Q2 FY27 call: revenue up 6.5% YoY, EBITDA margin 17.8%, net cash about INR 6.2 billion
Q2 FY27 earnings call transcript is out.
By ScoutQuest · · 2 min read
- Revenue growth
- 6.5% YoY and 1% QoQ in rupee terms; constant currency 0.5% QoQ and 0.2% YoY
- EBITDA margin
- 17.2% → 17.8%
- Net cash
- about INR 6.2 billion
Growth for the quarter came in line with what management had indicated earlier, and the commentary focuses on where the growth is coming from and what management expects next.
Growth by segment
- Overall revenue grew 6.5% year-on-year and 1% quarter-on-quarter in rupee terms.
- In constant currency, growth was 0.5% quarter-on-quarter and 0.2% year-on-year, which management described as broadly flattish and in line with its earlier expectation.
- Off-highway and Commercial grew 27% year-on-year and 17.6% quarter-on-quarter.
- Passenger car was down about 8% year-on-year and 4% sequentially.
Management said the impact from a sharp decline at its two top accounts, caused by cancellation of their programs or cutting of expenses, was 13% of the total revenue, and that growth in off-highway, commercial vehicles and Products made up that drop.
Products versus services
- Services revenue was flattish.
- Products revenue grew 5% quarter-on-quarter and 25% year-on-year.
Profitability and cash
- EBITDA margin moved from 17.2% to 17.8%, a 60 basis point improvement, attributed largely to business mix as Products contributed more than services and solutions.
- Investment in R&D went up by a couple of million dollars during the quarter.
- Net cash was about INR 6.2 billion. It came down mainly because of a dividend payment of INR 1.4 billion, an initial acquisition payment for Cymotive of about INR 1 billion, and DSO moving from 51 days to 53 days.
AI and delivery mix
- More than 9,000 users are on the company's AI platform, more than 5 million transactions took place during the quarter, and 12,000 engineering agents have been built.
- About 9% of revenues came from AI-first projects; management expects this to go up significantly.
- Fixed price projects moved to about 70% of the mix.
People
- Attrition was in mid-teens during the quarter. Management expects it to come down substantially in the next quarter and to move close to earlier levels.
- Increments for grades A to D and A to E were done during the quarter, with the remaining increments spread over the current quarter and the last quarter.
Wins and outlook
- 89% of the wins came from target accounts. The pipeline is described as active and healthy, though realisation is taking some time.
- Beyond mobility software, the company is creating specific offerings in Energytech and deep tech. One client, Cummins, already works in Energytech, and management sees scope to take this to another 15, 20 clients.
- Early successes in these adjacencies are expected in 2 to 3 quarters; management said entering them will take time.
- On technology, the shift is from software-defined vehicles to what management called AIDV (AI defined vehicle), where it expects Beacon and a few other products to position it well.
What to watch
The passenger car softness and the attrition trend on one side, against the pace at which off-highway, Products and AI-first work scale up on the other.
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More numbers
- Overall revenue growth, year-on-year (rupee terms)6.5%
- Off-highway and Commercial growth, year-on-year27%
- Passenger car revenue decline, year-on-year8%
- EBITDA margin17.8%
- Net cashINR 6.2 billion
- Dividend payment during the quarterINR 1.4 billion
- Days sales outstanding (DSO)53 days
- Share of revenues from AI-first projects9%
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