R Systems International Limited (RSYSTEMS) Q2 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the R-Systems Q2 and H1-2026 Earnings Conference Call. As a reminder, all participant lines will remain 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 the operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Tarun Kotari, AVP Finance and Accounts, for opening remarks. Thank you. I know it's here.

Thank you, Ryan. I welcome all participants to R-Systems Q2 and H1 2026 earnings conference call. Since R-Systems follows calendar year as its financial year, April to June quarter is quarter two for us. We have today with us Nitesh Mansal, Managing Director and CEO of R-Systems, and Nand Sardana, CO4 of R-Systems. We shared the investor presentation late evening yesterday as well as uploaded on company and stock exchanges websites. Hope all of you have received that. We will start the call with opening remarks on the performance of the company by Nitesh, followed by financial overview by Nunn. Thereafter, we will have a closer statement by Nitesh. Subsequently, we will open up for a Q&A session. Before I hand over, let me read out the customary disclaimer statement on behalf of the company. Investors are cautioned that this presentation contains certain forward-looking statements that involve risk and uncertainties. Company undertakes no obligation publicly to update or revise any such statements. These statements may undertake revision because of new information, future events, or otherwise. Actual results, performance, and achievement could differ from those expressed or implied in such forward-looking statements. Now I am handing over to Nitesh for his opening comments. Over to you, sir.

Thank you, Tarun, and good morning, and thank you, everyone, for joining our Q2 earnings call, and very proud to start with saying that this has been one of our strongest quarters with our revenues crossing 600 crore rupees with a strong margin in EBITDA. Just to let everyone know, for those of you who are referring to the slides, I will refer to the slide numbers, but if you're not, as I walk through the numbers and commentary, I'm sure you'll be able to follow. So, like I said, referring to slide number four, it's been a strong quarter with 601.7 crore rupees, or $63.6 million in revenue, which is a 17.7% year-on-year growth in dollar basis and 30.2% in rupees, which shows a quarter-on-quarter growth of 1.2% on dollar basis and 4.7% in rupees. Please. This also brings us to a record. 1,200.7 crore rupees in EBITDA, adjusted EBITDA, which is $12.8 million of adjusted EBITDA, or a 20.1% as EBITDA percentage. This is a 51.4% year-over-year growth, or 4.4% quarter-over-quarter growth. The adjusted net profit stood at 62.9 crore rupees, or $6.6 million, which is 10.5% of revenues, year-over-year growth of 35.4%. The adjusted EPS stood at 5.3 rupees, which is, again, a year-over-year growth of 35.3%. As we have stated in the past as well, the adjustment to EBITDA is with respect to RSU expenses as part of non-recording costs. We have given the adjusted EBITDA bridge just to explain the causes of increase, and while there are certain numbers that probably do not come out in this, we have definitely benefited from repeat appreciation, which has given us a boost. We have, as we've stated in the past, we've continued to invest both in AI, AI-related sales, and increase in sales and marketing. But overall, within this, what is also hidden is an uptick in both revenue and margin, which comes because of the revenue exchange, the whole AI compounded growth story, which is beginning to kick in and starting to show green shoots of better revenue per employee and a margin per employee story. Moving on to the next slide, looking because this is also our Q2 and H1 closing, looking at a half year over half year performance, we closed at a revenue of 1176.5 crore rupees or $126.4 million for H1, which is a 30.1% increase year over year. And an adjusted EBITDA number of 236.4 crore rupees, or $25.4 million, at 20.1% of EBITDA percentage, resulting in a 51% growth year-over-year. The adjusted net profit correspondingly was at 138.7 crore rupees, or $14.9 million, or 11.8% of adjusted net profits, a year-over-year increase of 54.4%. And EPS of 11.7 rupees, which is a corresponding increase of 54.3%. As the number shows, we have gone from, in H125, from 904 crores to 1176.5 crore rupees, with 20.1% EBITDA margins. Moving on, looking at slide number six, the margin and EPS analysis, just to make the comparison side by side. This is a quarter-on-quarter number. We closed the quarter at 691.7 crores compared to the same quarter last year of 462 crores, which is a 30.2% increase in revenue. The corresponding number for Q1 was 574.8 crores, which is a 4.7% increase quarter-over-quarter. The corresponding EBITDA stands at 120.7 crore rupees, which compares to 79.7 crores in the same quarter last year, which is a 51.4% increase in adjusted EBITDA. Compared to 115.7 crores in the previous quarter, which is a 4.4% increase in adjusted data. So from a percentage basis, we've gone from 17.3% to 20.1%, which is a 281 basis points increase, or a 6 basis points increase on a quarter-on-quarter basis. The adjusted net profits stood at 62.9 crores compared to 46.4 crores in the same quarter last year, or The 35.4% increase. Compared to 75.8 crores in Q1, which is a decrease of 17.1 percent if you refer to the notes below. This is largely due to a one-time benefit of currency hedging policy change that we implemented in Q1 and got a significant benefit out of that. Correspondingly, the net profit percentage moved from 10.1% to 10.5% on a year-on-year basis, but a 13.2% to 10.5% on a quarter-on-quarter basis, thus showing a decline, which was a one-time impact of the currency hedging benefit that we realized in Q1, which was to the tune of 18 crore rupees. Looking at similar analysis on a... Half yearly basis on slide 7, H-126 revenue stood at 1,176.5 crores compared to 994.5 crores in H-125, which is a 30.1% increase. So, corresponding EBITDA number at 236.4 crores compared to 156.6 crores, which is a 51% increase or 279 basis points improvement over previous half year, or as in the same half year last year, H1 last year. Adjusted net profit of 138.7 crores versus 89.8 crores, which is a 54.4% jump. And on a profit percentage basis, 11.8% versus 9.9%, which is a 186 pips increase from H1 last year. Coming to some operating metrics on slide number eight, revenue by geographies, slight uptick in America's while, so going from 69.3 to 71.5% of total revenues. Slight decrease in impact due to some of the larger projects that we were running in the last quarter that came to an end. Coming to 15.3%, Europe remains largely in the same range of 9.7%, and Middle East and Africa remaining on a similar range of 3.6%. Our client concentration has shown a positive uptake both on the top client and the top 10 client spaces, where top client contributes now 6% instead of 5.8%, top 10 clients leading to 24.4% instead of 24. So while we do not have a significant client concentration risk, the continued efforts on mining and growing existing accounts continue to create recurring revenues and deepening our pockets within large existing clients. The utilization percentage has slightly ticked up to reach 80.5% to 81%, which is our standard and accepted band of between 80% to 81%, which is where we want to operate. This also shows that post our investments in our AI initiatives and deliberately making those bench investments over the last two or three quarters, we are beginning to sweat those assets and investments towards revenue-generating activities. DSO remains largely in the band with build DSO staying at about 55, 56 days, and build plus unbuild coming to about 75 days, which is very much in line or better than, you know, the industry averages. Talking about some key wins on slide number nine, we're very proud that this quarter we not only saw our AI accelerated wins taking a larger share of all the wins that we had, but we also had a few decently large-sized deals that fueled the overall TCV win as well as the revenue numbers that will build up. And we have seen that impact come in in Q2 as well. So first one is a leading global telecom player where we have been chosen to leverage advanced analytics, data science, and other intelligent solutions to create actionable business insights. It is a strategic initiative from the client to enable them for smarter decision-making, optimizing operations, and accelerating growth in a highly competitive market space that they operate in. The second one is a strategic win to enable a small business lender, a large financial institution, which is into lending for small businesses, for whom we'll be creating a center of excellence, sort of a GCC in India, which would be responsible for product engineering, software engineering, digital operations, and fuel the AI-powered lending innovation to create enhanced operational efficiency for this client. The third one is a large leading global insurance and financial services provider who's partnered with us to advance their high net worth clients initiative to reimagine the AI-powered, you know, offering for those platforms offering AI-powered quality engineering and accelerating the testing enhancements of the quality and release cycles related work. We will be enabling faster innovation cycles, greater reliability, a superior digital experience for their customers. The fourth one is, again, another large global financial services organization with who has businesses in providing market access and exchanges who have We partnered with us to create a retail transformation, so this is a CRM and customer experience-related engagement, leveraging Microsoft Dynamics 365, integrating with omni-channel platforms and modernizing the entire lifecycle from customer acquisition to engagement to onboarding service operations and delivering seamless data-driven customer experience across global markets. And last but not the least, a leading ad tech company with an extremely complex ad distribution business have asked us to modernize their core platform on which they manage and operate ad agencies and distribution of advertisements to modernize it completely using AI without any disruption to their existing clients and everyday operations of ad spend. And making it a more reliable, faster, and scalable environment with superlative user experience. As you would have noted, all of these wins indicate a very AI-first stance, and our capability and ability to solution using AI and AI methodologies has been a great differentiator in making these wins happen. Coming to slide number 10, reporting the trailing 12-month ACV bookings in Q2, we recorded $82.9 million of ACV bookings compared to $82.3 million in Q1. This on a trailing 12-month basis continues to show that we continue to win newer engagements or deeper engagements, both from our hunting and mining efforts, And increase the size of the deals as well as more in terms of the deeper engagements with not just the top clients, but also the kind of pipeline that we are developing and generating. At this point, I'd like to hand over to Nand for a detailed financial performance readout, and then I'll take over for closing moments.

Thank you, Nitesh. Good morning to all. Thank you, everybody, for attending the call. The presentation gives detail of quarter to performance. For those reflecting to slide in the next presentation, it is last but one page. Devenue for the quarter was Rs. 601.7 crores or $63.6 million as against Rs. 574.8 crores or $62.8 million last quarter and Rs. 462 crores that is $54 million in the same quarter last year. This is year-on-year growth of 30.2%. This is on account of volume growth as supported by rupee depreciation and Novigo acquisition. We have started witnessing the results from our investment in cloud, data, AI, and automation in terms of large yield conversion, which is supporting sustainable revenue growth. The gross margin was 39.2% compared to 36% last quarter and the same 36% in the previous year quarter. Our quarterly margin have improved on the back of higher billable days, rupee depreciation, and improved utilization. SG&A expenses have increased by 23.8 crore from 91.4 crore in last quarter to 115.3 crore this quarter. This is mainly due to higher sales and marketing spend. Also, last quarter we had one-time AR reversals. The adjusted EBITDA was 20.1% compared to same last quarter and 17.3% in the same quarter last year. The company has been able to report robust margin percent through operation leverages, improved revenue mix, and favorable exchange rates. The RSU cost under Management Incentive Plan is Rs. 6.2 crores compared to 6.4 crores last quarter. EBITDA net of RSU expenses 19%, almost same as last quarter. Getting down to depreciation and amortization, the total expense was Rs. 22 crores compared to Rs. 21.5 crore last quarter. This includes Rs. 10.6 crore for intangible capitalized on account of past acquisition. Non-recognizing expenses are on account of service payment per certain redundant positions. In this expense is Rs. 9.5 crore compared to Rs. 9.6 crore last quarter. Other income was Rs-87 compared to income of 13.1 crore last quarter. During quarter 1-26, the company adopted hedge accounting for its forward covers. Consequent to this adoption, a fair value loss of 18.04 growth was recognized in other comprehensive income. The loss primarily arose due to the significant deficit of Indian rupee against the U.S. dollar, with the closing exchange rate increasing from Rs. 89.88 per U.S. dollar as at December 31, 2025 to Rs. 94.84 per U.S.T. as on. March 31, 2026, resulting in a higher mark-to-market loss on off-rending forward lows. During quarter 2, this quarter, there was no significant movement in the quarter and exchange rate, which remained largely stable at Rs. 94.84 per USD as at March 31, 2026, compared to Rs. 94.60 per USD as at June 30th. However, exchange rates experienced volatility during the quarter ranging approximately between Rs.92.6 and Rs.96.5 per USD. The movement dealt with partial reversal of M2M loss on forward contracts. In addition, certain forward contracts matured during the quarter, resulting in the reclassification of previously accumulated losses from OCI to the statement of profit and loss account in accordance with hedge accounting requirements. Further, the company recognized the realized loss of Rs.9 crore on the settlement of forward contracts due to the quarter, which resulted in decline in other income for quarter two. Overall, we had an exchange loss of Rs. 2.1 crore compared to 11.3 crore last quarter. Further, the other income comprised of interest income of 78 lakh this quarter compared to Rs. 60 lakh last quarter. As at quarter end, we have total forward cover of $43.32 million with average rate of 93.27. Our income tax expense was to be 24.94 crore this quarter, as against 24.2 crore last quarter. Our effective tax rate is around 31%. This is higher due to non-deductibility of amortization of intangible acquired through acquisition. Last quarter, we had certain two-ups. Our normalized effective tax rate is between 28 to 29%. Net profit after tax was Rs.55.6 crore or $5.9 million compared to $65.4 crore or $7.2 million last quarter. Gacy keepers for the quarter was Rs.4.69 compared to Rs.5.52 last quarter. Adjusted EPS for the quarter is Rs.5.3 as compared to Rs.6.4 last quarter. This is mainly due to decline in profit due to investment in sales and market and exchange loss in Q2 as against gain in quarter 1. In last quarter, due to adoption of hedge accounting, the cumulative exchange rate was recorded under OCI. I think with that, I'll hand over to Ditesh for his summing up.

Thank you, Anand. And referring to slide 13, sorry, slide 11, summing up, basically, the quarter has continued to strengthen our position in the AI-led space. As some of you would remember, we had launched our GCC service offerings a year and a half ago. We're very proud to report that we were recognized as a Horizon 2 GCC accelerator by HFS in the Horizon's GCC service 2026 report. It is a strong validation of our AI-first model. The global capability centers existing in India will continue to be challenged by their parent organizations to become innovation hubs and engines To lead AI-based and platform-based delivery, have leveraged our services, and we have successfully enabled a bunch of them with AI accelerators and establishing AI ecosystems within the GCCs. Our portfolio proprietary accelerators have been recognized as a key differentiator in enabling GCCs in this transformation. The agentic business operations side of service offerings has been seeing a lot of traction. This comes on the back of our deep domain understanding and investment in building agentic AI ecosystems. We have further continued to deepen our reach and approach. Did this segment and this, we believe, is going to continue to create more traction in the market? The modernization service offerings leveraging AI to modernize whether it is large code bases, meaning legacy technology platforms, or large data states using multitude of legacy data platforms or data stores is continuing to be a recurring theme across our wins in the market. The trends that continue to shape 2026, no significant change in terms of what we've been seeing, that organizations are looking at cost of running AI as a very important factor and turning towards experts like our systems to look at how do we architect AI-efficient ecosystems so that while they gain AI efficiencies due to leveraging it, they should not have huge financial costs to incur. For using that AI. Legacy modernization, like I said, continues to be a large dam across legacy code bases, data states, and reporting landscapes. And our entire narrative on engineering velocity as being a key differentiator for between where AI delivers ROI versus where AI fails to deliver ROI has been receiving very positive traction and is seen as a key differentiator, again, by our customers and analysts alike. With that, I would end up my presentation and open up for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Anmol Garg from Dam Capital Advisors. Please go ahead.

Yeah, thanks for the opportunity. We have a couple of questions. Firstly, you know, we have seen some uptick in our SG&A during the quarter, almost to the tune of 2 million on a quarterly level. So can you indicate some puts and takes over here? Has there been any sort of additional hiring in sales done, your take over here?

Jan Mool, is there any other questions?

Yeah, a couple of questions more. Okay. Secondly, I can ask them as well.

Yeah, please go ahead. I'll probably just be able to answer altogether. Yeah, go ahead. Sure, sure.

Secondly, I wanted to understand the outlook for the full year in terms of growth, given that our deal wins have been decent. So, how are we looking at organic growth for the full year, if you can get some percentage over there? And thirdly, is on our GCC business, so that has been increasing. So currently, what is the total percentage of GCC revenues for us, and how is the margins in that particular side of business?

Okay. Thanks, Anul. You know, first and foremost on SG&A, especially sales and marketing side, you know, we had always said that we are going to make conscious investments. And clearly, you know, with bringing CRO on board and adding to the sales bandwidth has been one of the key areas that we've been doing. But also, as we accelerate our AI-based sales, the engagement of both AI as well as domain experts in the sales process has been a necessary increase and something that we have been focusing on and we will continue to do. So there is definitely a very deliberate, you know, focus and effort to increase sales and marketing in that area. And it's not only sales, there's also marketing expense because we launched our new brand identity, which you would obviously have seen on the website. I talked about it during last quarter. We launched Execo as our AI studio, which has been getting a lot of traction. We have been, you know, been invited to several conferences, et cetera, where we participated and talked about the AI studio and how it makes a difference. All of that is in the direction of both building the market, having more feet on the ground, and being able to create more positive traction. So, yes, you're right, you know, deliberate increase in sales and marketing, and we continue to stay focused on making sure that the differentiation that we've built reaches the market as soon as possible, and we are able to leverage it towards growth. Looking at, you know, the overall outlook, as you know, you know, we do not provide guidance, but if our trailing 12-month numbers are an indication, then, you know, we are positively stepping into a zone where we feel comfortable that we will continue to create traction. And what we see, you know, as you also know that we have a lag effect in terms of revenue realization, our bookings of last half become, you know, revenues for this half. Our whole effort on sales and marketing is all setting up for creating ACV wins in this half, which will become revenues in next half, and so on, et cetera. So, clearly, you know, In a market which is dealing with a lot of uncertainty, we feel quite confident that we are doing the right things, we are being received positively, and we believe that that should result in the right kind of momentum. And from a GCC perspective, the recognition I talked about is on the back of, you know, several GCC wins where we have managed to deliver and show significant impact of innovation and AI. We continue to grow in that space. While I do not think we have disclosed the percentage of revenue separately, but it continues to be a growth vector for us because it provides us both engagement with some of the larger organizations which already have significant large GCC footprint, but more importantly, establish our differentiation through AI with those units.

Understood. Understood. Just, Nitesh, one last thing, just a follow-up on this, is that over the last one to two years, have we seen any increase in our deal durations, particularly the type of deals that we were bidding on earlier? Has that changed in any sense? Have we started to sort of do more implementation sort of work, which gives us more, you know, annuity-based of visibility in revenue? Just wanted to understand.

So, Anmol, our revenue mix has certainly changed quite positively over the last one and a half to two years, both in terms of, you know, the kind of work that we do, which is far more data, AI, and cloud-related, which clearly is in the more strategic spend areas of the client rather than, you know, just, you know, fill-ups or things happening in their legacy environments. And clearly, that has also increased due to the increase of channel play for us because we are working more with private equities. We are working more with hyperscalers and channel partners. And alongside that, you know, continuing to increase the AI component in our wins, which gives us, you know, more revenue per employee or more margin per employee. And we are beginning to see the green shoots of that. And of course, that mix will have to change quite significantly for it to show up as a line item on our overall results. But as we have started on the journey, we definitely see that uptick. It also creates, you know, a certain amount of stickiness. As to annuity revenues, we have started seeing some bit of annuity, but primarily being an engineering service provider and working on new platforms or innovation or migrations, etc., that portion of revenue is still not very high. But we are working towards creating more sustainable offerings, and that's where when I talked about agentic business operations, that's one of the areas we're beginning to see traction, and hopefully as we build our book of business over there, we might be able to have a reportable annuity revenue at some point of time.

Understood. Understood. Thank you. Thank you so much, Mr. Sparrow.

Thank you. We take the next question from the line of Ashish Das from Systematic Group. Please go ahead.

Hello. Hope I am audible.

Yes, Ashish.

Thanks for the opportunity. I have a question. If I look at, since you are joining, you have done a lot of changes within the organization. And also, you have done senior level hires. You have introduced new incentive structure. Also, partnership lead you are talking about. And the quality of deals has improved. But despite that, what we see is that organic growth remains very muted. And just wanted to understand your view why there is an impact on our overall performance. What is dragging that growth? And when we can expect, because we have done a lot of changes in the organization, and you are saying also that we are doing the right thing. So when we can expect some revival in that group?

So, Ashish, thanks for recognizing the changes that we've done, and they're all in the direction of catering to the changing market landscape and market needs, which are far more driven in the area of AI-led transformation and every company trying to figure out how they will remain more competitive or differentiated in their market space. But what you talked about as organic growth, we have consistently shown organic growth quarter of quarter over the last many quarters, and so is the story in this quarter as well. We have grown positively organically, so our wins continue to remain, you know, much higher than the number of project closures that happened because being a project-based business or discretionary spent business, We have to anticipate that the projects that we start will obviously come to an end, and hence, you know, we have to continue to win more than what closes in order to continue that growth trajectory. I think what I'm very pleased about is the fact that both our size of the wins as well as duration has continued to increase, and we have managed to provide almost 18% quarter over quarter growth despite or without any real headcount change, which also shows how the quality of the engagement and quality of revenues has continued to increase. We believe as the world is, you know, readying itself for more consumption of more AI and AI-based delivery, it will also allow us to take away more market share or wallet share from competition, which could then also provide us slightly larger numbers in terms of organic growth. But I, you know, I do not see it as a concern on that this is in any way, you know, not going to accelerate. Okay.

On the second question on that part only, so on the SCV, basically last quarter you mentioned that the growth in SCV was primarily organic, and there was no addition from the Novigo acquisition. During this quarter also, if I see the TKM, TCVs remains broadly similar to the previous quarter. And so how is the order in trajectory at Novigo? So any color on that part?

Well, our ACV wins or, you know, the growth itself is not influenced by the acquisition or inorganic addition. What that simply means is that both the organic component and inorganic component continues to play in tandem. We are, we, both organizations are continuing to play in the same manner. Novigo, of course, has an ongoing geopolitical challenge that they're dealing with, which is due to the geopolitical situation in the Middle East. But despite that, they continue to show strong deal wins all across the markets, including in the Middle East. And hence, you know, we are being able to operate in tandem in that zone and continue to increase our market traction.

Okay. And my last question on the margin side. So when we are going to take the wage hike and how, because we have already seen a lot of improvement on the margin over the last two to three years. So what is the near-term to medium-term margin outlook?

I'm sorry, I lost the first part of your question. When are you going to get wage hike?

Take wage hike.

Good morning, everyone. Oh, so you mean the wage hikes within the organization? Okay. So, we have implemented a wage hike in this quarter. We carry out bi-annual wage hike cycles. Our first cycle has already taken place, and the impact of that has already come in in this quarterly results. The margin uptake that you see is an outcome of essentially two or three factors. One, of course, is, like I said, revenue exchange where, you know, we are getting more, what I was saying earlier, you know, 18% increase year-on-year in revenue without any uptick in headcount basically shows that our revenue per employee has gone up. And that number may not be by itself sufficient to account for the entire margin increase because quite a large portion of it also comes from the forex or exchange rate or rupee depreciation, which we, you know, we cannot take for granted beyond our control. So we will, you know, we'll take benefit of it while it happens. But from a margin perspective, like I've guided in the past also, we continue to stay focused to stay in that 18, 18.x percent adjusted EBITDA on a sustainable basis, beyond which we will obviously continue to invest in our AI initiatives, sales and marketing efforts, And continue to build for the future in terms of capturing the whole AI-led growth.

Thank you so much for answering my question.

Thank you. We take the next question from the line of Sandeep Shah from Aquarius Securities. Please go ahead.

Yeah, thanks. Thanks for the opportunity. Mr. Sir, in terms of question again on the ACB on TTM basis, so last quarter it has shown a handsome increase in the first quarter. 2Q has been almost flattish. So is there a delay in vision making or is it more to do with macro where clients are not spending much on a discretionary side or a project side?

In fact, Sandeep, neither of the two, while delay in decision-making and all, you know, are on a continuous basis, you know, where clients are uncertain, they'll take some time, but that's an averaging out factor, and we consider it as a standard factor. The trailing 12-month wins, in fact, if you look at, continues to show that we are at least winning as much as we were winning in the past or slightly more. On a quarter-on-quarter basis, and if you... You know, look back at four quarters ago. Last year, we had had a few large deal wins in Q2. This year, again, we have had a few large deal wins in Q2, which has effectively filled up for what would have been an ACV, significant ACV uptick Q2 last year. And those, you know, deal sizes are quite promising, and hence, you know, we stay quite optimistic about the whole deal win and organic growth scenario.

Okay, okay. Any qualitative outlook on the growth about the ACV in the second half of this calendar year?

I wish that's a question I obviously keep asking myself. That's a million dollar question. More than even, you know, being able to, you know, whether I provide any forward-looking numbers or not. It's a very difficult question. And the only thing, Sandeep, that is certain is that we have the quality of pipeline is better, meaning average view sizes is better, the kind of work that the customer is asking us to do is better. What we are focused on is turning pipeline into revenue, and how much more we can turn pipeline into revenue is finally going to show up in this chart. But overall, positioning-wise, market recognition-wise, the reflection of that into pipeline is quite good, and that's something that we continue to work towards.

Okay, okay. And this related question, you said the wins of the earlier half

will form into revenues of the following half.

So, that can lead to a slightly better revenue traction in the second half because first half, ACB has been good versus the last year as a whole.

That is the revenue realization that is how we look at it, that these wins should translate into more revenue realization, and that we should be able to capture more real dollars out of the wins that we've made. So, yeah, I mean, that's what the entire organization is focused towards, that we have had these wins, we continue to deepen the engagement and increase our revenue realization from each of these clients.

Okay, and just the last question, data, AI, and cloud, as a percentage of revenue, can you share some numbers, how big it is for our system?

So, data and cloud taken together, while we don't share an explicit percentage, but, you know, it's something that we are quite focused on and happy about, that as an organization, we are now significantly data and cloud services driven organization, revenue numbers have crossed 50% and continues to go up.

Okay, okay. And here, the lumpiness, seasonality could be lower than the rest of the business, right?

You mean from data and cloud business? Yeah, yeah. Well, you know… I won't say seasonality, but this is still quite a lot of it is project-based, discretionary, spend-based business. This is not maintained or sustained. These are largely transformation or innovation-led initiatives, and hence, you know, they will still have the project life cycles. But, yeah, they're not driven by seasonal effects. They are obviously, you know, transformation waves that are happening across the industry, and we are being seen as a very credible player in that space. Oh, thanks and all of us. Thank you.

Thank you. We take the next question from the line of Dhir, from Monarch, Medport Capital Limited. Please go ahead.

Hi, can you hear me?

Yeah.

Following up on the previous question, can you provide some quantifiable guidance

on these events for upcoming quarters?

I'm sorry, there's some background noise because of which I lost last part of what you said, deal wins.

Uh, for the upcoming quarters, any quantifiable guidance on the deal wins for the upcoming quarter?

Well, like I said, very difficult to say in any way. We do not provide forward-looking guidance. All I can say is, like I was telling Sandeep, that the pipeline buildup is happening. The quality of the pipeline has improved, our positioning in the market has improved, which we believe all together should lead to a better conversion rate, and we will continue to report our deal wins as we do on a trailing 12-month basis.

Sure, thank you. That's it for myself. Thank you. We take the next question from the line of Sonal from Prussian Capital. Please go ahead.

Hi, sir. This is Sonal Minas. I hope I'm audible. Yes, Sonal. Yeah, thanks for taking my question. Sir, my question was with regard to the cost of revenue, the people cost. You mentioned that you've taken a half yearly salary rise. And if we compare quarter on quarter in dollar terms, your salary cost. It has actually come down, and even in rupee terms, it's also come down marginally. So, if you could give some subjective commentary on productivity gains, anything around what are you seeing in terms of implementation cycles from a productivity perspective, that would be great.

Sure. So, you know, we have not had a significant increase in headcount. In fact, on a year-on-year basis, it has largely remained flat. So despite, you know, adding a significant amount of revenue, we haven't increased our cost much. We have...

I was comparing quarter one to quarter two, and I was just saying quarter one to quarter two, because last year, same quarter, we didn't have the acquisition, I presume. So, that might not be comparable yet.

Yeah. So definitely, you know, the fact that we've increased revenues without increasing cost is also an outcome of productivity gains, which is resulting due to using AI and AI-led delivery. We are, you know, if you look at the whole Execo.ai, which is our Execo.ai studio website, we are able to deliver almost 2x productivity and 55% gains in turnaround time to our customers. We are being able to realize those kind of gains and productivity from using our Optima AI platform for the work that we carry out for clients. And that is, you know, reflected in the kind of productivity gain or revenue gains that you've seen.

Got it, sir. So, from a full year perspective, or let's say from a two, three year perspective, you seeing early signs of this productivity gain translating into more velocity for the revenue? Is there like, is that still a little far off or is that something which you see in the near term? Anything subjective there would be helpful.

Well, I'm certainly seeing signs of accelerating velocity, revenue velocity, and margin velocity there. Will it reflect within the year is difficult to say because, again, it will have to become a significant percentage of revenue to do that. However, you know, in the near term, I definitely see that happening because I am also looking at how fast the market is adopting and beginning to change. And as the market starts adopting and becoming far more accepting of AI-first ways of delivery and doing things, that will have the AI compounding effect to make sure that we see, you know, more AI-led delivery and more acceleration in that front. We certainly see that that should – that would result in a positive uplift on both revenue and margin per employee as well as, you know, effective acceleration from revenue perspective.

You got it, sir. Thank you. Thank you.

We take the next question from the line of Manish Chair from MNCL. Please go ahead.

Thank you for the opportunity. The first question will be regarding the growth. So, when do you expect CC revenue growth to return to 3-4% range, and what needs to fall into place for that?

So, constant currency growth coming to 3% to 4% range is something that we also keep tracking. And, you know, given... Given that the numbers are not very large, a small deviation obviously changes with, you know, 2% or 5%. But having said that, I think, you know, the biggest factor over there continues to be, you know, the kind of, you know, the decision cycles sometimes if a deal decision gets delayed or whatever. I think from a building up of pipeline, and especially with all the reusable assets and stories that we've got now in place, with all the experience we've had doing a bunch of these AI-led transformations, I think it's only a matter of time that we will actually start seeing that quite consistently. But again, you know, Like I said, you know, we will continue to focus on, you know, building that pipeline, which we are already seeing, and then effectively converting that pipeline to revenue to finally be able to kind of show that in numbers.

I understood. Secondly, I wanted to know how has your wallet share been increasing here in the top 50 clients, and what has been driving the expansion here?

So, WalletShare has certainly increased in top 50 clients, and part of it is obviously focused mining efforts led by a dedicated group of, you know, go-to-market leaders in the farming space. The main themes over there are, again, no different than what we've already talked about. Some bit of it is AI-led modernization, where we are engaged with these organizations. We have a better understanding of the legacy challenges that they're dealing with, which is allowing us to build better proactive propositions to help them migrate their legacy using AI. And in some of those cases, especially in the BFSI sector where we've been engaged, we also have a good and deep understanding of the process challenges that come into play despite being a highly regulated environment and how those banks or how those insurance companies operate. And our AI-led or AI business ops in both banking and insurance and other similar spaces is becoming a significant discussion topic and leading to some of that, you know, growth within that wallet share.

Okay, thank you.

Thank you.

We take the next question from the line of Deepak Malhotra from CapPro Capital Advisors, LLP. Please go ahead.

Hi, Nitesh. Can you hear me?

Yes, Deepak.

Thank you. While Nitesh tried to answer questions on the organic growth path, I see the numbers have definitely benefited from the no-eco acquisition.

Which was formally integrated by end of December quarter.

And you also mentioned about the agentic business operations in traction. So would you like to throw more light on what kind of additional deals you are getting through the Navigo acquisition part? And second part of the question is, are you still looking at any other inorganic opportunities if you find it or attractive to further hostels? Both going forward. Thank you.

Yeah, Deepak, so... When I've talked about organic growth versus benefits from Novigo, no doubt that adding Novigo to our portfolio has given us a boost, and that can clearly be seen or reflected between Q3 and Q4 last year, and then further Q4 to Q1 this year, from the fact that, you know, we did that integration middle of Q4 and completed that for the full quarter in Q1. So no doubt about that. But my point simply was that our organic growth engine has continued to perform. And while Novigo as a much smaller entity had a certain organic growth clip, we are currently matching the pace and both organizations growing in the same manner. Where Novigo acquisition has also significantly helped is in accelerating these whole agentic business ops type of offerings because the reason of acquiring Novigo was their deeper understanding of enterprise landscapes and enterprise business flows. So whether it is related to the insurance industry, banking industry, you know, travel and transportation industry, or some of these other related areas. Where they've had prior experience of working on business operations through RPA, low-code, no-code, et cetera, we have jointly been able to bring out a bunch of agentic business AI operations offerings, which is what we are seeing as the green shoots of, you know, both the pipeline buildup and some of the deal conversions. And from a go forward looking for any other acquisitions, like I've also said in the past, we as an organization have organic plus inorganic growth ambition and thesis. So we continue to be on the lookout. We continue to stay, you know, vigilant and actively receiving, you know, inbounds in terms of where interesting opportunities may lie. We evaluate those, but we are also, you know, very, very careful in terms of only acquiring where the capability is differentiated, the offering will help us create basically a positive or a creative effect, and that the organization is able to offer us both value as well as margin accretion. So we'll continue to stay on our lookout, and when the right opportunity arises, obviously, we would not be shy of taking action. But those things, you know, they happen few and far in between. So that effort is on. However, we right now are focused on making sure that we take full advantage of Novigo acquisition and continue to accelerate our AI position in the market. Okay.

One more follow-up in terms of the same. I think you talk of providing end-to-end system solutions. So, are you seeing any area where you need to further strengthen, either internally or inorganically, and in terms of your sales teams, which you still need to buffer up? Because if the objective is to achieve a higher 3% to 4% CC growth, which you just referred to, I mean, what additional steps we are taking? Thank you. Good.

So, you know, it's a little deeper answer. Deepak, you're right in saying that when we're talking about end-to-end solutions, and especially these days, they are more domain-intensive because they are, you know, now enabling organizations to transform their business, leveraging AI, and they are far more tech-intensive also because the conversations are very different. And what we are doing is, on one hand, we are deepening our domain capabilities, which is on core solutioning and delivery side. We are also increasing our domain expertise as well as technical expertise footprint in the go-to-market teams. So it is no longer enough to have just pure salespeople in the market, right? I mean, because that needs to be very quickly augmented, right, from the first discussion into a deeper technical and domain-led discussion. And those are the steps that we are continuing to take, investments we're making in both go-to-market as well as in the solutioning side. And then there will be a few areas that we do not do ourselves, and we continue to leverage ecosystem partners. As innovation is happening so quickly across areas, we also continue to strengthen our ecosystem partnership with startups and technology companies. That continues to give us that added differentiation when we build those end-to-end solutions for the market.

Thank you. Wish you all the very best.

Thank you. Last question from the next...

Thank you. We take the next question from the line of Ayush Shah from Alpha Accurate Advisors. Please go ahead.

Hello, am I audible? Yes, Ayush. Hi, sir. Congrats on a great set of results, and thank you for the opportunity. I just wanted to know if there has been any sort of deflation in the contract values because of AI, you know, you've had to pass through the productivity, because some IT companies are commenting on how renewal contracts are becoming, have slight effects on it, and do you see that effect going down further?

So, Ayesha, you know, while people have talked about AI deflation, I'm, you know, so far being, always been talking about AI monetization. And the primary difference is in, you know, while on one hand, we do wish to have higher annuity revenues and more sustained business. The positive effect of not having annuity and sustained revenue is that we do not have that deflationary effect because we're not doing multi-year contracts or year-on-year renewals where it is obvious that customers would, in fact, expect AI-led productivity gains, which could, for IT service providers, lead to some deflation. For us, the AI-based productivity is an inbuilt part of our AI-first delivery methodology. So what we bid for and what we win in the market is AI-led and already contains the elements of productivity gains that the customer is looking for. And a project revenue, which we have already won, then does not have deflationary pressures. In fact, you know, our average productivity is, revenue productivity is gone up. Our margins have continued to show improvement for a simple reason that we are able to continue to charge premium for delivering such AI-led productivity through our solutions.

Got it. Got it. Thank you so much.

Let's close.

Thank you. Ladies and gentlemen, with that we conclude the question and answer session. I now have the conference over to Mr. Nisish Bansal, Managing Director and CEO, for closing comments.

Thank you, Ryan. On behalf of our systems, I thank all investors and participants for the Q&A. And like I've always said, you know, your questions are insightful and definitely allow us to reflect on areas to focus on, which we continue to do. And hopefully, you know, we'll get to see you again in our next call.

Thank you. On behalf of our sessions, that concludes this conference call. Thank you for joining us, and you may now disconnect your line.