Highlights of the call
- For the quarter ended December 2008, on sequential basis, R Systems reported 5% growth in operating revenues at Rs 96.8 crore with de-growth in US$ terms by 9% to USD 19.1 million. The EBIDTA was up 32% Q-o-Q to Rs 14.6 crore with 15.1% EBIDTA margin (12% in Q3 FY09). The PAT at the end was up 34% sequentially to Rs 8.8 crore.
- For the year ended December 2008, the company reported 45% growth in revenue to Rs 359.4 crore with 96% growth in EBIDTA to Rs 46.5 crore and PAT stood at 47% to Rs 28 crore.
- The 5.5% revenue growth was backed by 8.75% depreciation in rupee value against USD which was partially offset by 4.4% sequential dip in volumes.
- The gross margin for the quarter was at 41.5% (38.9% in Q3 FY09) with rupee depreciation benefiting 160 bps; decrease in travelling expenses benefiting 160 bps, increase in license fee revenues impacting 40 bps while increase in leave and gratuity accruals negatively impacted 100 bps.
- During the quarter company has incurred MTM loss and other forex loss due to further fall in Rupee to the tune of Rs 2.1 crore. The company has written off portfolio investments of Rs 1.30 crore and provided for bad and doubtful debts for Rs 1.7 crore during the quarter. The company has also provided for Rs 1 crore for leave and gratuity accruals.
- For December 2008 quarter, USA contributed 61% (57% in the sequential quarter), Europe 24% (25% in the sequential quarter), South East Asia contributed 6% (8% in sequential quarter), India at 4% (4% in the sequential quarter) and ROW at 5% (6% in the sequential quarter).
- At the end of quarter, the company had 2080 head count against 2161 in Q3 FY09 and 2290 in Q1 FY09.
- Offshore operations contributed 61.7% (62.5% in sequential quarter) of the revenues and onsite/onshore contributed 38.3% (37.5% in sequential quarter) of the revenues. The utilization rate stood at 69.7% against 70.6% in sequential previous quarter.
- The company has 125 active clients with 18 $ one million clients constituting 43% of revenue. For December 2008 quarter, top client (GE) contributed 8% (8.1% in the sequential quarter), top 3 clients contributed 22% (20% in the sequential quarter) and top 5 clients contributed 31% (30% in the sequential quarter). Top 10 clients contributed 44% (43% in the sequential quarter).
- The negative economic sentiments have brought near term uncertainties for the company. The company’s customers are facing 10-30% drop in demand and have become extremely cautious. Though the company has not seen any significant contract cancellations so far, but customers are tightening belt and focusing restructuring.
- On the positive side, the wage inflation has eased and USD gain is helping in margin improvement. The company is also getting encouraging opportunities in Mobility Solutions and Digital Media.
- The company has recorded volume de-growth of 4.4% on Q-o-Q. Though the management expects that it is peak of decline and volume is expected to sustain at this level, but considering the economic slowdown, it may continue to remain a concern area.
- The receivables has increased from Rs 61.3 crore to Rs 79 crore on Y-o-Y but the outstanding days has came down from 74 days to 67 days.
- The company has cash and cash equivalents of Rs 63.6 crore at the end of Dec’08. However it also include fund of Rs 4.50 crore retained with the company for leave and gratuity. Thus the company has net cash per share of Rs 44 per share.