LTIMindtree Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from LTIMindtree Ltd (LTIM) Q3 FY24 Earnings Concall

• Financial Performance
  • Delivered resilient Q3 performance despite higher than expected furloughs and unchanged macro environment.
  • Q3 revenues at $1.08 billion, up 3.5% YoY in USD terms and 3.1% in constant currency.
  • Sequential revenue growth 0.8% in USD and 0.7% in constant currency reflecting broad furlough impact.
  • EBIT margin at 15.4% and net profit margin at 13%.
  • Strong order inflow of $1.5 billion, up 21% YoY despite unchanged cautionary environment.
  • 9-month FY24 order inflow at $4.2 billion, up 19% YoY reflecting strength of H2 experience capabilities.
• Industry Vertical Performance
  • BFSI vertical declined 1.4% YoY due to higher furloughs and cautionary approach to new spend.
  • High tech, media and entertainment grew 0.3% YoY despite higher than expected furloughs.
  • Manufacturing and resources strong growth of 20.1% YoY due to seasonal higher pass-through.
  • Secured significant transformation and supply consolidation deal in energy and utilities vertical.
  • Retail, CPG, travel, transportation and hospitality grew 0.6% YoY.
• Outlook
  • Expect Q4 performance to remain similar to Q3.
  • Strong order inflow and pipeline set stage for medium term growth.
  • Margin optimization continues but 17-18% exit margin pushed out.
  • Some furloughs will return but not all furloughs will come back in Q4.
  • Environment remains cautious, delays in client decision making to persist.
  • Growth recovery when it comes expected to be broad-based across industries, geos.
• Sales Activity & Pipeline
  • $4.6 billion overall sales pipeline, up 30% versus last year.
  • Participating in 30+ advised deals, seen as alternative to larger players.
  • Seeing strong growth in ERP service line with demand for core modernization.
• Margin and Growth Outlook
  • Overall margin program and approach not changing but modifying targets.
  • Targets being deferred by a few quarters to continue investing back in business.
  • Utilization already high, don’t want to increase further in unhealthy way.
  • Will get back to 17-18% exit margin target over longer term after some quarters.
  • Uncertain about growth outlook and lower H2 guidance.
  • Need sufficient bench to ramp up deals being closed. Utilization higher than comfort zone, want to bring it down.
• Leverage for Margin Improvement
  • Gross margin improvement in low margin accounts.
  • Pyramid rationalization by adding freshers.
  • Reducing average cost of resources.
  • Multi-year deals allow better cost management.
• Cash Allocation Policy
  • Priority is sustaining momentum and building cash balance.
  • Evaluating candidates for M&A at the right time and opportunity.
  • Payout policy based on profitability, not just cash balance.
  • Aim is to generate higher cash flow returns for better payout.