R Systems International Ltd (RSYSTEMS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the R Systems Q3 FY '26 conference call. As a reminder, all participant lines will be 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 an operator by pressing star, then zero on your touchtone phone. I now hand the conference over to Mr. Giriraj. Thank you, and over to you, sir.
Giriraj (R Systems International Ltd): Thank you, Iqra. Good morning, everyone, and welcome to R Systems Q3 2026 earnings conference call. Before we begin, on behalf of the entire R Systems team, I would like to wish all of you and your family a very happy and prosperous Diwali. May this festive season bring happiness and good health and continued success to everyone. As R Systems follow the calendar year as its financial year, the July to September period represent the third quarter of 2026. Today, we have with us, Mr. Nitesh Bansal, Managing Director and CEO of R Systems, Mr. Nand Sardana, CFO of R Systems. We have shared the investor presentation yesterday evening and and have also uploaded it on the company website and the stock exchange websites. We hope you you have had an opportunity to review it. We will begin the call with the opening
Giriraj (R Systems International Ltd): from Nitesh on the company performance followed by a financial overview from Nand. Nitesh will share his closing remarks after which we will open the floor for the Q&A session. Before I hand over the call, let me read out the custom disclaimer on behalf of the company. Investors are cautioned that this presentation and the discussion during the call may contain certain forward-looking statements that involve risk and uncertainties. Actual results, performance, or achievements could differ materially from those expressed or implied in such forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I will now hand over the call to Nitesh for his opening remarks. Thank you and over to you, sir.
Nitesh Bansal (R Systems International Ltd): Thank you, Giri, and good morning, everyone. Thanks for joining our call. Like I've always said, it's a pleasure for me to be doing these calls and getting your questions. Like Giri said, we circulated the presentation in advance, so those who are referring to the presentation, I will, you know, mention the slide number from time to time. Otherwise, any which way, yeah, you know, I'll provide the commentary on how the quarter has been. So, beginning with slide number four for the financial performance of the quarter, third quarter ended September. We closed with a strong revenue of 615.2 crore rupees or 64.4 million dollars, which reflects a 23.4% year-over-year increase or 2.2% quarter-over-quarter. The adjusted EBITDA stood at 124.4 million- 124.4 crore rupees or 13 million dollars, which is at an all-time high of 20.2% as a percentage of revenue and records a year-over-year growth of 47.4% or a quarter-over-quarter growth of 3.1%. The adjustments, as we have maintained, are largely related to RSU costs or any other non-recurring items, which is then carried forward into net profits, which stands at 66.5 crore rupees or 6.9 million dollars, which is at 10.8% 10.8% of revenue or 53.1% growth year-over-year, which results in adjusted EPS of 5.6 rupees, which is a 53% growth over the last year. If you look at the performance over the last eight quarters, this is seven continuous quarters of growth that we have delivered as an organization while not just maintaining but improving our margin performance in a very sustainable manner. If you look at the margin bridge, of course, currency helped quite a bit adding about 7 crore rupees to the to the net EBITDA increase. A slight dip in operating margin comes largely from the higher hiring costs, etc., of AI talent as a very large part of the revenues that we are now getting is influenced or leading or led by AI. Moving to slide number five, if I look at, because this is three quarters ending, so this is a Jan to September '26 performance compared to Jan to September '25, revenues for the three quarters ending stood at 1,791.7 crores or 190.7 million dollars, which is a year-over-year increase of 27.7%. Corresponding adjusted EBITDA stood at 3,000 sorry, 360.9 crore rupees or 38.4 million dollars, as a percentage of revenue at 20.1% and 49.7% increase year-over-year. Corresponding adjusted net profit stood at 205.1 crore rupees or 21.8 million dollars, which is adjusted net profit of 11.5%, an increase of 54% over the previous year and three quarter adjusted EPS of 17.3 Indian rupees or a growth of 53.8%. And this, you know, EBITDA bridge, of course, makes things clearer in terms of that we are, as we have increased our revenues, it has contributed to the margins as well as got the gains due to the currency amounting to over 178 crore rupees leading to the three quarters adjusted EBITDA of 360.9 crore rupees. Providing a comparative on slide number six, for those of who you are referring to the slides, if we just look at it, this is a quarter-on-quarter comparison with the same
Nitesh Bansal (R Systems International Ltd): year and then with the previous quarter. Revenue stood at six 615.2 crore rupees compared to 498.6 crores in the same quarter last year, which is 23.4% increase, or 601.7 crore rupees in the last quarter, which is a 2.2% increase. Adjusted EBITDA of 124.4 crores, which is compared to 84.4 crore rupees in the same quarter last year, which is a 47.4% increase, or 120.7 crore rupees in in the previous quarter, which is Q2 of '26, which is a 3.1% increase. The adjusted EBITDA percentage corresponding to it is 20.2% compared to 16.9% in the same quarter last year, or 20.1% last quarter. Adjusted net profit stood at 66.5 crores compared to 43.4 crores in the same quarter last year, which is a 53.1% increase, or 62.9 crores previous quarter, which is five 5.7% increase. And the basic EP adjusted basic EPS stood at 5.6 rupees compared to 3.7 in the same quarter last year, which is 53% increase, or 5.3 rupees last quarter, which is a 5.7% increase. Similar analysis on a nine-month basis, it can continue to slide number seven, where our nine-month revenue comes to 1,791.7 crore rupees in 2026, which was 1,403.1 crore rupees in the same period last year, which is a 27.7% growth year-over-year. Corresponding adjusted EBITDA stands at 360.9 crore rupees, or 20.1% for the nine-month this year, compared to 241 crore rupees or 17.2% in the corresponding nine months previous year, which is a 49.7% increase year-over-year. Adjusted net profit of 205.1 crores compared to 133.2 crores for the nine-month last year, which is a 54% increase. And adjusted basic EPS of 17.3 rupees compared to 11.3 rupees for the same period last year, which is a 53.8% increase. Coming towards operating metrics, you know on slide number eight, revenue distribution with geography, no major change. Americas continues to contribute over 70% at 70.6%. APAC has grown slightly from 15.3% to 16%. Europe correspondingly has slightly fallen down, just adjustment of numbers across the geographies from 9.7% to 9.4%. And Middle East and Africa, which contributed 3.6%, has grown to about 4%. So, broad distribution remains the same. Quarterly changes happen because of, you know, a project here or a project there. Similarly, on a client concentration perspective, top 10 clients continue to contribute 24.4% of our revenues. Our top client continues to be in the 5.8 percent, which is the 5.8% to 6% bracket. Top three clients provide 11.9% and top five 16.8%. Again no major change in that distribution. We have picked up on utilization as as we started winning more and more AI and data data for AI transformation projects. As you would remember, two quarters ago, we had talked about consciously building capacity and bench for our data for AI and AI projects, which we had done. And that bench has you know, obviously, become useful and utilized for us in in this quarter. But having said that, what that means is we will further invest in expanding that team, maybe add to a little bit of bench on that so that we can continue to win and serve more and more projects in those spaces. But as the company's strategy, you know we've continued to maintain our utilization above 80%. which we believe is healthy and for us you know, a great place to be in order to deliver sustained margin performance. On the DSO front, it's pretty much the same. We maintained 55 days of billed DSO and when combined with unbilled, about of 76 days, which is similar to what pretty standard from previous bunch of quarters. Coming to slide number nine, talking about some of the key wins, and this is this is clearly being a quarter of where we have seen our quality of wins go up and and and our AI strat-
Nitesh Bansal (R Systems International Ltd): beginning to play out in terms of the nature of deals that we that we see in the market. The first one is a leading European telecom player who's asked us to modernize their mission-critical telecom services as part of creating a next-gen network transformation initiative. And this will basically require us to modernize and transition a lot of their legacy applications to modern cloud-based architectures, improve scalability, operational efficiency, service reliability, etc. And doing it very fast using AI in order to kind of enable faster innovation for their services. Second one is where we have collaborated with a world-leading global management consulting firm in the Middle East to deliver a data lake house for a leading leading housing and real estate organization in the Middle East. This engagement will help establish a unified enterprise-grade data foundation that accelerates AI adoption. So this is all our data for AI readiness offerings that are coming into play and that enhances data-driven decision making and unlocks scalable business value through advanced analytics, machine learning, and agentic AI for the client organization. The third one that we're talking about is where we have worked with a large financial services provider in Saudi where we are building a Newgen-based core lending platform. So this is where AI or automation is getting into the core of the business, where we have built the solution architecture, created the digital transformation road map, we're doing the application development, tech modernization services, all of which, where the engagement spans across innovation, engineering, platform operations, enhanced digital customer experience, etc. to provide scalability, resilience, and continuity of business-critical lending services across both physical and digital channels. The fourth one is a very interesting where we are working with a a large global entertainment and games, both manufacturing and distribution type of a company, where we are helping them use Salesforce to transform their commercial and customer-facing operations. And this with this initiative, they'll be able to unify their key business processes, enhance data visibility, deliver seamless experiences across sales, service, and partner channels. And eventually, you know, with that unified data layer, be ready for more and more AI into their products. And last but not the least, we're working with a large insurance service provider where we are building their host-to-host bank connectivity solutions to deliver straight-through processing, intelligent payment orchestration, automated file processing, treasury workflows, operational resilience and efficiency. And maintaining of course, you know, because it is a regulated industry, you know, governance and regulation across their entire payment ecosystem. All in all, high-quality wins with with decent penetration into the core of the businesses of the of the clients and these are these are great leading indicators that obviously we are very excited about. Moving to the next slide, the trailing 12-month ACV of bookings, as we have been sharing for last few quarters, we continued our momentum on bookings quarter-over-quarter maintaining. And this quarter again, we have $82.9 million in TTM ACV of bookings. And this is while while changing the business mix significantly with not just AI and SDLC, but seeing modernization as well as agentic AI, business ops, types of wins come through. I think with that, I'll hand over to Nand to talk through the detail financials before I come back to sum up and provide a bit of a qualitative commentary, and then take the questions. Nand, over to you.
Nand Sardana (R Systems International Ltd): Thank you, Nitesh. Good morning to all. This presentation gives detail of quarter three performance. For those referring to investor presentation, it is slide number 13. Revenue for the quarter was ₹615.2 crores or $64.4 million as against ₹601.7 crore or $63.6 million last quarter and ₹498.6 crore, that is, $57.2 million in the same quarter last year. This is year-on-year growth of 23.4%. This is
Nand Sardana (R Systems International Ltd): account of volume growth as supported by rupee depreciation. We are starting witnessing the results from our investment in cloud, AI, and automation in terms of large deal conversion which is supporting sustainable revenue growth. The gross margin was 38.6% compared to 39.2% last quarter and 35.5% in the same quarter last year. Our quarterly margins have decreased due to change in revenue mix, slight change, and lower utilization in Europe due to holiday season as offset by rupee depreciation. SG&A expenses have decreased by rupees 2.2 crore from rupees 115.3 crore in last quarter to 113 crore this quarter. This is primarily due to support count optimization. The adjusted EBITDA was 20.2% as against 20.1% last quarter and 16.9% the same quarter last year. The company has been able to report robust margins percentage through operational leverages and favorable exchange rate. We have started getting the fruits of our investment in AI. The RSU cost under management incentive plan is rupees 3.2 crore compared to 6.2 crore in last quarter. The re- reduction is due to reduction in counts to whom RSU had been issued. EBITDA net of RSU expense is 19.7% compared to 19% last quarter. Getting on to depreciation and amortization, the total expense was rupees 22.9 crore compared to rupees 22 crore last quarter. This includes rupees 10.6 crore for intangible capitalized on account of past acquisitions. Non-recurring expenses are on account of severance payment for certain abundant positions, re- redundant positions. The interest expense is rupees 9.6 crore compared to 9.5 crore last quarter. Other income was rupees 53 lakh compared to negative rupees 87 lakh in last quarter. During first quarter of the year, the company adopted hedge accounting for its forward covers. Overall, we had an exchange loss of rupees 2.1 crore, which is almost same as last quarter. Further, the other income comprise of interest income of rupees rupees 1.2 crore this quarter compared to rupees 78 lakh last quarter. As at quarter end, we had forward cover of 46.75 million dollar with average rate of 95.79. Our tax expense was rupees 23.9 crore this quarter as against rupees 24.9 crore last quarter. Our effective tax rate is around 27%. Our normal effective rate, as I have said in earlier also, is between 28 to 20 9%. Net profit after tax was rupees 64.2 crore or 6.7 million dollar compared to 55.6 crore or 5.9 million dollar last quarter. Basic EPS for the quarter was rupees 5.42 compared to rupees 4.69. Adjusted EPS for the quarter is rupees 5.6 as compared to 5.3 last quarter. With that, let me hand over back to Nitesh for his last slide.
Nitesh Bansal (R Systems International Ltd): Yeah. Thank you. Yeah, coming to the summing up how the quarter has been and looking ahead what the trends are telling us. First and foremost, very happy with how Execo, our AI studio and our library of reusable industry templates and agent frameworks have been received by the market. It has strengthened our position across the key markets and industry verticals, and that is reflected in the quality of recent wins and the pipeline that is building up. A number of our clients are moving from experimentation to production-grade deployments, which of course helps us because these are our clients and and and they're moving into production. And our focus on building that scaled, enterprise-grade AI solutions leveraging Execo, with these successful productive implementations helping clients achieve measurable business outcomes. So, we are now beginning to see clients achieve ROIs and and clearly move more strongly towards adopting that. In terms of trends that we see shaping not just the remaining part of this quarter, but the year to come. Now AI PDLC, which is the AI in product development lifecycle, is fast replacing the SDLC as it used to be, the software development lifecycle, across the board. Client organizations want to adopt AI PDLC. They are struggling to, in some manner, to change their entire organization to embed AI PDLC in their ways of working. And a lot of them are turning towards people like like us, like RSI, to set up the tools, the trainings, bring in the best practices, and run parallel AI pods in order to be the catalysts to to be able to enable that change. And this is happening across HQs and GCCs taken together. The Engineering Velocity parameters that we have launched into the market, bringing AIEV as a terminology, has continued to be a key differentiator. It'll continue to remain so for enterprises who are focused on achieving return on investment
Nitesh Bansal (R Systems International Ltd): AI initiatives, I think more and more organizations are looking at engineering velocity as a key vector. Legacy modernization continues to be a very large total addressable market, a large TAM, across legacy code bases, across large data estates and large reporting landscapes. We have continued to see those wins and we believe that market is, you know, just beginning to kind of open up to the possibilities. We had a lot of interactions with private equity operating partners, and one of the trends as it seems emerging for us based on our discussions is that most of the PE guys are inclined towards using more custom AI development and implementations for bringing agentic transformation into their portcos rather than adopting or buying vertical AI platform solutions, which claim to solve for the industry. So we believe this these are trends which we're observing, which we obviously are taking note of and will help us, you know, shape our offerings and the narratives in the market to take advantage of of the market in the coming quarters and year. With that, I will finish this presentation and talking about the results and be open for a Q&A. Looking forward to it.
Moderator: Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press "*" and "1" on their touchtone telephone. If you wish to remove yourself from the question queue, you may press "*" and "2". Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Anmol Garg from DAM Capital. Please go ahead.
68 more turns of this transcript: log in to Stocksigma to read the full call.