R Systems International Limited
Q2 FY25
Call date · August 14, 2025
1 · Management Commentary
Key Positives
- Revenue for Q2 FY25 at INR 462 crores (USD 54 million), up 4.4% QoQ and 6.9% YoY in INR terms.
- Adjusted EBITDA at INR 79.7 crores (USD 9.3 million), up 11.7% YoY; margin improved to 17.3%.
- Adjusted PAT at INR 46.4 crores, up 53.4% YoY; adjusted EPS at INR 3.9, up 53.3% YoY.
- Strong deal momentum with multiple large, multi-year, multi-million dollar wins across AI, cloud, and data.
- Continued traction in Agentic AI and GenAI deployments; positive client endorsements.
- Mexico delivery center scaling up with five active clients.
- Broad-based growth across geographies and verticals; 75% revenue from North America.
Key Negatives
- Utilization declined to 82.6% (down 120 bps from peak) due to headcount addition and large deal transitions.
- DSO increased to 68 days (vs. 62–64 days historically) due to ERP rollout and billing delays.
- Gross margin declined to 36% (from 36.7% QoQ) due to investments in AI and headcount for new deals.
- No new leadership hires in the quarter; CSO hiring still in process.
Forward Guidance
- Capex: No explicit new capex plans disclosed; continued investment in AI, cloud, and data capabilities.
- New products/segments: Enhanced focus on Agentic AI, cloud and AI cost governance (with Mavvrik partnership), and FinOps offerings.
- Expected client wins/losses: Large deal pipeline remains strong; broad-based client additions, including in Mexico and via Blackstone channel.
- Revenue/margin outlook: Confident of maintaining high-16s EBITDA margin; any margin above 17% will be reinvested in growth.
- Strategic initiatives: Ongoing readiness for inorganic growth (INR 2,000 crores loan/NCD enabling for acquisitions); focus on annuity-based revenues and scaling AI-led offerings.
2 · Q&A Highlights
Q 1 (Composite): What is the average size and expected run-rate from recent large deal wins?
A (Management):
• Large deals are typically USD 2–5 million per year over 2–3 years; aim to create million-dollar-plus clients from these wins.
Q 2 (Composite): How is the AI business scaling and what is the outlook for AI-led revenues?
A (Management):
• Over 120 AI projects completed last year; rapid expansion in AI deployments and case studies; shift from POCs to productive deployments; AI to be a significant growth driver.
Q 3 (Composite): Are discretionary spends and client activity improving, especially among start-ups and SaaS/data platform clients?
A (Management):
• Platform and SaaS/data clients are spending aggressively on AI/ML; some smaller clients are pausing/re-architecting but overall discretionary spend is expected to open up further.
Q 4 (Composite): Can the current growth momentum continue into Q3 and Q4, and how will seasonality (furloughs) impact?
A (Management):
• Confident of continued growth in Q3; Q4 will have typical seasonal headwinds (furloughs/holidays), but strong pipeline and deal momentum may offset some impact.
Q 5 (Composite): Has the average deal size increased meaningfully over the years?
A (Management):
• Average deal size has increased 1.5–2x vs. past; approaching USD 1 million average, but not crossed yet due to large number of smaller deals.
Q 6 (Composite): Is growth broad-based or concentrated in Blackstone channel/particular geographies or verticals?
A (Management):
• Growth is broad-based across geographies and channels; Blackstone channel is important but still single-digit % of revenue; Americas, Europe, and APAC all contributing.
Q 7 (Composite): What is the purpose and timeline for the INR 2,000 crores loan/NCD approval, and what are the acquisition targets?
A (Management):
• Blanket enabling provision for future acquisitions, mainly in product engineering, data, AI, and cloud; focus on North America–India corridor, but open to LatAm/Eastern Europe delivery; not limiting on size if digestible.
Q 8 (Composite): What is the outlook for utilization, headcount, and annuity-based revenues?
A (Management):
• Utilization dip is temporary due to transitions and AI investments; expect normalization as new deals ramp; conscious focus on increasing annuity-based, multi-year revenues.
Q 9 (Composite): What is the expected RSU expense run-rate?
A (Management):
• RSU expense to average INR 5.5–6 crores per quarter going forward.
3 · Other Key Numbers
- Q2 FY25 Revenue: INR 462 crores (USD 54 million)
- Q2 FY25 Adjusted EBITDA: INR 79.7 crores (USD 9.3 million), margin 17.3%
- Q2 FY25 Adjusted PAT: INR 46.4 crores (USD 5.4 million)
- Q2 FY25 Adjusted EPS: INR 3.92
- H1 FY25 Revenue: INR 904.5 crores (USD 105.1 million)
- H1 FY25 Adjusted EBITDA: INR 156.6 crores (USD 18.2 million), margin 17.3%
- H1 FY25 Adjusted PAT: INR 89.8 crores (USD 10.4 million)
- Gross margin: 36% (Q2 FY25)
- Utilization: 82.6% (down from 83.9% peak)
- DSO: 68 days (vs. 62–64 days historically)
- Cash and bank balances: INR 203.3 crores (as of June 30, 2025)
- Receivables (including unbilled): INR 427.9 crores
- Total equity attributable to shareholders: INR 692.5 crores
- RSU expense: INR 4.9 crores (Q2 FY25), expected run-rate INR 5.5–6 crores/quarter
- Depreciation & amortization: INR 15.8 crores (Q2 FY25)
- Interest expense: INR 2.1 crores (Q2 FY25)
- Other income: INR 1.4 crores (Q2 FY25)
- Exchange rate (Q2 FY25): USD/INR 85.56; EUR/INR 96.99
- Forward cover: USD 36.75 million at INR 86.77; EUR 1.64 million at INR 96.05
- Tax expense: INR 23.3 crores (Q2 FY25); effective tax rate ~24% (due to capital gain), otherwise ~28%
- Headcount addition: 190+ associates in Q2 FY25
- Top 10 clients: 24.6% of revenue; top client: 6.1%; top 3: 13.1%; top 5: 17.3%
- Geographic revenue split: Americas ~75%, Europe ~9%, SE Asia ~13%, India/others ~3%
- Non-recurring income: INR 40.9 crores (profit on sale of NOIDA assets)
- Average working capital interest rate: 8–9.25%
- Planned acquisition funding: INR 2,000 crores enabling, INR 275 crores NCD approved (not yet utilized)
- Mexico delivery: 5 active clients
- No new leadership hires in Q2; CSO offer rolled out, joining expected in Q3