Strong top line and bottom-line growth for Persistent in Q4FY22 and FY22, resilient margins, Management aims to reach $1 billion annual revenue run rate over the next 4-6 quarters | Persistent System Q4FY22 Conference Call Highlights

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  • Q4FY22: Revenue of 1,637.8 Cr in FY22. Revenue Growth INR (47.1% YoY, 9.8% QoQ), EBITDA (49.3% YoY, 12% QoQ), PAT (45.9% YoY, 13.9% QoQ). EBIT Margin of 14%, same as during Q3FY22. PAT margin increased to 12.3% from 11.8% in Q3FY22. 
  • FY22: Revenue of 4,187.8 Cr in FY22. Revenue growth INR (36.4%), EBITDA (40.3%), PAT (53.2%).
  • Strong revenue growth in IT services was also led by broad-based growth across verticals and $4.7 million revenue contribution from full quarter consolidation of Software Corporation International (SCI) and Shree Partners and one quarter revenue contribution from the acquisition of Data Glove. The company’s organic revenue growth stood at 6.8% q-o-q and 36% y-o-y. For FY22 organic growth stood at 32.8%.
  • EBITDA margin improved by 34 bps q-o-q to 17.2% despite supply-side challenges, higher cost relating to acquisitions (+30 bps), and lower IP-led revenue. Margin headwinds were absorbed by operating leverage from strong revenue growth, lower subcontractor expenses as a percentage of revenue, recovery of old receivables, and currency tailwinds (+30 bps). Depreciation and amortisation expenses were higher due to recent acquisitions. Hence, EBIT margin remained flat sequentially at 14.0%, owing to higher amortisation expenses on account of recent acquisitions.
  • The order booking for the quarter ended on March 31, 2022, was at $361.00M in Total Contract Value (TCV) and at $261.90M in Annual Contract Value (ACV).
  • Quarterly Business offerings revenue mix: IP led (8.9%), Services (91.1%).
  • Quarterly Segment revenue mix: BFSI (32.4%), Healthcare and life sciences (20.7%), Software, Hi-Tech & Emerging Industries (46.9%). Growth rate (YoY)- BFSI (53.1%), Healthcare and life sciences (52.3%), Software, Hi-Tech & Emerging Industries (43.5%).
  • Geography revenue mix Q4FY22: North America (78.6%), Europe (8.4%), India (11%), Rest of the World (2%).
  • Human Resource: 18,599 in Q4FY22 as compared to 15,721 in Q3FY22. Attrition rate decreased from 26.9% in Q3FY22 to 26.6% in Q4FY22.
  • Management aims to reach $1 billion annual revenue run rate over the next 4-6 quarters, which implies a CQGR (Compounded quarterly growth rate) of 2.4% to 3.6%.
  • Restructuring of its large IP contract had $4 million impact on revenue. Management remains confident of delivering 10-15% revenue growth in its IP-led revenue.
  • The company has strong capability in shifting workload to Cloud along with development of industry Cloud.
  • EBIT Margin to remain at 14% in FY23 although management is aiming at growth which can have impact on the margins.
  • During Q4FY2022, the company completed acquisitions of Data Glove. This acquisition along with Shree Partners (consolidated from mid-November) contributed around $4.7 million in incremental revenue to PSL’s revenue during the quarter.
  • Key Risks 1) Any slowdown in macro environment; 2) hostile regulatory development against the current VISA regime; 3) delay in product launches; 4) stronger Indian Rupee and/or adverse cross-currency movements; 5) margin dilution from M&A activity; and 6) high client concentration could affect revenue growth.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks or MF.

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