dividends at the current levels that we've been paying.
Thank you, Saurabh. John, would you like to comment on FY '25 outlook versus FY '24 by what we saw? John, I can't hear you.
Sorry. On FY '25, I mean, my view is that there will be continued headwinds with all the macro dynamics going on. But I think, as you've mentioned, Sudhir, a number of times, areas that we're focused on actually do hedge us to a certain extent against some of those. We are in those areas where banks, for example, are investing. The regulatory space, and there's an awful lot of regulatory change coming on downstream in the next 12 months, for example, consumer protection in the U.S. as a good example, T+1, the payment transformations, all of those areas which we're heavily invested in. Other areas, obviously, you can't have a conversation without talking about Generative AI, and again, that is an area that we've consciously decided to invest heavily in, and we've seen an awful lot of pickup on what we're doing there, which we see driving a lot of our growth.
Yes. And the only piece that I'll add beyond the detailed color that John added, Dipesh, is growth will have to be clawed out next year like it had to be this year. And those headwinds are real. And I don't see them -- at least we don't see them abating anytime soon.
The next question is from Girish Pai from Nirmal Bang.
Sudhir, just wanted some comments on what you said in the analyst meet in July of last year. You talked about a competitive situation where there was a lot of price-based tussle going on between various players. Has the competitive situation improved, or worsened, or it still remains the same?
I don't know how to classify improved or worsened. All I can tell you, it's highly competitive out there. Everyone is trying to -- and I used that word consciously in the last answer, everyone is trying to claw growth out. This year, we've had to -- when I talk about a 14.7% year-to-date growth, organic growth that we've delivered so far at the end of the first 3 quarters cumulative, it's literally growth that has had to be clawed out from competition. And as you can imagine, in that context, pricing pressure tends to be acute. Pricing pressure is not easy. It continues to be really competitive out there. So nothing has changed over the last 5 quarters. We've seen the same scenario play out in terms of both demand, and because demand is depressed, pricing pressure has been high. It's happened over the last 5 quarters. I suspect next 2 to 4 quarters, it will likely continue.
The other comment that you made in that analyst meet was around Generative AI, where you kind of hinted at potential deflationary pressures coming from there. Do you see that kind of panning out in the immediate term? Or you think it's going to be like somewhere down the pipe?
No, we're not really seeing Generative AI bringing in deflationary pressures at all. I mean, if I were to look at what we've been doing, and if I just look at the last 6 months, forget a longer time horizon, last 6 months, we've engaged with 60 customers. And for a firm our size, it's material. We've undertaken somewhere around 22 or 23 pilots, workshops, assessments, consulting, live revenue-generating engagements now. To the point that John was making, there's been a clear step up that has happened.
So we're not seeing deflationary pressures at all. What we are seeing is, especially in financial services, which is our sweet spot, active revenue-generating small projects kicking off over the last few quarters. If I were to give you examples around this, there's a very large bank in the U.S. We did a very successful pilot with them where we used a GenAI based product, it's called [ Queria ], and because of that pilot, it's now part of their enterprise workflow. And what that in turn has allowed us to do is it's propelled us to join their customer acceleration hub.
So in many ways, what GenAI is doing is it's not just the net new services revenue that is coming in, it's also the integration into existing revenue streams that is helping us drive growth. We've done something very similar for a U.S.-based investment management organization, where we actually work with them on GenAI in 10 different use cases collaboratively. Correct? And we've been leading the entire analysis recommendation. Now the work that follows may not necessarily be GenAI only, but there is going to be downstream revenue that will keep coming in.
We've done something very -- I mean, just building on that, something fairly similar for another bank will be come up with a very novel situation for check fraud detection using GenAI. And that, again, is positioning us well for downstream revenues, not just from the GenAI service line, but from cross service line.
So short answer to your question is no, we have not seen a deflationary impact. We do see a revenue creation exercise here. John did talk about the fact that we've invested, for a firm our size, very, very heavily. When we finished the Princeton meet, 40% of the incremental investments next year will be in AI. And I said that from the stage with 268 of our leaders there. I think -- and I just build on what John said, the work that we've been in creating our own platform, Coforge Quasar, the work that we've done in terms of creating the GenAI accelerator, the Document AI, the MLOps, the Predict Graph, the Speech AI, the Vision AI, and so on and so forth. The 120-plus jump-starter use cases we've created has just proven to us that, a, in the short term, this is not deflationary, and b, in the medium term, this can be a significant credibility booster and also potentially downstream revenue enhancer.
And if I may squeeze the last question, and this is regarding leakage in your TCV numbers. Are you seeing any leakage, and if there is one, is that higher compared to, say, what you saw 12 months back?
No. This is the one thing that I think we do well, Girish, is execute. And if there's one thing that we've tried ourselves on as a team, it is execution. Once we bite into a project, once we land at a client side, the one thing that always sets us apart, and John can talk about it because he has led global delivery, is our ability to deliver on our commitments, is the nature of the resources and the employees and the SMEs and the architectural land. And so we do not see that leakage. You can look at our order executable numbers over the last 4 quarters, and you will, I suspect, not see that leakage. But John, do you want to build on that?
Yes. That's a good segue. Execution, execution, execution. And I'll give a couple of examples in this last quarter. We had one program where there was a large cloud migration going on in a major airline. 18 months, this program had been going on, not delivered. We stepped in, 8 weeks, done. Another case, which, again, shows the commitment of our teams, our problem. Our team stepped in, even though we weren't contractually obliged to, but as a partner we did. And the teams worked nonstop 96 hours to resolve the problems and turned around, saving the customer a major fallback in vacation. And I think that is key to us, key to our delivery.
The next question is from Sandeep Shah from Equirus.
First question is, looking at the demand commentary, it's slightly mixed across verticals. So is it fair to assume -- with the headwinds which we are still witnessing in the macro versus some of your consulting peers are actually talking about discretionary spend revival, which could happen in the BFS as a vertical, is it fair to assume, in a worst-case scenario also, what we achieved in a constant currency growth in FY '24 can actually replicate that in FY '25? Why I'm asking, Sudhir, is at the end of last calendar year, the 12-month executable order book has grown at 20%, versus this time at the end of the calendar year, it is growing at 16%.
Correct. So what we'll do Sandeep is we give our guidance at the end of the year, and we've done that over the last 3 years. We'll talk about guidance after factoring in everything that we see, with hopefully demand settling down a little bit more by the time we have a conversation end of April. At this point in time, I can just tell you what we've always said. We believe that the #1, #2 and #3 objectives of Coforge are driving growth as a commercial enterprise. And that is an idea to which we have vetted very, very strongly.
We shall use -- leverage the execution that John talked about to continue in the years, not just the quarter or the next year, to drive robust growth, sustained growth and profitable growth. I will, along with John and Saurabh, try to give you -- hopefully try to give you a broader range next quarter when we give our annual guidance for next year.
Okay. Okay. And the second question is in terms of margins. I agree there has been a good pickup in terms of the gross margins. But the kind of utilization increase, the kind of offshore increase, is it fair to assume FY '25 could see slightly higher tailwinds in terms of average resource cost as well as some amount of SG&A leverage versus the investment which we are doing in S&M?
Absolutely. I think the one thing we're very clear on, and we can say it's straight off the bat without waiting for next quarter end is next year, margins will clearly be higher. They'll be higher because what we start off next year is offshore revenue as a base -- offshore revenue percentage as a base would have gone up. We've already hit the 15% mark around SG&A, which is where we said we wanted to be at and then stop further investments as a percentage of revenue. And there are clearly tailwinds around what we internally call the average resource costs. So next year, margins will be higher, no question about it.
Okay. Okay. And just the last bookkeeping observation. One suggestion, please don't stop giving a separate line item on cost of revenue as well as the ESOP cost, because we guide on an adjusted EBITDA margin.
Point taken. Thank you, Sandeep.
[Operator Instructions] The next question is from Shradha Agrawal from AMSEC.
Congrats on a good quarter. A couple of questions. First is on the 3 large deal wins that we've spoken about. Can you quantify, is it more of renewables? Or is there some new deal component involved in it? And if yes, what could be the quantum of new deal sign? And what verticals are they spread across?
Sure. Let me take both questions, Shradha. Out of the 3 deals, 1 is 100% NN, net new. The second one is essentially EN, but most of it is new revenue, incremental revenue. The third one was an interesting one where we had a certain amount of real estate at an insurance client and we were able to push out the second largest player. So half of that is new for us. Just summarizing, one is clearly just new business; the second one, again, is largely new business; and the third one, half of it is new business. Verticals for these 3 would be insurance. banking, and public sector in U.K.
Got it. Got it. And in terms of our performance geography wise, it seems that the furlough impact in Europe this time around was not as significant as what we saw in the U.S. So if that was the case, and if at all, in general, how are the growth dynamics between the 2 geographies?
Furloughs were, as always, very client specific. So I won't generalize our experience across what's happened in the broader industry across the 2 continents. At this point in time, we are equally -- I would say, as we finished the first cut of our planning in the week of Jan 8th, I haven't seen our teams come up with materially different numbers across the 2 continents. So they've come up with growth numbers and those growth numbers are not very different from each other right now.
All right. That's helpful. And Saurabh, just one question. Would it be possible for you to give the breakup of other income?
I will not have that handy, but I'll share that separately.
The next question is from Ravi Menon from Macquarie.
So you talked about how BFS continues to be having a difficult time, but the last 4 quarters, you delivered good growth in BFS. So could you give us some idea about what sort of programs are you seeing? And what's the pipeline looking like over there?
Pipeline from our vantage continues to be good, Ravi. 1 of the 3 deals that we signed was from the banking space. We continue to see spends. And I think I spoke about this earlier as well in the innovation space. We're seeing a lot of interest around introducing agility in software delivery in banking, which is somewhat new for this sector. And we continue to see, 1 of the 3 deals we signed, the 1 from banking actually came from the compliance and regulatory space with one of the central banks in Europe.
So innovation speed, agility in software delivery, and compliance reg. Those are the 3 spaces where we are finding happy hunting downs from our vantage point.
And it looks like Europe done really well this quarter. And I think even year-on-year, Europe was up a lot better than the U.S. So again, any color on the verticals, what's really contributed to growth there and can this sustain?
Yes. Europe for us is essentially a banking and a travel play. The travel vertical for us globally on the Europe side has done significantly better than it has across the states. Banking has been slightly better than it's been in space. So that's how I would call out the things that have worked for us.
Europe also for us has been a very happy hunting ground in the public sector space, and that continues to be a growth driver, and we are not present in that vertical in North America. So if I were to contrast our 4 key verticals, that's how 3 out of the 4 have played out.
And on utilization, how much headroom do you think you have to improve that?
Best case, maybe another 150 bps, because the way we calculate utilization is we also count our trainees into our calculation. So we think we're not going above 81% anytime soon, we're at about 79.4%. So maybe 150 bps, 160 bps.
The next question is from Abhishek Kumar.
This is Abhishek from JM Financial. Sudhir, as you rightly mentioned, the story of Coforge has been to eke out growth in a challenging environment. But when I look at the performance across verticals, even if I look at the 9 months of this year, it seems to be, again, driven predominantly by BFS. While I think at the beginning of the year, you had said that probably most of the verticals will grow in a narrow range.
So just wanted to understand, has the demand in other verticals kind of surprised us negatively, or we have not been able to eke out the growth in other verticals as well as we have been able to do in BFS. Any color. And the question really is because if this trend continues, does it become a headwind next year?
Let me start off by saying -- let me just step in there. In our defense, we haven't eked out growth, we've clawed it out, and it's been tough, but it's been far better than eking it out. And answering your immediate question, Abhishek, see, if you look at our growth, banking, you're right, year-to-date, at the end of quarter 3 is growing 15.5%. But insurance also is doing extremely well, year-to-date at the end of the third quarter, CC terms, insurance is growing 11.5%.
To that extent, in the environment that we have today, both banking and insurance are doing well. Travel is growing 3%, and that's largely because of issues that we've seen with some of our largest travel clients, most of whom are based in North America. I would suspect that travel, especially airlines, the softening that we saw -- clear softening that we saw in the travel tech and the airline space in North America has bottomed out. Travel should only be rebounding back. So hard numbers show banking having grown YTD. Cumulatively, the first 3 quarters, 15.5%; insurance, 11.5%; and travel 3%. Travel, we would expect to start amping up here on.
The next question is from Kawaljeet Saluja from Kotak.
Sudhir, congratulations on, once again, a robust quarter. A couple of housekeeping questions, and then a question for you, Sudhir. But for you, Saurabh, a couple of questions are, like first is that have you locked in on the type of instruments or ESOP that you want to give out, because, look, I mean, the approval that you're taking is 3%, which seems to be large-ish. So are you going for an RSU structure or more of ESOP structure, which is at discount to the market price?
So Kawaljeet, it's not locked in right now. I think before we come for the postal ballot, I think we will have a response to that.
Okay. But if you had to basically have a preference between the two, ESOP versus RSU, what would you prefer?
So it will be a mix of both this time. So last time it was more of heavily discounted ESOPs. This time it will be a mix of both. But whatever it will be, once it is finalized, we will come back to shareholders with the proper explanation as part of the postal ballot.
Okay. The other question is for Sudhir. Sudhir, I just saw a couple of changes at the Board level. Is the Board refresh complete post the change in -- post the exit of Baring or that's something which will materialize completely at a later date? And second is that if there are going to be additions, right, what's the type of additions you would love to see? Yes. Of course, it is for the Board, but nonetheless, I understand that.
So the immediate Board size that we will be going forward with will be a Board constituted of 6 members. At this point in time, we have line of sight to all 6. Yesterday, we announced Mr. Anil Chanana has joined in as the Audit Committee Chair, who shall take over from Mr. Ashwini Puri, who retires after his second term with the firm on March 31. Mr. Chanana is already on the Board. He attended the Board meeting today. And once Mr. Puri steps down, he will take over as the Audit Committee Chair.
Mr. Pradhan, as everyone knows, will be stepping down after his second term at the end of June. Mr. Pradhan and the NRC have been working very closely together, and we have a clear line of sight to an identified candidate, who is going to be stepping in as the Chair after Mr. Pradhan steps down. He will, of course, be onboarded before Mr. Pradhan steps down.
And the third nonexec director that we need, again, we've identified the gentleman. He's based in the United States, and he is, in all probability, going to join us over the next 3 weeks. So the immediate plan was to have a Board with 6 members and everyone has been identified, and we should be good to be in that configuration over the next 2 months.
Okay. Fantastic. The third question, again, for you, Sudhir, is that when I look at the composition of our revenue mix, of course, you always have a different mix, courtesy the strength in Europe, but when I look at the growth in ROW, that's been quite remarkable. Just wanted to get a little bit more, what I would say, insight into the type of programs that you are winning in the ROW world. This question is more in the context of the fact that for the industry, ROW has never been a very happy hunting ground there, so...
Yes. So for us, ROW has, compared to other firms, been a happy hunting ground because travel for us has always been a very strong vertical all the way from the Middle East, all the way down to Australia, New Zealand. APAC, ASEAN, let me call it ASEAN and ANZ have also done extremely well for us on the banking side. And especially given our partnership with Duck Creek, we found Australia to be a very happy hunting ground for insurance as well increasingly. So our growth is coming, a, from insurance, largely off the back of our partnerships with the platform players. It's coming in banking largely on the back of our DPA capabilities and also from the fact that a lot of the European banks have very strong interconnects with ASEAN and ANZ banks. And of course, travel has always been a strong space for us in that area. So that's how ROW is playing out. We have taken increasingly a very strong geo sales-based approach to how we operate. Verticals continue to be prime, but we're also trying to set up geo-based pods. And the establishment of these pods across the world, including what we call Middle East, India, ASEAN and ANZ is working well for us.
The next question is from Manik Taneja from Axis Capital.
Once again, congratulations for the steady execution. Sudhir while you've already answered a few questions around the outlook, let me try my luck once again. So given the macro backdrop, given the exit arithmetics this year heading into FY '25 and both looking at you executable order book, how should one be thinking about FY '25 growth compared to FY '24, any initial remarks on that front? That's question #1.
The second question was for Saurabh with regards to our segmental margins. While you've provided some outlook around the Asia Pacific business mix, but when I look at your segmental margins, both India and Asia Pac essentially are a drag on margins. If you could talk about what's ailing that and how should we be thinking about the trajectory going forward?
Right. Let me take #1. Why don't you take #2, Saurabh? Outlook, you are clearly a betting man, Manik, and I am a very mulish man. Let me just repeat what I said. I think we'll wait till the end of next quarter. And then we will endeavor to provide the best possible guidance that we can for FY '25. And I'm sure, Saurabh, you want to pick up question #2.
So ROW, Manik, continues to be a drag. It is lower than what we call is Americas and EMEA region. And it's coming because of 2 reasons. Number one, there is significant investments that have gone in building the geography, because we have ramped up the sales team in Australia. It used to be a geography which was operating with 1 or 2 resources. And over the last 1 year or so, we have hired 9 to 10 people there. And with Australia Head and along with him, we have now a full sales team ramped up across insurance, across travel, across BFS, and focusing on newer sectors as well.
So it's largely coming in from the point that these are ASEAN, Australia and Middle East, these are 3 regions wherein we are investing and these are identified as growth levers. So that is why you're looking at lower margins there. So initial investment phase, and the margins will not be as good as the Americas or Europe, but you will see margins uptick happening over the next 6 months or so.
The next question is from Sudheer from Kotak Mutual Fund.
Congrats on yet another good quarter. On the budget comments that you said, you are saying budgets in CY '24 maybe flattish versus CY '23. But in CY '23, the complete amount budgeted at the beginning of the year would not have been actually spent throughout the year by many clients given some of the macro shocks like SVB or Credit Suisse happened 3 to 4 months into the year. So even if the amounts budgeted at the beginning of the year look optically flattish on a year-on-year basis, is there a possibility that the actual amount spent may see an increase?
I hope it does. And of course, our intent, despite whichever way the budgets fall, is not to be flattish when it comes to driving growth from the banking sector. You're right, the scenario that you talked about might play out, but there's a might attached to it, Sudheer. If it does, it will be great. Even if it doesn't, we'll have to figure out a way of driving growth, even in a flattish demand scenario.
The next question is from Jalaj from Svan Investments.
Saurabh, so I had 2 quick questions with regards to the numbers. So I see that there is a drop in people cost to an account of almost INR 70 crores. Could you please break down between ESOP cost and the otherwise, what is the other component?
Yes. So ESOP cost has gone down by roughly USD 4.5 million, which would be INR 35 crores, INR 40 crores, almost 50% of that.
And the balance would be?
Balance would be -- obviously, we are looking at ARC correction. So there are levers wherein we are controlling bench, we are controlling average resource cost of the people. There was an initiative that we started in the beginning of the year, wherein we were looking at controlling the average resource cost because it has gone up very, very significantly over the last 2 years or so post first phase of COVID, and the balance reduction is the function of that.
And in those two accounts, it mentions that there is almost INR 13.7 crores of the reversal from an Indian client which has come. So where is that amount sitting?
Yes. So it is not a reversal. It was an exposure the firm was sitting at. And the amount was not provided in the books of account because there was a dispute with one of the clients. And that dispute is resolved. So there is no more exposure. So it's not an upside, it's not a downside. There was an exposure the firm was sitting at, it's gone now. The settlement is done.
Okay. So no impact on the P&L?
No impact on the P&L in the current quarter.
The next question is from Rahul Jain from Dolat Capital.
Just 2 questions. Firstly, on the travel, of course, you gave some insight to us. But would appreciate if you could help us reconcile that why these spends would have taken hit? Is it because there was a lot of onetime spend they did in the past that was not getting in this year? Or this is higher market competitiveness or any other factor that you could highlight?
Sorry, I don't think I got the question clearly. Rahul, would you mind repeating it, please?
Yes. So I'm saying that in the travel vertical that we have seen a relatively weaker performance or flattish performance. Is it because there were a lot of spend that happened in the previous calendar, which were like one-off, onetime in nature, and that's why we could see this? Or this is simply a function of higher competitiveness that we observed in the previous calendar. Otherwise, this has been a strength area. So what explains that?
Yes. I mean, clearly, competition continues to be high across the space, and also equally, clearly, you're absolutely right when you say last year there was a significant rebound in spends and there's been some normalization. But having said that, we didn't expect to be only at 3% YTD growth at the end of quarter 3, when BFS is growing 15.5% YTD organic and insurance is growing 11.5% YTD organic. A lot of it has to do with 2 of our largest clients in North America, one of whom has had significant budget cuts. And the other one also is currently going through a potential merger, so tech spends are under pressure. That's the fundamental reason.
Right. And secondly, since we are at the end of the quarter 3, would it make better sense to narrow down on the top end of the band for our guidance given the visibility that we may have for the Q4?
Yes, we're very clear, it's 13% to 16%, but we clearly aren't coming at 16%. We are equally explicit around the fact that we will come towards the lower end of the margin cap. So it's going to be somewhere around 13%, 13% plus. So we aren't trying to tighten margin, but we are equally clear that it's the lower end of the revenue guidance band that we gave at the beginning of the year.
The next question is from Ashwin Mehta from Ambit Capital.
Just 1 question, Saurabh, in terms of other expenses, there was a INR 69 crore increase this quarter, and this was more than a revenue increase. So just wanted to get a sense in terms of the nature of this increase? Is it more any bought-out items or pass-through elements which are driving this?
So Ashwin, what we are doing is, in the current quarter, so we actually won a contract wherein we are trying to -- not trying -- we are actually building up the treasury module for the clients for a bank in India. So that's the reason. So there is a subcon part included into it. There is an implementation cost which is going into the other expenses. There is infra buildup needed for the treasury module that is being implemented for a bank within the India and the ASEAN region.
So that's what you saw, even after the furloughs, the banking revenue for the current quarter was higher, there was a growth in the current quarter. So it has to do with a couple of contracts that we have got within the banking space in the APAC region, ASEAN and India region.
The next question is from Ashis Dash from Mirae Capital.
So my question is on your top accounts. So the last 2 consecutive quarters, I see that your top 5 of 10 accounts declined sequentially. And now though you explained that furloughs is one of the reasons, and also you mentioned that BFS is doing well, your TTH vertical has bottomed out. So can we expect that this top accounts will start growing in coming quarters?
Just to correct you, quarter 2, our top accounts did grow. It's only quarter 3 that you've seen a very marginal decline. Please don't conflate revenue contribution from top accounts with actual growth. The revenue contribution can come down, but in a growing firm, that doesn't mean the accounts have degrown. Only in this quarter, there's been a marginal, very marginal, I think for the top 10 accounts, negative 1.2% degrowth, and that is largely because the majority of our top 10 accounts are from financial services, and the furloughs have been very extreme. It will 100% come back in the next quarter, which is quarter 4.
John, do you want to add anything to that? You might have some more perspectives there.
I mean, the only other comment I would make on that was the -- you've mentioned on a number of the other prior questions that we have, within the TTH industry, a number of U.S.-based customers that have struggled a bit, which had a slightly negative effect, but that's it. And I agree with what you said.
Just last question on the gross margin side, on the Investor Day, you mentioned that there is a possibility that, if I'm not wrong, so gross margin would improve 100 bps in FY '25. So that guidance -- that expectation continues?
Are you talking about FY '25?
Right.
Yes. And I said this earlier also, revenue, we will wait for another quarter to give a guidance. Margin, we are very comfortable giving a guidance. There will be a significant increase in FY '25 over FY '24. John, any views on that?
No further comments there on that one.
Saurabh, anything from you?
No, Sudhir, I think we had mentioned that we will grow -- we will improve margins in the current -- gross margins in the current year and also expand margins next year. So not just at a gross level, but EBITDA level and EBIT level, we will look at coming back with a formal guidance. But yes, the expectation is that gross margin will improve, and it will flow down to the bottom line because the SG&A has now peaked out at 15%. We don't plan to expand SG&A beyond 15% level. So it will grow in line of the revenue growth now going forward.
The next question is from Chirag from Ashika Group.
So Sudhir, if we absolutely furlough, then what would be the sequential growth, if you could give some rough idea like?
I'm sorry, are you talking about sequential growth in quarter 4?
In quarter 3, let's say, furloughs were not there, then what would the numbers look like?
I can't give you a hard number around what the revenue growth would have been, but I can tell you that our margin clearly would have been about 40, 50 bps higher in Q3 had the furloughs not happened.
Okay. And for fourth quarter, what we are expecting? Is it similar? Or we might see some recovery in terms of revenue?
No, revenue is pretty robust. So I don't think we're talking recovery after a decline.
I'm asking like a normal trajectory on a sequential basis will be there or the repetition of 3Q?
Chirag, we don't offer quarterly revenue guidance normally. But overall, when the year is over, as we've said, we will come within that 13% to 16% band, towards the lower end of that band.
We have a follow-up question from Manik Taneja from Emkay (sic) [ Axis ].
So Sudhir, just a clarification question. When you mentioned that we should be coming in closer to the lower end of the guided range, that implies almost only about a 1.2% sequential growth, which is going to be lower than what we've achieved in Q3, and in the backdrop of what you are suggesting in terms of furloughs going away, some improvement, et cetera, et cetera, what is dragging the Q4 performance for us?
No, I haven't said we'll come in exactly at 13%, Manik, but we clearly aren't coming to 16%, right? So that is a fairly broad range that we started the year with, 13% to 16%. We will be towards the lower end of that range. The intent will be to -- of course, we think 1.2% is imminently possible, which is why we started out the call by saying that we are possibly the only firm that gave a revenue guidance which was clear at the beginning of the year and that we have met that guidance.
Having said that, within the 13% to 16% band, we will be lower. Exactly where we will be is not something that we can call out very explicitly. But clearly, the intent is not to just touch 13. We might be slightly higher. Difficult to quantify that slightly at this stage.
We have one more follow-up question from Girish Pai from Nirmal Bang.
So just a question on color on the spending slowdown that we've seen in the industry. How much do you attribute this to macro worsening versus the normalization of heightened spending that we've seen during the pandemic? And what does this have in terms of implication for a pent-up demand driven pickup in growth, say, in FY '26?
John, do you want to take a stab on that?
I actually do believe that both levers had an impact. Certainly, the macro situation has created significant tailwinds -- sorry, headwinds. And yes, there has been a shift away following the spending during the COVID and post-pandemic period. So to my mind, firm, especially in BFS, TTH step, they're all watching a bit, and that is meaning they're being a bit conservative. But the areas, as I said, we're focused on are very, very specific areas in which many of our customers have to invest.
And then overlaying all of that is the AI space, which is generating significant traction for us. In one area -- and I'll take one good example. A lot of our customers are actually looking at AI and what they're now realizing is for them to leverage the benefits of that, that they're having to relook at their entire engineering platforms, their data layers, because those have to be in place, and that's where we're seeing quite a lot of traction and growth. Hopefully, that answers your question.
I was just asking what is -- suppose it's like 100% is -- how much of that is contributed by the heightened spending that we saw during the pandemic versus the macro concerns that we kind of see?
[indiscernible].
Sorry, Saurabh?
No, it wasn't me, John. Go ahead. If you want me, I can step in.
Look, I would say, now significant impact is more on the macro situation.
And I would second what John is saying. We have passed the stage where we can point to normalization as a reason for it. There's still a lot of tentativeness around spend. Macros from a growth, et cetera, perspective, clearly aren't stressed, but there's just a lot of ambiguity that clients are dealing with in terms of what they believe might be future scenarios. That's what we would point to.
I now hand over the call to Mr. Sudhir Singh, CEO, Coforge.
Thank you very much, folks. I have always said this and we've always meant it sincerely. We learn a lot from our interactions with you, from your questions, from your comments, from the follow-ups that you do. Thank you very much for making time for us. Thank you very much for following us. And we look forward to seeing you once again 3 months from now. Happy New Year, and I hope it's full of health, it's full of meaning, it's full of success for all of you. Thank you. Bye-bye. Good night.