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Persistent Systems cautiously optimistic for Q1FY21; key highlights of concall

Now management sees FY21 to be better placed in total expenses point of view than FY19 & FY20.

May 07, 2020 / 02:26 PM IST
6. Persistent Systems: Persistent Systems promoters increased have their stake in the company to 31.91 percent from 30.47 in the previous year. The stock has given 8.49 percent return YTD (Image Source: Moneycontrol)

6. Persistent Systems: Persistent Systems promoters increased have their stake in the company to 31.91 percent from 30.47 in the previous year. The stock has given 8.49 percent return YTD (Image Source: Moneycontrol)

 
 
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Persistent Systems has reported a 4.7 percent sequential decline in Q4FY20 adjusted profit at Rs 83.8 crore on revenue of Rs 926.4 crore that grew by 0.4 percent QoQ.

Dollar revenue dropped 1.8 percent quarter-on-quarter to $127.1 million in the quarter ended March 2020.

Now management sees FY21 to be better placed in total expenses point of view than FY19 & FY20.

The company is seeing customers asking for discounts and also seeing delays in a few new or second phases which are expected to impact some business. However, the company has not seen any large scale degradation in businesses.

For Q1, the company remains cautiously optimistic for the quarter.

Here are the highlights of Persistent Systems' Q4FY20 earnings call compiled by Narnolia Financial Advisors:

Management Participants: Anand Deshpande - Chairman & MD, Christopher O’Connor - CEO and Executive Director, Sandeep Kalra - Executive Director & President - Technology Services, Sunil Sapre - Executive Director & CFO

Alliance Business

The company saw ups and downs during the quarter. While there was strong growth in certain categories and continued growth in resellers business, the company saw a change in royalty structure which is an issue and is planning to work out.

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The company is trying to make more balance with top clients by levering more services. The company is now expanding more with ISV or systems providers.

Technology services unit

Q4 came as very strong for TSU with a growth of 3.7 percent QoQ on a back of 6 percent QoQ. Digital revenue grew sequentially by 7.1 percent QoQ. The booking for TSU remained healthy.

From vertical performance, BFSI grew 5.5 percent sequentially, followed by IP business, Hitech grew 5 percent QoQ. Healthcare, life science fairly remained flat QoQ.

From the service line, the salesforce service line continued the growth momentum by delivering 13 percent QoQ. The company saw strong traction from cloud and infrastructure business.

The top TSU customer grew by 3.9 percent, top 5 grew 4 percent and top 10 grew 2.8 percent QoQ.

The company is seeing a wallet share rise. The company's forward-looking technologies will continue to support growth in this unit.

The company has started to close deals in the current quarter with Red Hat expansion that will provide revenue stream in the coming years.

The company continued to grow large accounts and saw fairly large multi-year deals. Added 7 new logos in the quarter.

Margin performance

The sales and marketing expenses came lower by 1 percent due to few exits at the end of last quarter and also due to some adjustments. The company expects credit loss due to COVID-19 crisis and made provision of Rs 3 crore particularly for small customers who may see liquidity crush.

The company has provided Rs 48.5 million in provisions against IL&FS provision, taking it to 100 percent.

EBITDA margin was at 13.8 percent versus 13.4 percent last quarter. Currency benefit during the quarter was 50 bps points.

Outlook

FY20 margin was hit due to restructuring changes which came with a cost. The rebranding exercise is completed. The company is seeing levers and board members have taken a temporary cut in pay from 20 percent to 25 percent. Likewise, other levers will be seen by managing cost, squeezing travel cost which will support margins. Now management sees FY21 to be better placed in total expenses point of view than FY19 & FY20.

The company is seeing customers asking for discounts. Also seeing delays in a few new or second phases which is expected to impact some business. However, the company has not seen any large scale degradation in the businesses.

For Q1, the company remains cautiously optimistic for the quarter.

Persistent is working on patient engagement for the first digital front door with one of the largest pediac healthcare in the US.

No immediate plans for buyback.

Moneycontrol News
first published: May 7, 2020 02:20 pm

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