5.27 earnings webinar of Sigility Limited. This is Siddharth Rangnekar from CDR India, and I shall be your host for today. As a reminder, all attendee lines will be in the listen-only mode, and there shall be an opportunity for you to ask questions after the presentation concludes. Please note that this webinar is being recorded. To introduce the management, we have with us today Mr. Ramesh Gopalan, Managing Director and Group CEO, and Mr. Srinivas Matapalli, Executive Vice President and Group Chief Financial Officer. Before we begin, I would like to state that some of the statements made on today's call could be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Quarter 2 and H1 FI27 earnings presentation that has been uploaded to the stock exchanges. I would now like to hand over the forum to Mr. Ramesh Gopalan to begin the proceedings of this webinar. Over to you.
Thank you, Siddharth. Good evening, everyone, and thank you for joining us for our Q2 FI27 earnings call. U.S. healthcare is still navigating steep cost increases overall. However, many of the national payers reported a significant improvement in their profitability in the first half of 2026 as a result of right-sizing of membership and decrease in medical utilization rates. In order to retain these margins, they need to continue to focus on managing medical costs, improving clinical and care outcomes, and driving operational efficiency. To help them achieve these objectives, they turn to large-scale domain specialist players like Sagility that combine deep healthcare expertise with AI capabilities and flexible partnership models and greater accountability for outcomes. We are pleased with the progress that we have made through the first half of FY27. The business momentum has been strong. We are expanding within our existing relationships. The clients we added in FY26 are growing well, and our pipeline is robust. Let me start with what we are seeing in the market. Demand remains healthy, and clients are more deliberate in how they make decisions. Clients are prioritizing investments that address immediate business pressures and show a clear path to measurable value. This is creating opportunities across our business, across our core business, managed services, and AI. For larger transformational deals, the buying process is more rigorous. More senior stakeholders are involved, and clients want a compelling business case, clear evidence of value, and confidence that their partner can execute at scale. Increasingly, they are choosing partners who combine deep domain expertise with practical AI and a willingness to take accountability for outcomes. Our pipeline reflects this shift. It includes more managed service deals and a healthy set of opportunities with Blues and other mid-market plans. This quarter, we won a large payment integrity engagement from a Big Ten health plan, covering over 10 million members. This win demonstrates our growing ability to secure larger, higher-value engagements. The deal has a minimum potential of over 10 million in ACV and could possibly be much more. In payment integrity deals, which are contingency-based, linked to payment recovery, revenue will build progressively over time. Our other managed services deals are also progressing well. By their very nature, they take longer to negotiate and close, but they lead to deeper, longer-term relationships. AI is now central to these transformation conversations with clients. We are seeing this momentum translate into new SOW events and more solutions moving into production. Our focus is on practical healthcare-specific solutions, such as Smart Tech Appeals Assist, Nurse Assist, and Claims Assist, which address real client priorities. We are gradually progressing from narrower AI use cases to a larger end-to-end workflow transformation using Agentic AI. For example, for a client, we are implementing Synchrony Claims Lifecycle, an agentic workflow for claims adjudication for multiple agents working in tandem with human in the loop, handle extraction from unstructured inputs, drive workflows basis SOP for each scenario, do reasoning and decisioning, all of this in order to adjudicate a claim adhering to all compliance requirements. Similarly, in RCM, we are deploying a synchrony RCM lifecycle, an agentic solution to handle denials, including identification, evidence collection, determination of appealability, and writing the appeal letters, again with humans reviewing at distinct checkpoints. We're also leveraging AI in how we go to market. It's helping us develop solutions faster, align more closely with client priorities, and have more strategic value-focused conversations with clients. We are making progress on our other strategic priorities as well, broadening our capabilities across the healthcare value chain and expanding our addressable market. The cashier acquisition announced last quarter is now integrated into our clinical practice. It strengthens our healthcare quality capabilities, particularly in the Medicare Advantage market, and gives us access to a broader base of mid- and small-sized clients. Yesterday, we announced the acquisition of Chiroc Health LLC. Providers are a clear growth focus for us, and Chiroc fits in line with that strategy. Chiroc's mid-cycle revenue solutions are a natural complement to Sagility's proven front-end and back-end revenue cycle offerings, helping Sagility generate improved financial and operational outcomes for health providers from patient access through final payment. I'll talk about Chiroc a little more in detail later. Along with this, we are also scaling our provider go-to-market team to accelerate growth in the provider segment. With this, let me get into the specifics of our Q2 and H1 performance. Consolidated revenue for Q2 came in at 20,321 million rupees, or $212.6 million, representing a year-on-year growth of 22.5% in INR terms and 12.2% in constant currency. Excluding the cashier acquisition, organic revenue growth remains strong at 22.2% in INR terms and 11.9% in constant currency. Operating profitability remains strong, with Q2 adjusted EBITDA at 5,353 million rupees, or $56 million, representing a year-on-year growth of 23%, with a margin of 26.3%, the highest in six quarters. Net profitability also remained healthy. Adjusted path for Q2 was $3,254 million, or $34 million, up 8.1% year-on-year, with a margin of 16%. Turning to the half-year performance, H1 FY27 was 39,956 million rupees, or $420.4 million, representing a year-on-year growth of 25% in INR terms and 13.7% in constant currency. H1 Adjusted EBITDA was 10,069 million rupees, or $105.9 million, growing 25.2% year-on-year with a margin of 25.2%, while Adjusted PAT was 5,951 million rupees, or $62.6 million, growing 18.9% year-on-year with a margin of 14.9%. Moving to new deal wins, deal ACV increased 18.2% year-on-year to $40.2 million, with wins across 31 existing clients and one new client. I'm also happy to announce that the board has approved an interim dividend of rupees 0.15 or 15 paisae per share to be paid in Q3. Before I move on, I'd like to highlight some of the external recognition we received this quarter. Industry analysts are increasingly recognizing our healthcare depth and our ability to deliver transformation at scale. Sigility received the 2026 Everest Group Elevate Honor for Voice of the Customer in the Healthcare and Life Sciences Service Specialist category. The Elevate Honors are grounded in Everest Group's independent research and recognized top-performing service providers based on direct client feedback. In addition to this, Avasanth named us as leader in the healthcare payer business process transformation. Our smart tech nurse's solution won a Stratus Award for cloud computing. On the people front, Sagility ranked 57th in the 100 best large workplaces in Asia 2026 by Great Place to Work, and we were also recognized amongst the top 10 India's best places for women in 2026. We also won a bronze Stevie Award for AI adoption with headcount growth in the U.S. On sustainability, we are proud to have won the Golden Peacock Award for ESG, which recognizes a commitment to responsible business practices. Together, these awards recognize our healthcare expertise, our progress on AI, and the culture of doing right for all stakeholders that our teams have built. Moving on to the next slide. In Q2 FY27, payers accounted for 89.9% of revenue and providers for 10.1%. Employee strength stood at 51,486 at the end of Q2. Q2. Quarterly voluntary attrition improved to 25.7% from 28.6% in Q1 FY27 and was also lower than in Q2 FY26. Moving to the next slide, the annual KPIs. At the end of Q2, we had 105 active client groups, and for the first time, each of our top 10 client groups are now more than $20 million in revenue on a trailing 12-month basis. Now, let me spend a few minutes on CHIROC, right? Moving to the next slide, we closed the CHIROC acquisition yesterday. CHIROC is a specialized provider of clinical documentation improvement solutions, along with medical coding, risk adjustment, and HEADIS and quality services. As you can see, the trailing 12-month revenue up to September 2026 was $13 million, with an adjusted EBITDA margin of 35.8%, and a net revenue retention rate of 115%. They have 750 employees, most of them in India, and a few of them in the U.S., and the consideration was $20 million that was paid up front with an ability to earn an additional $12.35 million payable subject to achievement of certain revenue targets over CY27 and CY28. As you know, Sagility has strong capabilities in the front-end and the back-end of the revenue cycle operations, and Chirag complements that with its mid-revenue cycle expertise. They have prestigious clients that include large health systems, physician groups, and value-based care organizations. Like I said, they have a 700-plus strong team of specialized coding staff in India, along with a small team in the U.S. Moving to the next slide, this shows the complementary nature of our capabilities. Like I said, while Sigility is strong in the front end, which is the patient access, and the back end, which is around denials and AR follow-up, Chiroc is strong in the middle office, which is around clinical documentation and coding. With the acquisition of Chiroc, our end-to-end capability in RCM is vastly enhanced. The complementarity of the services means that we have an opportunity to cross-sell each organization's services to the other's clients. The risk adjustment and HCC capture for risk-bearing providers and VBC companies pairs well with Sagility's care management offerings. The small footprint of the payer side in quality doing chart review can be extended to Hedis abstraction and care gap closures. So we are very confident that Chiroc will help us grow our provider business going forward. Moving to the next slide, a little bit on marketing and our thought leadership. This slide highlights how we are using marketing and thought leadership to accelerate our go-to-market solution. We're increasing go-to-market velocity. Our AI-led tools and workflows are helping teams bring together healthcare insights, sigility capabilities, and relevant proof points faster, improving the speed and quality of solutioning. We are focusing our thought leadership on issues that matter most to our clients. Our perspectives cover priority areas such as CMS0057F compliance, payment accuracy, claims, and the application of intelligence across healthcare operations. This is helping us engage clients around their immediate business priorities. We are also making our capabilities more visible and easier to understand. Through Core IQ, Sagility Synchrony, and Smart Tech Solutions, we are showing the market how Sagility brings together deep healthcare expertise and practical AI to address real operational challenges. With that, I'll hand it over to Amar to walk us through the financials, and then I'll come back for closing comments. Over to you, Amar.
Thank you, Ramesh. Good evening, everyone, and thank you for joining us. Let me begin with the financial highlights for Q2 and H1 F527. Q2 revenues was $20,320 million INR or US$212.6 million. This represents a year-on-year growth of 22.5% in INR terms and 12.2% in constant currency. Excluding our trade-seed acquisition, organic revenue growth was 22.2% in INR terms and 11.9% in constant currency. Our profitability also remained healthy. Adjusted EBITDA grew 23% year-on-year to 5,353 million with a margin of 26.3%. Adjusted PAT increased 8.1% to 3,254 million with a margin of 16%. Turning to the first half, H1FI27, revenue was $39,956 million, representing an year-on-year growth of 25% in IANA terms and 13.7% in constant currency. Adjusted EBITDA was $10,069 million with a margin of 25.2%, while adjusted PAT was $5,951 million. Cash generation also remained robust. In Q2, we generated operating cash flow of 3,182 million and a free cash flow of 2,760 million. For H1, the same numbers, operating cash flow was 6,343 million and free cash flow was at 5,176 million. This resulted in OCF2 reported EBITDA conversion of 64.9%. Collections also improved with our DSO declining from 80 days in Q1 to about 78 days in Q2. Overall, the first half delivered strong growth, healthy margins, and a robust cash generation. Moving to the next slide, let me talk about the sequential revenue movement in the context of our normal seasonality. The first half is typically the lower half of our annual revenue cycle, with AAP and open enrollment revenues concentrated in Q3 and Q4. Q2 revenues has increased to $212.6 million from $207.8 million in Q1, reflecting continued growth in our steady-state business. As we move into our second half, AAP and open enrollment volumes will begin to contribute revenue. We are working closely with clients to capture available volumes and grow the steady-state business. Our focus remains on operational readiness and consistent execution across key programs to help drive growth across a broader portfolio. Turning to our margins, we delivered our highest adjusted EBITDA margins in six quarters, Improving from 24% in Q1 to 26.3% in Q2. This improvement reflects stronger operating leverage, disciplined cost management, delivery efficiencies, and favorable for next-chain movements. This was despite the continued impact of statutory wage revisions and our annual compensation increases. Overall, our steady-state business continues to grow at a healthy rate, supported by the resilience of our operating model. As we execute through the second half, we will remain focused on balancing growth investments with sustainable profitability. Moving to the next slide. Stepping back a little from the quarterly performance, this slide highlights the progress we have made over the past few years. Revenue increased from $47,536 million in FI24 to $79,910 million on its reeling 12-month basis through September 2026. Over the same period, adjusted EBITDA grew from $11,436 million to $20,229 million, while adjusted PAT more than doubled from $5,896 million to $12,000. Currently, our profitability has grown faster than revenue, reflecting an improved operating leverage, disciplined execution, and lower finance and G&A costs. This performance demonstrates our ability to scale business while sustaining healthy margins, strengthening cash generation, and creating greater capacity to invest in a future growth. On this slide, turning to the other indicators, adjusted EPS increased to Rs. 2.62 on its reeling 12-month basis through September 2026, supported by continued growth in adjusted PACT. Our adjusted ROCE remains strong at 55.4%, reflecting disciplined capital allocation and the strength of our asset-laid business model. For H1-FI27, operating cash flow conversion was 64.9%, while free cash flow conversion was 52.9%. This was achieved while continuing to fund growth and acquisition-related commitments. The most significant development in this slide is our continued strengthening of our balance sheet. We moved from a net debt of $1,962 million at the end of FY26 to a net cash position of $1,127 million by September 2026. This provides greater flexibility to invest in growth technology and selective strategic opportunities. This slide is a little busy and it sets out the detailed consolidated profit and loss for Q20 and HYFI27. I have already covered the key moments of numbers of this slide, so I will just pause a few seconds to allow you to review these numbers. The only item I would want to highlight at this point is the impact of statutory minimum wage revisions. Quarter 2 reflects the full quarter impact of about 148 million compared to about 70 million in quarter 1. Moving to the next slide. This slide provides a bridge from our reported EBITDA and reported PAT to our adjusted EBITDA and adjusted PAT for Q2 and H1 FI27. For Q2, reported EBITDA of $5,252 million reconciles to adjusted EBITDA of $1,353 million after adjusting for acquisition-related donors, share-based payment awards, other income, and foreign exchange moments. Similarly, reported PAT of $2,842 million reconciles to our adjusted PAT of $3,254 million, adjusting for acquisition-related items, share-based payment awards, and amortization of intangible assets. For H1, the bridge also includes exceptional past service costs included in Q1. There is no corresponding exceptional adjustment in Q2. These adjustments are consistent with our historical presentation and provide a comparable view of the underlying performance. Moving to the next slide. This represented a forward-looking position and summarizes the expected moments relating to debt payment, share-based payment awards, acquisition awards, earnouts, and amortization of intangible assets. We continue to remain on track to repay our outstanding debt fully during 2020, which will further strengthen the balance sheet and reduce the finance costs. The key moment in this slide reflects the case state acquisition, scheduled debt repayments, and fornication moments. Turning to our balance sheet, again, the strength and flexibility of our financial position is a key takeaway from this slide. Our net cash position at the end of September 2026 gives us the capacity to fund our strategic priorities while retaining our flexibility for selective opportunities. We will continue to take a disciplined approach to capital allocation, balancing investment in technology, AI, and domain-led growth with appropriate returns to shareholders. Finally, let me close with our cash flow performance in the next slide. In for H1, cash flow performance for H1 to FI27. We generated an operating cash flow of 6,343 million during our first half. After fixed asset additions of 1,168 million, free cash flow was 5,176 million. Cash flow for acquisitions was $1,338 million. Net cash used for financing activities was $3,123 million, primarily reflecting the repayment of promoter borrowings and lease liabilities, as well as the dividend payment. Overall, cash generation remains healthy and provides the flexibility to continue investing in growth. With that, I conclude my remarks. Thank you for your time. I will now hand over the call back to Ramesh for his closing comments. Thanks. Ramesh, OD.
Thanks. Thanks, Amar. As we enter the second half of FI27, our immediate focus is AEP and open enrollment. This is a critical season for our payer clients. Across our key programs, our teams have been preparing for the expected increase in activity with a clear focus on capacity, operational readiness, and consistent delivery. We expect OE and AEP revenue to be slightly lower than last year, But in spite of this, we are continuing with our guidance of low double-digit organic revenue growth in constant currency for FY27. Building on the strong Q2 execution, including our highest adjusted EBITDA margin in six quarters, despite minimum wage increases in Karnataka and Telangana, we are raising our FY27 adjusted EBITDA margin guidance from our earlier 24% to 25% to a new 25% to 26%. With that, I'm happy to take questions, and for now, I'll hand it back to Siddharth.
Thank you. Participants who wish to ask a question, kindly click the raise hand icon at the bottom center of your screen. We will wait for the questions to assemble. I'll repeat. Participants who wish to ask a question, kindly click the raise hand icon at the bottom center of your screen. We shall wait for the queues to assemble. The first question comes from the line of Chirag Kachadia from Motil Aloswal. Chirag, your line has been unmuted.
Yeah. So, congrats on a good set of performance in terms of profitability. Just a couple of questions. The margin guidance which you increase, I mean, what levers has contributed during the quarter respective of the wage hike impact or wave bill impact to be able to, you know, post a good set of margins and also what gives you confidence that this margin trajectory will continue. And second, the acquisition which you announced on provider side, how large it can be from next two, three years perspective.
Yeah, I'll take the question on acquisition and I'll ask Amar to talk about the margin guidance in more detail. Like I said, we've mentioned in the previous calls that growing the provider space is an increased focus for us. We've done a couple of things. We have reorganized our go-to-market in the provider space. We are giving it additional focus by creating a separate go-to-market team in the providers. And the acquisition of Chiroc is also in line with that strategy. So like I said, Chiroc fits the gap that we had in the mid-revenue cycle. And so with this, it kind of gives us an end-to-end capability in the revenue cycle and pretty strong at all components of that revenue cycle. So, we are hoping to grow providers at a much faster clip than we've grown in the past. But Chiroc, like I said, the trailing 12 months is about 13 million. And Chiroc is also growing at a healthy clip. So, combined with our capabilities and our ability to cross-sell each other's services, I'm expecting the provider to pick up its growth momentum.
On the margin numbers, it's been a combination of very good operating efficiency that's kicked in during this quarter, plus a little bit of FX tailwind that we have got from quarter one to quarter two, and we also had a favorable geomix that happened. So I think considering what we have been able to achieve in quarter two, we do feel that the full year, we'll be able to continue to, you know, leverage those efficiencies. And we expect the effects also to remain at broadly the same levels. And that gives us a confidence to be able to raise our guardians to the 25 to 26%.
We move to the next question from the line of Rishi Jhunjhunwala from IIFL. Rishi, your line has been unmuted.
Yes, thanks for the opportunity. Just going back to that question around the acquisition of Chirov, and just trying to understand a little bit more on the longer term side. Historically, we have been predominantly on the fair side, and the provider has been around that 10% or percent. That is a space which has very different dynamics or industry dynamics in terms of being highly fragmented. You could still make decent margins or competition also higher. And there are a lot of assets which are otherwise available. So I just wanted to understand the current acquisition is mostly to augment whatever we have, or do you think there could be a thought process to increase the provider segment uniquely over a period of time?
Sorry, I didn't get the last part, Rishi.
Can you repeat the last sentence?
Yes, sir. Yes, sir. I just wanted to understand whether the Chiroc acquisition is only to augment whatever we have today, or can we potentially think of increasing the provider segment substantially for us over a medium to long term as a proportion?
Like I said, it's exactly to accelerate the growth in the provider segment, right? So like I've always maintained, provider market is also large. What you said is absolutely right. It's a lot more fragmented. But having said that, there are enough physician groups which are large in size, and there are a number of health systems which can be a good size in terms of revenue for us. And the capability that Chirog brings in, and not just the capabilities and even the current set of clients, like I said, includes certain large health systems, includes some very large physician groups, and very uniquely some value-based care organizations, right? And all of these have tremendous potential for us to cross-sell some of our services, not just on the provider side, but also on the services that we've specialized on the payer side, like care management and quality and so on. Overall, I've been telling all of you that, yes, historically, our focus on the provider segment has been lower than the payer because we've been heavily indexed on the payer side. But we wanted to change that and give equal focus on the provider. So along with the Chiroc acquisition, like I said, we've also made some changes in the go-to-market structure, created a very focused provider go-to-market engine. And so with a combination of these two, the idea is to accelerate the growth in the provider segment so that it's a much larger percentage of our revenues going forward. It will take some time because we are still, like you said, at 10% of our total revenues, but we want to accelerate that journey.
Got it, sir. The other thing is, I think you mentioned that, you know, the enrollment season this year, the overall impact on growth may be potentially slightly lower. I think you had mentioned somewhere around 6 percentage point last year, if I'm not wrong. So, yeah, I mean, any sense of how much newer could that be?
Look, look, the open enrollment, the AAP season has just started, right? So these numbers could change a little bit, but basis current visibility, we think, like you said, it was 6% of our total revenues last year. We think it may be lower by 100 basis points or so, but all of this could change over the
And lastly, on the margin, now that you've upgraded the margin guidance for the year, But slightly from a, you know, two to three year perspective, do you think this is where we should structurally be? Or do you believe some of it could potentially be utilized to either gain more volumes of business or offset any kind of AI related productivity benefits that typically companies have to pass through? So, just wanted to understand whether this is more
for this year or structuring. No, I mean, historically, our response has been that, look, we've always done between 24 and 26 percent, and we are happy to be in that range while trying to accelerate our top-line growth. So broadly, that's still the sentiment, right? So the improvement in operational efficiency coupled with FX tailwinds has increased our margin performance in Q2. On the AI front, like I said, a lot of the productivity gains that we gain from AI will basically be passed on to our clients. However, we will still retain some portion of those benefits, obviously, to fund our investments and to compensate for the operating cost of some of those. But that's also likely to improve a margin a little bit. So there is a potential to increase margin, but a large part of the AI-based benefits are things that will flow back to the client. So to answer your question more specifically, I think it'll still continue to be in the 24% to 26% range, but over a period of time, it could marginally increase if we manage to retain the benefits of AI.
So thank you. Thank you. We take the next question from the line of Dipesh Mehta from MK Global. Your line has been unmuted, Dipesh.
Yeah, thanks for the opportunity. I'll answer a couple of questions. First, about on the provider side, I am referring to the organic business. It seems to be slightly weaker even on a YOY basis. Can you help us understand, because earlier we were hopeful about growth returning in that business after four or five quarters of relatively absolute number remaining, let's just try to understand what is working there. Second on the zero acquisition, if I look the revenue trajectory over the last three years, remain relatively weaker, but TTM revenue is showing significant expression in growth compared to last calendar number reported. So, can you help us understand what led to growth and the sustainability of that growth momentum, and how one should understand medium-term growth profile of that business. And related question on the other, we indicated adjusted EBITDA margin
You asked a whole bunch of questions.
I'll leave the adjusted EBITDA question to Emar,
but I'll try and answer some of your other questions. Hopefully, I got them all. Yeah, on the Chirok acquisition, you're right. There was a dip in revenue, I think, between 23 and 24 because volumes from one of the clients went down. But subsequently, growth has been back on track. And if you see the difference between CY25 and the TTM numbers that we've presented, you can see that the growth has been pretty good. Right. We expect Chirog to continue to grow at a healthy clip. I mean, I'll possibly give more guidance, hopefully, towards the end of FI27. We just closed the deal yesterday. But overall, from the other question, yes, our provider business has also been in the 10 to 11%. And while we've grown clients and we've grown revenue, we've also had some revenue tapering off from some discrete projects from one of our provider clients. And so that's offset some part of the growth that we had in the provider business. And that's why you see that the rate of growth in the provider has been lower than that of the payer. And that's what we are trying to reverse going forward with the acquisition of Chiroc and the combined capability that Sigility and Chiroc now have. I'll ask Amar to answer the adjusted EBITDA question. Historically, we've given you the list of adjustments we make, but it's there in one of the slides. Amar, can you just...
It's there on slide 17, the reconciliation between adjusted EBITDA and reported EBITDA.
It is like us only. There is no other adjustment in their adjusted EBITDA model.
No, there is no change that we have done this particular quarter. It continues to remain the same.
I am asking for the equate entity, adjusted EBITDA margin. The way we define adjusted EBITDA, they also follow the same way, 35.8?
Yeah, yeah. We have equated what we report to what they do broadly. There might be minor differences, but broadly, yes. The 35.8 is broadly in line with what we have.
And whether it would be largely linked with kind of revenue they make or last three years also margin remain within that range, upwards of 30 percentage?
The margin is broadly meant the same.
Thank you. We move to the next question from the line of Ranjit Thorat from Axis Capital. Your line has been unmuted, Ranjit. Sorry, Rohit. My bad.
Rohit
Analyst — Axis Capital
Yeah, thank you for the opportunity. So you mentioned that your endeavor is to grow provider segment much faster than payer going forward. But inherently, see, there is a conflict of interest between payers and providers. Like, if one entity is benefiting, the other one loses. So is there, do you believe there is any friction from clients for giving business to outsourcer, Which is operating in both segments? Or are they more comfortable giving RCM business to pure play RCM players only? So could you give some color on that? Or that really doesn't matter? Like, clients usually don't have any issues due to this.
Yeah, so Rohit, the first hypothesis that if one wins, the other has to lose is not true, right? So the work that we do is we help clients run their operations more efficiently, right? So that's what we do for payers. That's what we do for providers, right? Each party can run their operations more efficiently without it having to have a negative effect on the other, right? Right. In terms of, I mean, we've had our provider business for almost 15 years, along with the payer business, and there is no inherent conflict because it's not that we bypass the traditional ways of how payers and providers work with each other. On the other hand, the fact that we work for both providers and payers have, in fact, helped us bridge some of the issues between providers and payers in terms of the friction around claims, denials, and delays in payments and so on. So we've brought them together and we've devised new ways of working by which both parties could gain efficiency. So there's absolutely no reason why we can't grow both of the businesses together. And like I said, we've run both those businesses for at least 15 years together.
Rohit
Analyst — Axis Capital
Okay, second question is regarding Chiroc acquisition. If I look at revenue per headcount for Chiroc, and if I compare it to the provider focused player which is listed in India, the revenue per headcount is significantly lower compared to your another listed peer in provider space. So what could explain such a significant difference in that metric?
I mean, I can't answer the question very specifically at this point in time. I mean, we can come back to you once we understand more details. However, from our diligence, the pricing for their services, when we did our commercial diligence, our understanding is the pricing is at market, right? So, it's not that they are much lower priced for their services compared to competition. But beyond that, if you say that the revenue per headcount is lower, that's something that we need to look into and come back later.
Rohit
Analyst — Axis Capital
Thank you for the opportunity.
Thank you. We next move to the line of Vamsi Krishna of Kodak Institutional. Vamsi, your line has been unmuted.
Sure. Yeah. Thanks. Thanks, Ramesh. And really strong execution this quarter. So my first question was on your starting comments that there has been some let up in the medical costs. At least they have stabilized and not increasing for most of the providers. And then it appears that the star ratings are also favorable for some of the large nationwide payers. So does that mean that the extent of productivity or the cost pressures that the suppliers would have had to share with the clients, would that be lower compared to what it was in the last couple of years?
I understood your question. So, is your question, will the cost pressures on my clients be lower? Is that what you're asking?
No. So, since the medical costs of the clients are stabilizing, or at least coming off slightly, does it mean that the vendors such as you will have lower cost pressures in engagements?
Look, this is all relative, right? So like I said, while the medical utilization rates have eased off a bit, that's also because of some recalibration of membership and so on. The focus continues to remain cost takeout from operations. And so that's something that most of our clients are still focused on, right? So their need to take out cost and take the help of partners like us has not gone down. In terms of pressures on us because of that, I mean, those pressures will always be there because now with the availability of AI and other transformational opportunities, clients are expecting service providers like us to take out more cost from the work that we do. So I don't think that is going to go away. And like I said, even with that, we still have ways to help clients take out cost while not impacting our margins. And as you can see from our numbers, that's not really impacted our margins.
Perfect. Thanks for the response. And second is on the Chirap acquisition. So just wanted your thoughts on the mid-cycle RCM space, where it appears that there are some elevated pressures of new competition or even disruption from AI appears to be a little elevated compared to the back end or the other parts of the RCM. So, I just wanted to get your thoughts on the asset that you have acquired. So, what led to that? Is there some commonality in clients which has led you to acquire this asset?
No. So, answer to the last question, no. There are no common clients. The answer to your first question, yes. I mean, AI is a disruptor in almost any aspect of operations, right? So, when you say disruptor, AI can improve efficiencies in almost every single thing that we do for either a payer client or a provider client. And what Chirok does is no exception. Having said that, even in coding, the areas that are most vulnerable are outpatient coding, whereas clients still today feel that inpatient coding is something that AI is still not very good at, right? And so while AI will continue to play a role in terms of improving the efficiency of the work that we do and Chirog does, it is unlikely to eliminate it completely, right? So we've had a lot of conversation, not only with Chirag, but also some of the clients. And they continue to believe that the services that Chirag provides will continue to be relevant, even into the future.
Good. And last question, have you included Chirag in your guidance? Or is the load, double-shot growth guidance entirely?
No, that's organic growth. But yes, Chirag will be, Chirag and Kersheed will be on top of that.
Thank you. We move to the next question from the line of Akshat Agarwal from Jefferies. Akshat, your line has been unmuted.
Thank you, gentlemen. Congratulations on a good side of numbers, Ramesh Frini. I had a couple of questions. Firstly, following up on Rishi's question on open enrollment. So if the contribution is going to be 100 basis points lower, given that your overall revenue base has expanded year on year, effectively, you're talking about flattish revenues from open enrollment on a year on year basis. Is that understanding correct?
So, probably, yes, flattish revenues. Amar, is that right? It may be a little less than flattish.
We are marginally lower than flattish, I would say, at this point of time. As Ramesh said earlier, obviously, it's still the early start of the season. We might pick up, but at this point, EIT is slightly lower.
Perfect. The second bit is, last quarter, you talked about minimum wages being raised in Telangar and Karnataka and its impact on your margins. And from what we understand, it's not been fully implemented, right? There has been a stay which has been put. So when do you expect this to be implemented, if at all? And if it's not going to be implemented, can there be potential upsides to our margin guide? That's the first question. Second one is, there is a consistent decline in your delivery centers. Last year, it was 34, NFI 25. March 26, it fell to 31. And this quarter, we're seeing the number to go down to 28. And is there any potential upsides to further reduction in delivery centers? And if that's the case, what kind of margin expansion could that lead to for you guys?
So, on the minimum wage, obviously, the impact has been fully baked in in our numbers. At this point, what we have talked about in terms of guidance reflects the impact. You know, from end May and 1st June, respectively, for Karnataka and Telangana. Yeah, I mean, if there is some change in what has been called out, I mean, there could be a potential upside of those numbers. But at this point, we are fully baked in those numbers. On the other point on facilities, some of those changes in the numbers is also a reflection of, you know, the way we are counting our facilities. For example, if there are multiple facilities in one sort of park or one campus, we are now counting that as one. So, if you look at the number of seats, that's definitely continued to increase. The number of sites might technically be down more because it's, you know, multiple sites are counted as one now because it's in one campus.
I see. You know, the reason I was making this point is because there is a sharp reduction in your lease liabilities and right of use assets. So I thought maybe some lease facilities are being let go of, which is driving this and which shows up in the delivery center numbers as well. Yeah.
There are a couple of sites that we had closed earlier in our, you know, place like our Jamaica operations. But again, as I said, it's more from a consolidation perspective and increasing our footprint in the same site. So, there is also a temporary movement from our, you know, to short-term leases for a few of the sites, as we are in the process of consolidating and maybe moving to newer sites. So, that would reflect a short-term revenue and not be part of the lease assets.
Perfect, sir. That's all from my side. Thank you so much. And congratulations on a good set of numbers again.
Thank you. We move to the next question from the line of Sujai Sawan from Prabhudas Leeladar. Your line has been unmuted, Sujai. Sujay, you can go ahead. Your line has been unmuted.
Yeah, thank you for the opportunity. Now, most of my questions have been answered. So, I'll just focus on the provider segment. Now, we have said that we want to explicitly increase our provider segment. Now, this has been hovering for about 10% for quite some years. So, is there any goal or any internal target that we have said that we want to expand to? And taking it forward, what are the sort of investments that we would like to make And any impact on the margins, if there are any?
I mean, there's no explicit target that I can give you at this point. Like I said, we want to accelerate the growth in our provider segment. And we want it to be a higher percentage of our total revenue. But beyond that, there is no explicit two-year or three-year target that I can give you at this point. In terms of investment, investment in Chirac is the big investment, right? So as you know, one of the things in wanting to grow is also to plug any gaps in capability, which is what Chirag will help do for us. So that's a big investment that we've already done. We've also, like I said, basically created a dedicated go-to-market team. These investments are not going to, I mean, investments in sales and marketing is not going to have a major impact on our margins, right? So all of that is baked into a regular SG&A. So to answer your question, no, it's not going to have a direct impact on the margin. But the aim is to accelerate the growth in the provider space. Yes.
Yeah. Okay. Thank you. That's it from my side.
Thank you. We move to Vibor Singal from Duvama. Vibor, your line has been unmuted.
Yeah. Hi. Thanks for taking my question. And congrats to the team for a very solid performance. So, Ramesh, just a couple of questions from my side. On the ACV number that we have seen, that stands quite solid this quarter. So, just trying to get a hang of this number, Does this include deals from the payers as well as the provider segment? And if yes, is there any major difference between the kind of deals that we win in payers and provider segment? Are the provider deals, let's say, longer duration or shorter duration? Are they higher margins? Do they have a higher GNI component? Or anything on that, any color on that would be really helpful. And my second question is on the acquisition. As you mentioned, the Chiroc Health acquisition that we've done is in the middle cycle of RCM providers that we're looking at. So taking that into account, given that we're not necessarily acquiring revenues, just we're acquiring capabilities, any other white spaces that come to the mind immediately that you would be probably looking for in terms of acquisition in the near to medium term?
So, yeah, I forgot the first question was, sorry.
The deal wins across payers and providers.
No, so look, the deal wins in the payer side, look, is a combination of large and smaller deals. When you win additional opportunities with existing clients, some of them could be a small tuck-in deal. Like the payment integrity deal that I spoke about, over $10 million in ACV. That's a very large deal. However, the deals on the provider side tend to be smaller so far because we either get the front end of the RCM for a mid-sized provider or the back end. So they tend to be smaller in size. Having said that, with the new capability, I think we can go for a slightly larger deal size on the provider side also. But historically, the provider deals has been smaller. Margin, I don't think is very different between a payer and provider business, right? So roughly, I would say the gross margin level plus minus 200, 300 bps would be the difference. And that's very deal specific, right? So we could make slightly higher margin on one deal and lower margin on another. But structurally, there is not a big difference in the margins between the two segments. The other question that you asked was, sorry. The white spaces in the portfolio that you might have. So at this point, look, at this point, we continue to look at if there are things in the clinical space that we can continue to fill gaps in, right? But broadly, I would say both payer and provider side, we are reasonably, from a capability point of view, we're at a really good spot, right? So while I'll never say no to another acquisition if it comes with either a specific capability that we don't have or a set of clients that are attractive, at this point, I can't tell you any specific capability that we are still looking to specifically fill.
Got it, got it. And just as a follow-up bookkeeping question, in the $40 million TCV, what part would be the payer and provider if there is a break-up, a broad number, if we could have?
I don't have that number offhand, but we can get back to you.
Sure, I'll take that offline. Great. Sure, thanks for taking my questions and wish you all the best.
Thank you. We move to the line of Madhu Chanda Day from MC Pro. Your line has been unmuted, Madhu Chanda.
Hi. Good evening and congratulations on a very solid quota. My question is on the Chiroc acquisition. So I wanted to understand from you qualitatively, what are the inefficiencies that, you know, Sagility plans to address to start with in Chiroc? Because the margins of Chiroc, as you have mentioned, is already pretty high. It's a very decent margin. So, basically, what are the low-hanging fruits that you plan to address to start with?
So, the simple answer to your question is this is not an acquisition where we want to try and improve the margins of Chirag, right? So, that isn't the goal of this acquisition. The acquisition was to increase our capabilities in the revenue cycle. So the main focus of this acquisition is the revenue synergies and how we can use this complementary set of skills to grow the overall business, right? So that's going to be the focus. Along the way, if there are any efficiencies that we can get through shared services and so on, we'll obviously look at those efficiencies. But that's not the prime focus of this acquisition. The focus, like I said, is more on revenue synergies and trying to grow the revenue line.
Got it. So, in terms of, say, if I may just ask this question, you mentioned that $13 million was a trading 12-month revenue. So, what kind of potential does it have, you know, what kind of scaling of potential is there for this entity under Sigility?
Look, like I said, first, to an earlier question, I said we don't have any overlapping clients, right? So the very first potential is whether we can cross-sell each other's services. We don't do the set of services that Chirag does today, and Chirag doesn't do most of what we do, right? So is there a potential to cross-sell each other's services to each other's clients, right? So that's the first potential. And two, when you combine the mid-cycle along with the front and the back offers, and you have an end-to-end revenue cycle capability, what kind of new opportunities that it presents to us, right? Can we increase the size of deal wins to the earlier question? If I have an end-to-end capability in RCM, can I leverage that to increase the deal win sizes, right? So those are the obvious tracks that we'll be working on. The one thing that I also said is it also comes with some capabilities that are of use and value-based care organization, which is also then transferable to payer organization. While the focus of Chiroc was mainly to accelerate a provider journey, some of the capabilities that Chiroc has is also something that we can take to some of our payer clients. But that's another track that we'll be working on. So, all of these has tremendous potential. But like I said, the acquisition closed yesterday. We'll come back and give you a better set of guidance as we go along.
Thank you. We move next to the line of Ruchi Mukija from ICICI Securities. Your line has been unmuted, Ruchi.
Congratulations on a very good execution and automation team. My question was on the acquisition and your provider business. Could you help us identify the client characteristics for your provider business and how for the combined entity, the client profile would look possibly the skew between large hospital systems and acclimations?
So, Ruchi, it's not that we don't have the nature of the clients that Chirok has. We also, Sagility also has large health systems as clients. Traditionally, we didn't have too many physician groups as clients. Chirok also has physician groups as clients. So that could be one nature of client group that will be new to us. But Sagility has large health systems as clients. It has got ancillary providers like lab companies, durable medical equipment companies, radiology companies as clients. Whereas Chirok is more focused, like I said, on large health systems, physician groups, and some value-based care organizations, which is, again, something that we don't have in our client base. So there are a couple of client groups that may be new to us, but then health systems is something that Sagility also has in its portfolio.
And going forward, as we build on our provider practice, do you expect our intensity for solutioning and maybe a platform built up for provider go up?
Yeah, from a capability point of view, like I said, it gives us more of an end-to-end capability. We are also, I spoke to you about the Synchrony Lifecycle Solutions. We are also using AI to improve the efficiency of what we do in the RCM space. We will extend those capabilities to the mid-cycle through Chirac. So both from a service capability as well as from a technology capability, we think as a combined group, we'll have a lot to offer to provider clients.
Got it. Thank you and all the best.
Thank you. Thank you. That concludes the last of the questions for the day. On behalf of Sigility, we thank you for your time, and you may now log off the event.
Thank you. Thank you, everyone.
