Earnings Call Transcript - Q3FY20 for Zensar Technologies
Opening Remarks by Management For Q3FY20 we reported revenue of USD 143.3m. This represented YoY $ growth of 1.1% and a QoQ decline of 5.9%. The sequential revenue decline in Q3 was primarily on account of certain one-time and seasonal items. These one time or seasonal items include furloughs of USD -4M, specific year end discounts USD -1.5M for two of our top 20 clients, and ramp downs in retail USD -5M. Other verticals, especially Cloud and Infrastructure Services and Financial Services continue to show good revenue increase of USD 2.3M positive growth. Our order booking was strong at USD 170M of TCV. We also have a strong pipeline of more than USD 1B, with a number of deals in final stages of closing. By end of this fiscal, we expect growth to normalize and the business metrics to return to Q1FY20 levels. Our endeavor is to deliver industry level growth and margins in the coming quarters. The digital revenues increased sequentially 1.6% QoQ and 20.2% YoY, the legacy business declined by 13.4% QoQ. Almost all the revenue de-growth is in legacy business. The de-growth in revenue translated into a corresponding margin impact as well. Reported EBITDA for the quarter was 6.8%, however after adjusting for the one time and seasonal items, Normalized EBIDTA was 11.2%. The 280bps drop from Q2 EBIDTA to normalized EBIDTA is explained by lower utilization of 210bps and higher G&A; of 70bps. We have been working on cost rationalization initiatives and better operating tracks to improve margins. We do expect to get to our target EBITDA of 15% over the coming quarters. Q3 witnessed strong cash collections of $33m on account of better receivables management (DSOs down from 102 days to 93 days). We will continue to focus on improving our free cash conversion and ROCEs metrics. Click pdf to read the full transcript30-01-2020