Earnings Call Transcript - XNSE:DATAMATICS 2026-11-04

Operator

Ladies and gentlemen, good day and welcome to Datamatix Global Services Ltd. Q2 F527 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this call is being recorded. I now hand the conference over to Mr. Pratik Chaktap from EY Investors Relations. Thank you, and over to you, sir.

Pratik Jhaktap, Head of Investor Relations

Thank you, Anam. Good day to all the participants in the call today, and welcome to Q2 FY27 earnings call of Datamatics Global Services Ltd. The results and presentations have already been mailed to you, and they are also available on the website of Datamatics. In case anyone has not received a copy of press release or presentation, please do write to us, and we will be happy to send it to you all. To take us through the results today and to answer your questions, we have with us the top management of the company, represented by Rahul Kanodia, Vice Chairman and CEO, Ankush Akar, EVP and CFO, Mitul Mehta, EVP and CMO. Rahul will start the call with brief overview of the quarter on business, which will be then followed by Ankush, who will take us through the financials, then we will open the floor for Q&A session. I would like to remind you that anything that is said on this call which gives any outlook for the future or which can be construed as a forward-looking statement must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties are included but not limited to what we have mentioned in prospectors filed with SEBI and subsequent annual reports, which you can find on our website. With that said, I now hand over the call to Rahul, sir. Over to you, sir.

Rahul Kanodia, Chairman

Thank you, Pratik. Good evening, everyone, and thank you for joining our quarter 2 F527 earnings call. I'll cover the quarter's highlight and strategic progress. Ankush will then take you through the financials in detail and will open the floor for questions. Data Mesh delivered another strong quarter with healthy revenue growth and margin expansion. Revenue grew at 11.5% on a year-on-year basis to 546.6 crores. EBITDA increased 30% to 115.5 crores, which is an expansion of 301 basis points to 21.1%. This growth came from three drivers, deeper engagement with strategy clients, continued expansion with existing accounts, and growing portfolios of ALS services. Customers are choosing us because we pair AI innovation with disciplined delivery, and that is helping us win larger, higher-value engagements from both existing and new clients. From a geographical perspective, the U.S. and Europe were primary drivers of our growth. These are the most attractive markets for our services over the long term, and we are actively investing there. Let me now take you through our segments. Digital operations remain our strongest growing segment, reflecting in a revenue growth of 15.6% on a year-on-year basis. Digital content continues to grow steadily on deeper customer engagement and continuous operational excellence. In insurance, we added agency claims management to our true AI underwriting offering, extending our coverage across the policy lifecycle. Digital technology's revenue grew at 8.8% on a year-on-year basis. With accelerated demand and AI-led application modernization and development, our Kai modernization factory delivered up to 40% of cost savings and a 3x faster go-live by lowering the transformation risk. Recently, at the Gartner AIT Symposium in Florida, we jointly presented with the Fortune 500 customer of ours the Legacy Transformation Journey. And this drew a strong interest from CIOs in the audience. Our priority is now converting these opportunities into production, deployment, and repeatable engagements. Digital experiences, business remain stable. Here we are focused on broadening the customer base and using an AI-enabled delivery to improve productivity and customer experience. I am proud to share that the Indo-American Chamber of Commerce recently recognized our founder, Dr. Kanodia, our founder, chairman, Dr. Kanodia, for his contribution to the U.S.-India business relationship. We have strengthened our leadership team to accelerate our growth. I am pleased to welcome Dr. Rajesh Galpure as President and Chief Operating Officer. Rajesh has a record of scaling global businesses, driving profitable growth, and improving service delivery. As we shift further towards an AI-led services, that experience will help us scale execution and deepen our client engagements. We are building on a strong first half. Our focus remains clear, convert AI demand into deployment, keep expanding within strategic accounts, and enhancing our delivery capabilities to sustain profitable growth. With that, I wish you all a very happy Diwali and a prosperous New Year. I now hand over to Amkush for the financial update.

Ankush Akat, CFO

Thank you, Rahul. Welcome, everyone, and thank you for joining us for the Quarter 2 FI27 earnings call. Let me take you through the financial performance for Quarter 2 FI27, and then I will take you through the financial performance for half-year ended 30th September 2026 as well. Our Q2 FY27 revenue stood at Rs 546.6 crore, reflecting a growth of 11.5% year on year. Our EBITDA stood at Rs 115.5 crore, a growth of 30% year on year. Our EBITDA margin for the quarter stood at 21.1%, reflecting an expansion of 301 basis points year on year. Our EBIT stood at 92.2 crore, a growth of 33.8% year on year. Our EBIT margin for the quarter was 16.9%, reflecting an expansion of 281 basis points year-on-year. I would also like to draw your attention and highlight that as part of the purchase price allocation of T&Q tech acquisition, which we acquired in quarter 4 FI25, we have recognized intangible assets during that quarter, which was being amortized over 12 quarters. This is a non-cash accounting charge that comes from the acquisition and does not reflect the underlying operating performance of the business. This amortization of intangible assets started from Quarter 4 Fi 25 and will be fully amortized by Quarter 3 Fi 28. If we exclude this quarterly amortization of intangible asset acquired as part of the acquisition, our adjusted EBIT for the quarter stood at Rs. 99.3 crore, reflecting an adjusted EBIT margin of 18.2%. Our PAT after non-controlling interest was 73.4 crore, up by 16.1% year on year basis. Our PAT margin for the quarter was 13.2%, reflecting an expansion of 69 basis points year on year. In terms of segments, digital operations continued to deliver healthy, profitable growth. Digital operations revenue for the quarter stood at 314.9 crore, which is up by 15.6% year-on-year. Digital operations EBIT margin was 21.8% for the quarter. Digital technologies revenue for the quarter stood at 166.6 crore, which is up by 8.8% year-on-year. Digital technology's EBIT margin was 9.5% for the quarter. Digital experience's revenue stood at 65.1 crore, which is slightly up by 0.8% year-on-year. Digital experience's EBIT margin was 12% for the quarter. In terms of geographical footprint, U.S. remains our largest geography, with 57% of our business coming from here. Followed by UK and Europe at 24%, then India at 12% and ROW 7%. Our client concentration remains very healthy, with top 5, 10, and 20 clients contributing 29%, 39%, and 53% respectively. Talking about H1FI27, our revenue stood at Rs. 1060.6 crore, reflecting a growth of 10.7% on a year-on-year basis. Our EBITDA for the first half of the year stood at Rs 216.6 crore, a growth of 31.4% on year-on-year basis. Our EBITDA margin stood at 20.4%, reflecting an expansion of 322 basis points year-on-year. Our EBIT stood at 170.6 crore, which is up by 36.1% on year-on-year basis. Our EBIT margin was 16.1%, reflecting an expansion of 300 basis points on year-on-year basis. Adjusted Aribit for the first half of the year stood at 184.7 crore, reflecting an adjusted Aribit margin of 17.4%, which excludes amortization of intangible assets recognized under purchase price allocation of T&Q tech acquisition. Our PAT after non-controlling interest for the first half of the year stood at Rs. 145.8 crore, up by 28.3% on year-on-year basis. Our pet margin stood at 13.4%. EPS for the half-year ended 30th September 2026 stood at Rs. 24.66 per share, reflecting a growth of 28.3% on a year-on-year basis. Our billed DSO was at 66 days as of 30th September 2026. We continue to maintain healthy balance sheet with net cash and investment net of debt standing at 557 crore as of 30th September compared to 710.2 crore as of 30th of June. The reduction primarily reflects the payment towards the final tranche of the TNQ tax acquisition. Overall, we are pleased with our financial performance and remain confident in our strategy to drive sustainable growth. With this, I will now pass on the call to the operator to open the floor for questions. Thank you for your patience and continued interest in Datametic, and wish you all a very happy Diwali.

Operator

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ritika Sheth from Anantaya Financial Services. Please go ahead.

Ritika Sheth, Analyst — Anantaya Financial Services

Hello, congratulations on a good set of numbers. I just had one question that our target is to achieve 3,000 crores in three years. In order to achieve this goal, what would be our organic growth percentage year-on-year and inorganic growth as we have cash surplus of 557 crores?

Rahul Kanodia, Chairman

Yeah, so it will be largely driven by organic growth. You're looking at a 15% CAGR, out of which about 10 to 12 would be organic, maybe 3 or 4% could come to inorganic growth. From a cash point of view, we have a very strong balance sheet, and we will leverage that to make acquisitions. However, there's nothing that has matured yet to talk about. But yes, we are in dialogue with a few companies from an acquisition point of view.

Ritika Sheth, Analyst — Anantaya Financial Services

Okay, thank you.

Operator

Thank you. The next question is from the line of Avi Jhaveri from Choice Institutional Equities. Please go ahead.

Avi Jhaveri, Analyst — Choice Institutional Equities

Yeah. Hi. Am I audible? Yes, are we? Okay. Yeah. So, my question was with respect to overall AI monetization. So, Datamatix has been primarily expanding its AI capabilities through AI, through BOT, through CAP+, and other agentic AI solutions. So, can you please provide us with an update as to the revenue contribution from these AI-led services and proprietary platforms and how is it translating into larger deal sizes? And my second question was with respect to the EBITDA margins. So EBITDA margins did primarily improve to 21.1% in Q2F by 27, primarily due to the operating leverage in the digital operations segment. So how much of this margin is sustainable in future? And are there any further levers for that?

Rahul Kanodia, Chairman

Yeah, so to your first question, we don't call out any of our specific revenues around these platforms, because these platforms are bundled as part of the service. So there's a platform with license and then there's HITL services. So it's really bundled, so we don't call that out. Increasingly today, all our services have some component of AI in it. So it's very hard to define AI or non-AI. But I would say that about... From the opportunity that we are getting, approximately 55% are very heavily AI driven. So that gives you a sense of what's happening in the market. To your other question, which is a bit of 21.1%, you're correct that it was largely driven by the operations unit, but this is fairly sustainable. We don't see that fluctuating too much, and we are confident that it will remain steady.

Avi Jhaveri, Analyst — Choice Institutional Equities

So, I didn't...

Rahul Kanodia, Chairman

I, we can't hear you. I don't know who's on the line, but it's not audible at all.

Operator

Mr. Javeri, you're not audible.

Avi Jhaveri, Analyst — Choice Institutional Equities

Audible right now? Yes.

Operator

Yes, sir.

Avi Jhaveri, Analyst — Choice Institutional Equities

Yeah. So, are there any further margin levers? And what, how do you see the overall H2 being playing play out?

Rahul Kanodia, Chairman

The H2, we will remain steady. At the beginning of the year, we had talked about 100 to 150 basis points improvement in margin. We are clocking at that right now, so I'm not too concerned. We had talked about being in the vicinity of about 20%, so that's really where we are. So I think it will remain where we are. I don't see a problem. Next year, we come to, we're going through our planning for next year, so we will discuss that as we come to Q4 of the year.

Avi Jhaveri, Analyst — Choice Institutional Equities

Okay. And how do we see the overall growth from an H2 perspective?

Rahul Kanodia, Chairman

It looks good. The pipeline is looking good. So, I think we will maintain a healthy growth. We've talked about a high single digits for the year. We will maintain, and that probably will be closer to 9, 9.5% versus like 7.5% or 8%. So, it will be a little better. But I think we will maintain that. As of now, for H1, we've done a 10.7% growth. So we've, in that sense, beaten our expectations. But, yeah, I think we will keep it steady at that level.

Operator

Thank you. The next question. A reminder to all participants, you can press star and one to ask questions. The next question is from the line of Aditya Srinivasan from iThought EMS. Please go ahead.

Aditya Srinivasan, Analyst — iThought PMS

Thank you for the opportunity and congrats on our set of numbers. So, I just have a couple of questions first with respect to the digital operations margin. So, margins was about 21.8% this quarter, which is up quite a bit, and it's a very good non-Q4 quarter, at least in the last two years. So if you could pinpoint what came from currency, what came from TNQ and content mix, and also if you could give a split between digital content and digital finance, that would be great. So, for my second question, I would like to... Sorry, sorry, go ahead. No, no, you could, I'll come back to my second question once we're done with this.

Ankush Akat, CFO

So, from a currency perspective, versus the last quarter, there is no major movement from a currency standpoint. It remains steady in the similar close trajectory, so there is not material impact which is there because of the currency. What you see from a profitability standpoint is driven through the growth and the operational leverage that we have. So, that's what is reflected from a profitability standpoint currently. We don't share in terms of the further breakdown from a numbers perspective. So this is the overall growth, 21.8% is what we have achieved. 21.8% average margin is what we have achieved from a digital operations business perspective.

Rahul Kanodia, Chairman

But to your point, T&Q has also had a healthy growth. So I think that that acquisition has turned out extremely well for us.

Aditya Srinivasan, Analyst — iThought PMS

A thin one for digital technologies margin. So, I mean, you did mention before that FY27 would be led by the technology segment, but I think the operations segment has been leading quite a bit. So, would it be higher hardware prices that kind of leading to lesser margins in this segment?

Rahul Kanodia, Chairman

So, there is some impact of the hardware, but that's the fair collection business that we have, and that has impacted a little bit more hardware. No, in the technology segment, what happens is a lot of our investments that we make in R&D are booked into the technology segment, and therefore you see those as little muted numbers, but the technology really supports all the business units. So, really, in some ways, one can spread that cost across, and you see better, healthier margins in technology. But right now, we are booking all of it in technology.

Aditya Srinivasan, Analyst — iThought PMS

So, the R&D is still in the 40 to 50 crore level?

Rahul Kanodia, Chairman

That is correct. That is correct.

Aditya Srinivasan, Analyst — iThought PMS

Yeah. I just have one more question. So, if you could just put the number on the number of clients that were added in H1. That would be great.

Rahul Kanodia, Chairman

At H1, we were probably added six, seven-odd clients. So our focus, actually, we shifted our strategy a little bit. If you go back a few quarters, we were adding at the rate of about 15 to 18 clients per quarter. We changed our strategy to focus on mining existing accounts because the logos, we have our brilliant logos, and not going after a lot of what is called hunting, hunting new logos. So that strategy has been implemented. We are focusing on farming and mining existing accounts, and those relationships are panning out quite well. So we will remain with this strategy for some time, rather than acquire.

Mitul Mehta, Other

And we typically would do a selective hunting, which means, which is in our... Areas of ITP, which is ideal customer profile. So we are very choosy on the ones we will, you know, hunt for, but we'll grow our existing accounts more. And that's where you see, if you see the release, is where the growth has also been attributed to.

Aditya Srinivasan, Analyst — iThought PMS

Got it. Just one more last question. So, if you could, would you be able to give a breakdown or split between the revenue models, that is, the different revenue models that you guys have?

Rahul Kanodia, Chairman

So, revenue models as in we have time and material billing, we have an outcome-based billing, and we have a fixed price. These are the three large ones. Increasingly, one is shifting towards more and more outcome-based. So, a lot of our digital operations go into the outcome-based, but the other area is also shifting.

Aditya Srinivasan, Analyst — iThought PMS

Would you be able to give a number on that?

Rahul Kanodia, Chairman

I don't have the breakup handy right now, but we can maybe circle back separately.

Aditya Srinivasan, Analyst — iThought PMS

Thank you. Thank you. Got it.

Operator

Thank you. A reminder to all participants, you can press star and want to ask questions. A reminder to all participants, you can press star and 1 to ask questions. The next question is from the line of Aditya Srinivasan from iThought PMS. Please go ahead.

Aditya Srinivasan, Analyst — iThought PMS

Thank you for taking up my question again. One more question with respect to the customer concentration. Either top five concentration went down a little bit and top 10 went down a little bit. Could this be attributed towards them moving the services in-house or anything to do with GCCs?

Rahul Kanodia, Chairman

No, no, we've not had any of that. About a year ago, we had a few customers moving to the GCC. We talked about it in the earnings halls. But right now, we don't see that at all. So right now, I think it's just, you know, some of the non-top-5, non-top-10 are also growing because of the whole account mining strategies that we've adopted. So we've got this bunch of focus 50, the top 50 accounts that we are focusing on growing. And as they grow, obviously, the dependence of the top five, top ten would come down to some extent. In percentage terms, that's what it is. In absolute terms, they are all doing very well.

Ankush Akat, CFO

Just to add, from a concentration perspective as well, our client concentration has improved. It was 26% in quarter to FI26, versus quarter to FI27, it has gone up to 29%. So, top 5 concentration has improved, top 10 remains stable at 39%, and top 20 has improved to 53%.

Mitul Mehta, Other

On an average, if you look at it, it's a 5% per account roughly, which is a fairly healthy contribution.

Aditya Srinivasan, Analyst — iThought PMS

Understood. Thank you.

Operator

Thank you. The next question is from the line of Sanjay, an individual investor. Please go ahead.

Sanjay, Analyst — Individual Investor

Hello. Good evening. I just wanted to check about the annual wage hike. Is it done already in Q2 or is it happening in Q2?

Rahul Kanodia, Chairman

So, this year, actually, the results that you see has got double. So, I said, yes, the annual wage hike is done for this year. But this year, we had a partial wage hike in October and again in April. So, from my H1 point of view, you see an impact. But, yeah, to your point, it's been, it's already factored, eh?

Ankush Akat, CFO

It was done in Q1-FI-27 itself, so, effective, first of all, it was given.

Sanjay, Analyst — Individual Investor

It's just, it's all done for the financier now, there is no more, yeah. Alright, thank you and all the best.

Operator

Thank you. Thank you. The next question is from the line of Aditya Srinivasan from iThought PMS. Please go ahead.

Aditya Srinivasan, Analyst — iThought PMS

Would you like to get an idea on the headcount, the trajectory for headcount, maybe FY27 and FY28 as well, if you would be able to...

Rahul Kanodia, Chairman

So the headcount, we don't expect headcount to increase proportion to revenue, largely because we are using more and more AI tools. And we see that happening. So, in fact, I think our headcount might just remain stable or flat, maybe marginal increase, because the bulk of the growth will be adjusted against tools and AI. So, right now, we are, I think, overall, roughly in the vicinity of 14,000 to 15,000 people, depending on some seasonality that we have. I don't expect that to change too much, maybe 15 and a half, perhaps.

Aditya Srinivasan, Analyst — iThought PMS

Got it.

Rahul Kanodia, Chairman

Thank you.

Operator

Thank you. A reminder to all participants, you can press star and 1 to ask questions. I now hand the conference over to the management for closing remarks.

Rahul Kanodia, Chairman

Thank you, everyone, for being on this earnings call with us today. Once again, I'd like to wish everybody a very happy Diwali and a prosperous new year, and we look forward to speaking to you the next quarter. Thanks again.

Mitul Mehta, Other

Bye, everyone.

Operator

Thank you. On behalf of Datamatics Global Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.