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Ladies and gentlemen, good day, and welcome to Saksoft Limited Q1 FY '24 Earnings Conference Call. As a reminder, all participle lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations for Saksoft Limited. On behalf of the company, I'd like to thank you all for participating in the company's earnings call for the first quarter of financial year ending 2024. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is clearly to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We firstly have with us Mr. Aditya Krishna, Chairman and Managing Director; Mr. Niraj Ganeriwala, Chief Operating Officer and Group CFO. Now I request Mr. Aditya Krishna to start with his opening remarks. Thank you, and over to you, sir.
Thank you, Anuj. Hello and good evening, everyone. Welcome, and thank you for joining our Q1 FY '24 earnings call today. Let me firstly give a brief introduction to Saksoft for the sake of some of the participants who may be new to the company. Saksoft as a digital transformation partner and assist the customer -- assist our customers to automate, modernize and manage IT systems through a combination of domain-specific technology solutions and solution accelerators from consulting to support. We have been in business for almost 2 decades now with offices across 16 locations, covering U.S.A., U.K., Asia Pacific and Europe. We have an associate strength of 2,000-plus employees. The key verticals that we operate in are fintech, telecom and utilities, transportation, logistics, retail and health tech. The interconnected nature of the verticals mentioned addresses a huge market, which also facilitates us to cross-sell and upsell service offerings to our clients. These verticals are supported by horizontal service offerings, spanning analytics, cloud solutions, legacy modernization, intelligent automation, application development and testing. As a company, we offer a bouquet of digital transformation services. Now moving on to the quarter under review. I'm delighted to share with you that we continued our growth performance with 24% year-on-year growth in revenue and 54% growth in EBITDA despite the visible slowdown in the IT sector. We believe that the improved revenues in this current quarter is a reflection of the differentiation that Saksoft has created over the years. As we move forward in our journey to reach USD 500 million in revenues by 2030, we have recently acquired another software design and development company with niche expertise in cutting-edge e-commerce applications headquartered at New York with offices in London, Gurgaon and Noida, namely Solveda. Solveda will add another market niche for us with its capabilities and strength in the e-commerce vertical, especially for the B2B segment. The e-commerce space is witnessing significant global technology spend as physical stores add digital to their distribution channels. This acquisition is to reinforce our focus on the select industry verticals and is a testament to our inch-wide mile deep strategy. As an additional step to reach the USD 500 million revenue, we are also investing in front-end sales force to have more feet on the ground to acquire new logos and scale the existing ones. We're also investing in more capabilities to plan a next phase of growth. As we grow our business, we realize the importance of contributing to a greener scene world. And towards this objective, we are adding sustainability is also one of our major goals.Now I would request my colleague and our CFO, to give you the financial highlights for the quarter under review.
Thank you, Aditya, and thank you, everyone, for taking the time and joining our earnings call today to discuss the results of the first quarter of financial year 2024 under review. For the first quarter of FY '23, '24, revenues were reported at INR 183.47 crores, representing a growth of 0.78% increase over the previous quarter and 23.95% growth over first quarter of the previous year. EBITDA for the current quarter was INR 34.53 crores, which grew by 6.23% over the previous quarter and 53.67% over the first quarter of the previous year. The EBITDA margins reported at 18.8%, representing a growth of 96 basis points over the previous quarter. Net profit for the quarter was INR 35.15 crores, which grew by around 0.68% increase over the previous quarter and 41.29% growth over the first quarter of the previous financial year. The PAT margins for the quarter FY '23, '24 was a 13.7%. Now coming to the revenue split by geography for the quarter, the Americas contributed to 44% of our revenues, Europe contributed to 21%, while the remaining 35% came from Asia Pacific and other regions. The on-site revenue mix was 45% and offshore at 55% in the current quarter. The revenue split across verticals for the financial year '23, '24 is as follows: Fintech contributed to about 37%. Telecom and utilities around 19%. Transportation and Logistics contributed to 12% with the public sector and healthcare retail at 5% and 4%, respectively. Coming to some of our customer metrics Saksoft had around 14 customers of USD 1 million plus revenue and we added another customer this quarter in the $0.5 million to $1 million client profile. The total employee count at the end of the quarter stood at 1,993, of which 1,813 were technical with the utilization level of the employees, excluding trainees, standing at 85% for the quarter. Revenue for contribution of the top 20 customers continues to remain above 70%. In terms of balance sheet and the cash flow position and as of the 30th June 2023 is around INR 192 crores, while data days for the quarter is 57 days. That concludes the updates on the quarter, and we can now move -- and now we can open the floor for the Q&A session.
We will now begin with the question-and-answer session. [Operator Instructions] We take the first question from the line of Vikash Diwakar from RBC. Please go ahead, sir.
Hi, thank you. A few questions interrelated. Consolidated, do you expect this to be EPS accretive as a percentage -- EBITDA accretive, sorry, one. B, with this acquisition, would you throw some light on the consolidated EBITDA margins for the year? And the third question was that would you give a range of your original target or any upward risk of your original target of USD 100 million for the year, both including the existing turnover of consolidated and the growth and the organic growth during the year, the balance 9 months of the year?
Hi, Vikash. As far as EBITDA being accretive, Solveda has EBITDA margin of above 20%. And Saksoft currently is operating at between 17% to 18% EBITDA. So it will help our combined EBITDA for sure. That's number one. Number two, what Solveda does is it opens up another market niche for us with a competitive advantage. So as an organization, we are trying very hard to compete in niches rather than be a pure more technology company. And the only way we can do that is to have competitive moats around the areas we operate. And we do this through building up accelerators, artifacts, et cetera. Now what Solveda has is it has a very strong artifact for organizations that are looking to add digital to their existing distribution channels. And that's what excited us about this company, and that's why we decided to acquire them because we are confident that with technology spend more and more towards digitalization of physical stores by organizations, there will be opportunity to grow. As far as the combined entity is concerned, at this point, I would say that we are sticking to our guidance of achieving $100 million in this financial year, which is '23, '24.
Okay. Got it. That confuses me a little bit because our guidance was $100 million without Solveda or when you gave a guidance of $100 million in the previous quarter, did it account for M&As? How does that work? And my second question really was in terms of the -- in terms of -- if you're in a position to share acquisition costs and turnover, et cetera, or Solveda as it stands today?
Okay. So whenever we have given guidance, it has been for both organic and inorganic. So let's make that -- let's be very clear about it. Our $100 million was organically and inorganically. So Solveda will contribute to it. Now obviously, we hope to beat $100 million. But as of now, we are sticking to $100 million given the headwinds that are happening in the tech industry. As far as revenue of Solveda is concerned, they are targeting USD 8 million in this financial year. And the price we have paid is $18 million.
Got it. Thank you. I'll come back in the queue.
Okay.
Thank you, sir. The next question is from the line of Hiloni from Pi Square Investments.
Hi, congratulations on a great set of numbers. I wanted to know our PAT margins. I think what we were targeting for the year was around 14% to 15%. Does that stay intact?
We are definitely looking at moving towards 14% as we move forward. This is the first quarter, and we should see some improvements coming in as we move forward.
Thank you.
[Operator Instructions] We take the next question from the line of Pratiksha an Individual Investor.
Congratulations on a good set of number. I had a couple of questions. For Solveda, could you please talk about your order book and visibility of revenues for this financial year?
In terms of order book, we generally, as we have mentioned, we generally start the year in terms of -- we have given a guidance of almost $100 million for the current financial year. Our order book is typically 78% to 80% of the target, which we have and the guidance, which we have given, and it is continuing to be in that direction. With Solveda coming in from an acquisition perspective to that extent it as because of the order book which they are having. And as we speak, they are still looking, as Aditya mentioned to the previous question of Vikas, our focus is to reach 100 million by the end of this year.
Understood. So you've also spoken about your $500 million target by FY '30. Just wanted to know the road map that would lead us to this target.
We need to grow by 25% to 30% year-on-year to get to $500 million by 2030. So it's an uprise to ask, but I think our team is up to it. The -- definitely, the market opportunity is there. The business opportunity is there. And what we have done over the last 3, 4, 5 years has been to build -- to put the building blocks in place, which is why last year was our best year ever in terms of growth and in terms of revenue. If you have noticed, we have been growing quarter-on-quarter, although this quarter was muted, but we have been growing quarter-on-quarter for the last almost 20 quarters plus. So the key is to grow. That's where the focus is. And I'm confident with what we have, the building blocks, the strategy, the offerings, the target market and the focus that we have, we should get there.
Sure. Just a couple more questions. Regarding EBITDA, we see a good improvement in the margins. So what exactly helped us with this improvement?
EBITDA improvement is primarily on account of operational efficiencies and effectiveness. As you have seen that the quarter was quite slow and muted when there are such time we are able to focus internally better in terms of operations, and we ensure that the overheads and others are controlled well and monitored well. So it's predominantly a factor of operational efficiencies and effectiveness.
Understood. And if we see the revenue contribution from our top 5 clients that has slightly come down, why exactly has -- what exactly led to this?
This is the reason why I responded to Vikas's question earlier about headwinds and the fact that organic and inorganic is important to get us to our items of $100 million. There is a slowdown in the U.S., there is a slowdown in Europe. So a lot of our customers are deferring projects, they are reducing technology spend temporarily, and I'm pretty sure this is temporarily as is the case with most other technology companies. And that's the main reason why there has been a drop. And it's not a significant drop. I think it's only 1%.
Understood. Thank you so much and good luck.
Thank you.
[Operator Instructions] We'll take the next question from the line of Vikas Vasava from RBC. Please go ahead, sir.
Thank again. Just if you take out $8 million, we are left at $92 million, this muted growth this year, this quarter, are we saying it was an aberration because if I remove the $8 million which you are adding or $6 million because you have 3 quarters left post your Solveda purchase, we are then looking at -- you're already there on that run rate, if I look at the current quarter, are we looking at muted organic growth other than acquisitions right through the year then? How does it -- if you can throw some light on this, if I'm looking at my base figure of 92% from organic, I'm just distinguishing between organic and inorganic, and I remove Solveda from the -- and assuming there's no growth that we assume it $6 million for the next 3 quarters, we are at 94%. It pretty much gives muted quarter-on-quarter growth on our original organic business. That was one question to answer that. I have another question after that.
There are -- like I mentioned, because there are lots of headwinds right now. And while the focus is to grow organically at a faster pace, I can't hold your numbers with, what, 6, 8 months left in the year, that will give us -- you're right about $6 million of Solveda. We will grow organically. For sure, we will grow. Now will we grow at the same rate as we do last year? Probably not for 2 reasons. One, the base is bigger. And secondly, the U.S. economy or the U.S. technology spend is not at the same level as it was last year. So there is a little bit of conservatism built in. I don't want to be overly conservative, but at the same time, I don't want to be optimistic. I think by getting to 100 million next year, which is a year ahead of our original target, I would be happy with that as well as we can set the pace for next year and the following years.
Okay. And just a little more information on the Solveda. Is it a regular kind of an earnout kind of deal or is it 100% stock purchase? And what is your stock?
There's no stock purchase. We have never done a stock purchase. We always do cash. We always do a mix of internal accruals and if necessary, a little bit of debt. Here, it's been all internal accruals. And there is an earn-out. In all our deals, we do -- we buy 100% on day 1. We normally pay anywhere between 50% to 60% upfront, and the balance is over a 2 or a 3-year earn out. And this is exactly the same.
All right. And what's the stock option to what level are you giving stock options within the organization?
We have 6% of our equity allocated for employee stock options.
And what is the level until which top down till what level are you offering stock options to in place?
It's leadership. That means my one down and one level below that. So the total number of my colleagues who would be eligible would be in the range of 20%.
Got it. Thank you.
Welcome.
Thank you. [Operator Instructions] We take the next follow-up question from the line of Hiloni from Pi Square Investments, please go ahead.
Hi, I wanted to know what was your attrition rate?
Our attrition rate for this quarter was much lower as compared to the past, it was around 17%.
Okay. And last year, what was the number? So if you are comparing Q-o-Q or Y-o-Y what would that number be?
That was close to 24% to 25%.
Last year, it was close to 24%, 25%.
Yes.
Okay. Thank you.
Thank you very much. [Operator Instructions] We take the next question from the line of Mr. Ranjan [indiscernible]. Please go ahead, sir.
The name is Rajan, not Ranjan.
I'm sorry, sir.
No, it's okay. What percentage of profits is spent on learning and development of employees?
In terms of learning and development, there is a continuous process of learning and development, which we have, there is no specific measurement in terms of what is actually spent because learning is an integrated part of our employees. We have an LMS tool, and most of our employees in the technology sector and the delivery team are required to complete certain courses. And that's something which is done regularly. In terms of numbers, unfortunately, we don't have [Technical Difficulty]. Yes. Because it's also a combination of -- we take trainees. We train the trainees to join experienced teams now that's also learning, that's also trading. So it's a difficult metric to really answer. But it's a good question. I think we should keep it as a metric to evaluate and monitor going forward. Thank you for that.
Thank you.
Thank you, sir. As there are no further questions, I would now like to hand the conference over to management for closing comments.
We thank each one of you for taking our time to participate in this call and your continued interest. We believe that with every passing day, we are closer to our goal. I hope we've been able to answer your queries. In case of any other queries, please reach out to us or Valorem Advisors, our Investor Relations adviser. Thank you.
Thank you. On behalf of Saksoft Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.