Inventurus Knowledge Solutions Ltd (NSE: IKS) Q1 2026 Earnings Call dated Aug. 01, 2025
Corporate Participants:
Saransh Mundra — Investor Relations
Sachin K. Gupta — Founder & Global Chief Executive Officer
Unidentified Speaker
Nithya Balasubramanian. — Chief Financial Officer
Analysts:
Sagar Dhawan — Analyst
Srinath V — Analyst
Ruchi Mukhija — Analyst
Nilesh Jain — Analyst
Seema Nayak — Analyst
Presentation:
Operator
Good morning ladies and gentlemen. Thank you for joining us today on Q1FY26 earnings call of IKS Health. On behalf of ICICI Securities, I would like to thank management of IKS Health for giving us opportunity to host this earnings call. Today we have with us Mr. Sachin Gupta, Founder and CEO, Ms. Nitya Subramania, CFO, and Mr. Saraj Mudra, AVP Investor Relations. I turn it over to Saraj for the safe harbor statement and to take the proceedings forward. Thank you. And over to you, Saraj.
Saransh Mundra — Investor Relations
Thank you, Ruchi. Welcome everyone. Thanks for joining the call early in the morning. We’ll start with the disclaimer and then I’ll hand it over to Sachin. As part of our prepared remarks, we may make certain statements that are forward looking and may involve uncertainty. We don’t take any responsibility to update those statements and your discretion is warranted by making any investment decisions. Over you, Sachin.
Sachin K. Gupta — Founder & Global Chief Executive Officer
Great. Thank you Saransh. Thank you, Ruchi. Just a minor correction. But anyway, good morning everyone and welcome to our earnings call for the first quarter of fiscal 26. This is our third earnings call since we went public in December last year. So excited to talk to everybody again on the call today I’ll do probably three things.
One, I’ll pick just because there is only some participants that are relatively new. Start off with very quick high level overview of the business talk specifically about our execution this past quarter as it relates to those five strategic vectors along which he wants to measure our progress, and along which I think our discourse is most relevant because I think those vectors drive the financial outcomes that all of us are interested in.
And then of course we’ll dive into our points and high level commentary on our financial performance for the fiscal Q1. After which I’ll turn it over to Lithia to talk through some of the details and then we will open it up for questions. But before I dive into the high level overview, let me kick the call off. Obviously all of you have seen the release that came out last night.
Hopefully you studied the numbers. One of the things that I think some of you saw in the release that perhaps might have caused some confusion and I want to just clarify it up front, was the change in Director status in the consult mothership. And I just want to clarify, there’s nothing really that changes fundamentally.
This is barely a technical change associated with the fact that I live in the US and hence my employment pretty much needs to be. Reflect with the US entity and as a result of which I can’t really be employed by the Indian mothership. And so as a result of that, I’m no longer full time director. And because the company obviously needs a full time director, Vista is being made the full time director. I continue to be the group global CEO and continue to be at the helm and at your service for as long as you guys desire. So just wanted to clarify that up front because it felt like it was causing concerns or reference. We can certainly take any other questions around this when we get to the questions. Okay, now to just jump into the business. Obviously you’ve seen the numbers, a solid quarter of performance. But before I go into the quarter, just a quick high level recap of the business model. So we are perhaps the most comprehensive care enablement platform that delegates chore tasks from large physician groups in the US so that they can focus on their core of patient care and patient experience. We do so in a manner where we have built proprietary technology to eliminate as much of these tasks as possible. And because technology often doesn’t entirely eliminate the task, our technology is coupled with our global human capital, which becomes a very important human, also from a safety perspective, to deliver these tasks. We do so in a manner where not only is it physically transformative for the patient experience and the quality of care, but also it’s financially transformative for the practice, which, as you know, US healthcare is under tremendous financial stress. And so through these 16 odd tasks or actions that we delegate for institution groups in the US we are often able to, at the full manifest of the platform, deliver between 800 to 1,000 bits of additional economic value for them after paying for the platform. So it’s financially transformative in addition to being clinically accretive for them as well. We have over the last 18 years grown our business to about half. 150,000 clinicians across the U.S. remember, there’s about 900,000 in total. So 150,000 clinicians in the U.S. use some manifest of our platform or the other. And 150,000 are spread across now about 650 organizations that these physicians are a part of. So 150,000 clinicians, 650 organizations. Remember this number was close to 820, 23 when we completed the acuity acquisition. We have then said that our strategic business model is always to have the consolidators as our clients, which are the large groups that are buying the other groups. And so with acuity we got a lot of good stuff. But one of the things we got was a long pain of small. And strategically, intentionally, we are continuing to pull that tail. We are now down from a combined customer base of 800 plus in October 23rd to about 650. And as I stated in the past, a sort of steady state will probably end up closer to 500. So that’s just one thing to keep in mind. 650 plus customers, 150,000 providers. Our business model, because of its unique nature by which we actually delegate all of these tasks that are chores but are very important for the sustainance of their practice, is, by that very nature, business model becomes annuity also. So 95% of our revenue is repeat revenue to retail customers. And in addition to that, it becomes really, really sticky. So it’s a very sticky annuity business model. And the human elements of what we do now comprises of about 12,368 FTEs across the US and India. Again, remember, this number in Q1 of FY25 was actually 13,277. So on a year, on year basis, our global headcount is down about 7%. Which is again something that we will talk a little bit more about when we discuss our strategic vector of execution. Obviously, because we are very intentional about working with consolidators, our top 10 and top 5 clients drive a large part of our revenue and our growth. That is very intentional. The good news is that our top 10 and top five clients have great linkage and are actually growing. So that always is a good sign of the progress in the business. Also, as you probably already know, we operate in a very large TAM. Our TAM traditionally was about 225 billion odd dollars just in the physician market in the US starting about a couple of quarters ago. As I mentioned, we have also pivoted our business model based on the pool that we saw in the market into the acute or hospital RCM space. And that expanded the TAM of $260 billion, of which really only about 34, $35 billion have been delegated. So it’s still largely automatically an e sourced market. And yet I think the pressures that the U.S. health care system is facing, cost, quality, access. It’s becoming imminent that this scam, the outsourced scam of 24.5 billion, is actually going to go faster than the overall market. So the market’s going at 8%, but the outsourced market is growing at 12%. And this is important again because I keep saying if they’re growing faster than 12% on a constant currency basis, we are gaining market share. If they’re going slower than 12%, we’re losing market share. So that’s an important indicator and something to always watch out for. Now, if that 12% further accelerate. Because of the pressure in your healthcare, we’ll certainly keep you updated and that should also reflect in our door. And our idea would be to grow significantly faster than the outsourced TAM over a period of time. One of the other dynamics that it creates because there’s such a large TAM, which also then leads to, if you go to the next slide, our competitive positioning is that because the 16 oughta, because these 16 odd tasks have a TAM of about 260 billion. The reality is that the TAMs of several of these tasks individually is quite large. For example, if you look at documentation which is reflected in our scribble product could be a 30 billion TAM. The four or five features that comprise amplitary RCM is $40 billion TAM. And so as a result there is several genres of competition that we have to deal with. One of those is actually what I call these point solution companies that are focused on one or two or five of these 16 tasks because the relative talent of each of these tasks itself is so large that you can build a very large company just focused on them. Now, our thesis always was that as the market matures and buying behavior matures, buyers will realize that they can’t be in the business of buying point solutions and integrating them, carrying the burden of managing ends of vendors across these point solutions. And so over a period of time they realize that the value of the whole is much greater than the individual parts and that is a better strategy. And we see that the buying behavior will slowly but surely migrate towards the platform buying behavior. And so what that means is, and we set our strategic competitor advantage to that, which is we’re the only company that has the full breadth of the platform for those buyers that are willing to buy the platform thesis today, but because there are several buyers, especially in the larger system market that are still interested in a point solution best of the approach. The reality is for those, we still need to be one of the top two or three vendor partners in each of these point solutions. And that creates a very important strategic predicament for me where we have to execute as a leading point solution vendor across 16 point solutions, even as we’re perhaps one of the very few companies that are building out the entire platform and that really continues to be our competitive position. So with that, let’s just quickly touch upon the five strategic vectors of execution that we are consistently focused on. That again, I think should shape the discourse that we should have on a continuous basis, unless something changes, in which case I will achieve. So the first of the five is the fact that we are moving rapidly to this AI. Native agentic platform manifest for doing all these tasks. And happy to report that there’s been a lot of progress on this strategic vector over the last couple of quarters. But specifically last quarter we launched KL now, which is our fully ambient autonomous digital documentation solution. And with that I think ICF now has the most comprehensive set of variants that meet physicians wherever they are in their journey of choosing the right clinical documentation solution for their needs. We’re also in the process of actually launching a very unique multivariate SCRIBBLE option which will allow each physician user to choose different variants of SCRIBBLE for different type of visit. So there’ll be some indication with it where the fully autonomous ambient listening solution without supervision from the human will instantly on a synchronous basis is best for them. And then there’ll be other situations where there’ll be more complex encounters where there is a need for more comprehensive documentation, where the human in the loop or the physician in the loop becomes very relevant. And the ability to pick and choose different variants of clinical documentation solution for various parts of their patient panels we suspect could be a very exciting differentiator over a period of time. Just based on the utilization trends that we’ve seen across the country from ambient autonomous only AI driven solutions where a lot of doctors perhaps have bought them, but the utilization of those solutions as a percentage of their own visits is sort of still in the 50s and 60% or out there. So I think that should be very exciting. Also happy to report that we’ve actually been able to build out our autonomous medical scaling technology. Again. Obviously Genai led for two medical specialties which we now continue to optimize and now of course we are expanding to several other medical specialties. Again remember, just like clinical documentation, there are companies out there that all they do is medical coding. So this is to my point of wanting to be number one or two or three, which is the point solutions even as we are trying to build the full platform out. And then of course we’ve done significant progress in the denial, prevention, prediction and prevention space using our AI technologies that we built. And we’ve also launched an AI led patient engagement hub that actually drives behavioral economic inputs driven patient engagement to help shape various aspects of patient behavior, including reducing no shows for this that help improve access to care, including nudging patients differentially around adoption of our adherence to various protocols, etc. So significant progress in dramatically. Moving from sort of that human LED tech in the loop to not only tech led human in the loop, but with AI now moving towards a fully autonomous set of features which don’t need the human in the loop at all over a period of time. That’s the first sector of our execution this quarter. The second one is obviously the big Acuity acquisition that we did in October 2023. Within that sector, there were three dimensions of execution that we had to accomplish to be successful with the acquisition. The first is actually the people process technology, and the cultural integration. And I’m happy to report that about maybe 18 months out, we feel like that effort feels complete. We feel like one company and a lot of that synergies associated with that are now evident in our performance. The second big piece was the margin expansion. As you know, when we acquired Acuity, the pro forma blended margins of IKs that were traditionally in the high 30s EBITDA had dropped to about 24% performer. And we had said at the time that as we transformed QG’s delivery model from a sort of human led model to an IKS technology led global human led model, we will bring our EBITDA numbers back towards the early to mid-30s. I’d like to say that I think a large part of that work is moving faster than we had anticipated, which is obviously being reflected in the numbers that we Talked about for Q1. So I’d say that that sort of part of the work is maybe 2/3 done. And the last but not the least and perhaps the most exciting part of the thesis really was the cross sell notion of our platform into Acuity’s large customer base. And happy to note that I think we’ve now figured out how that motion is going to work. We are starting to see some wins in that space now. Obviously those wins and the revenue impact of those wins is slightly offset by the intentionality by which we are cutting the tail of Acuity small customers, number one and second, the revenue in terms of revenue per unit of physician coming down. Because now we are replacing the sort of Acuity human execution model with an IKS technology led model. So important to note that even as we are starting to feel early tailwind of the cross sell motion, some of them are offset by the intentionality of the cooling of the tail as well as the revenue per unit coming down, even as margins improve in the Acuity customer base. So overall, I think a solid quarter of execution on the acuity sector. Third, this predicament of establishing leadership in each of the point solutions even as we continue to build the platform. I think it’s great to receive some recognition from BlackBook as the number one partner in AI driven RCM and in. And then as it relates to clinical documentation, both by class and black book. So continued progress in that dimension and of course, the biggest validation of progress there is customer expansion which we continue to talk about every quarter and maybe continue to make some exciting progress in. We have now figured out our go to market strategy and have established our go to market teams in line with that go to market strategy. So we have four segments of the market. Large single specialty groups, large multi specialty groups, large health systems, large and medium sized health systems. And then last but not the least absolutely a whole market segment is UnitedHealthcare which is the largest employer of physicians in the world positions. And happy to note that I think we have now dedicated teams across all of these market segments that are really, really starting to hum and drive some energy and along the lines of the buying trend, I want to clarify, we continue to see more platform based buying behavior across the large single specialty and the large multi specialty group market segment. The large health system market segment is still more open. So we have to drive the land and expand motion there. And then the midstream health systems actually are starting to show more and more proclivity towards the platform pieces. So we continue to drive those along those lines. And then last but not the least, JIR is an important, very, very important vector for our future. Especially those of you that are not only interested in our next 1, 2, 3 years, but our next 5, 7, 10 years. We feel like we are in the process of building a very important moat, long-term moat by becoming more and more of an outcome oriented company. So what do I mean by that? \Our pricing model was always percentage of customers, revenue based, whatever, NFT based pricing, which has obviously been an advantage for us. But when I talk about being outcome oriented, we’re now actually talking about constructs that fundamentally align us upstream with our customers in a manner where we achieve three things by doing this alignment of outcomes. First, we actually by aligning ourselves with the outcomes, we are only in those constructs. Like we did in Palomar, we talked about Western Washington Medical Group. Again, we are actually only building the full manifest of the platform for those customers. So as a byproduct we are creating more and more examples of the platform thesis and the value of the whole being greater than much of some of the individual parts. Second, these deals are typically much longer term deals. So for example, paramar is a 15 year deal, Western Washington is a 50 year deal for all practical purposes. So they bring a different level of long-term stickiness to our core business model of the platform. And third, they actually create a second set of economics if we can do them back. Because now not only are we getting our economics for the deployment of the platform, but we also get to participate in the outcomes that we generate through the platform on the client’s pnl. So that could be a very those three sort of key criteria are the ones that we will continue to use to drive this outcome oriented company thesis. And the biggest execution challenge that it presents is that now not only are we responsible for the deployment of the platform, but we are also responsible for driving change in the customer’s organization so that they actually produce the outcomes relative to what the platform can do. This has been a big challenge for customers. So we’re solving for a challenge. But it is a unique of capability that we have to build over a period of time. And I’m happy to note again that in these dimensions we made some really good progress. You’re all aware of the Western Washington deal which you just recaptured. Second also the Palomar deal seems to be progressing tremendously ahead of plan.And then the one concern that some of you had about Palomar in terms of their financial health, which I had mentioned at the time, that likely that one of the traffic three big systems in the area eventually by Palomar, it looks like they are getting closer and closer to an alignment with UC San Diego which could also have other positive effects for us if we actually end up delivering the value prop that we have for Palmar. So across each of the five strategic sectors, solid execution, happy to note and all of that I think has resulted into a fairly strong quarter for the fiscal Q1 of fiscal year 26. Happy to note that we have been able to drive 16% year on year growth for the quarter coming to a revenue for 740 crores on a constant currency basis that’s 15%. So as I was saying, we’re gaining market share, not losing market share. Also important to note that this is in spite of the continued headwind of tooling the acuity tail, if you would and the transformation that we continue to do in the acuity install base as it relates to that affects their unit price realization that we get from the mission but improves our margin significantly. And that margin improvement is actually reflected in our very strong EBITDA performance for the quarter coming in at 32% or 238 crores which really is a growth a year on year growth of 36% in EBITDA margin, which then translated to an even stronger pad growth of nearly 59%, with our PAC coming in at 151 crores for the quarter. Obviously the bad growth is even faster than the EBITDA growth primarily because our interest costs are coming down as we are continuing to pay down the debt, which is something I’m sure that they will delve into. And then very important to note that all of this has been achieved like I was saying, with 12,368 employees compared to the 13,277 that we had in Q1 of last fiscal and that’s as I said, really important because this is the true reflection that for 16% growth or 13% constant currency growth, we have actually reduced the workforce net by 10%. So the gross reduction as you can imagine is pretty significant and that shows the continued non linearity in the business and our true demonstration of moving from human led to tech led while driving industry leading growth. So that’s been a high level summary of how we’ve done in the quarter moving on. And I’m going to invite Mr. Shortly to talk a little bit about more details about this, but also just wanted to highlight a few key customer wins. Like I would say last quarter we announced a very significant customer win in Skylakes Health System in the Pacific Northwest where they had signed up for the full adoption of our platform not only in the ambulatory side but also has taken on our acute RCM solution end to end. Happy to note that we now have a second end to end. We have other RCM customers that are also ramping that are not end to end but Vision Community is our second end to end acute RCM customer. So obviously that segment, that mid size health system segment of the market is continuing to show promise. Labor and health is one of the most important and fastest growing specialties in healthcare today given the ramifications it has on chronic disease. And so happy to note that we have announced a relationship with Bicycle Health which is a private equity owned leading platform already emerging as a leading platform for behavioral health. And then we expanded our relationship with Oxford, New York to now include our virtual clinical assistance program, which then moves that relationship to a full platform pieces. And then obviously we’ve consumed some in our top health system customers. This one is an example of a top health system where we’ve been able to drive tremendous cross sell and are now expanding the coding relationship. So remember like I said, in large health system market it’s still a sort of land and expand motion, whereas in the other segments of the market we’re seeing more and more proclivity to the platform. So exciting quarter of client success and then last but not the least actually two other points, Western Washington. We had a specific call dedicated to it. But just to recap, this is a monumental opportunity for us for several reasons. One, here we actually get to go all the way upstream. And participate in the value creation with a significant sized primary care led multi specialty group. As you know invested $17 million to get a 48% stake in the MSO that has a perpetual contract to manage all of the non clinical operations except in fact all of the operations other than the actual delivery of care by the doctors is managed by the MSO and we have a 48% stake in the MSO for our investments and that MSO is now contracted with IKS back to back to leverage our entire care enablement platform to help doctors and delivering Medicare more efficient care. And so this also becomes, if you were our live lab to demonstrate the full value of our platform in deep integration with the EPIC system which is as you know, one of the most significant health record systems or systems of record prevailing in the provider community in the US And again I think it for us checks all the three boxes of long-term stickiness, full platform adoption in integration with EPIC and then the second set of economics where our 48% taken in the MSO would actually create that second set of economics in addition to the traditional economics that the platform creates on our P and I. So super excited about this deal and its success will be defined by we anticipate at the deployment of our platform likely upsides of 15% plus in revenue for the same patient mix and the same payer mix. Now that could be so transformative in terms of value creation both for the medical group and then our state in the NSO that if they’re able to do this, it creates a whole different model for the sustainability of physician led transformational healthcare in the US and creates a fundamentally set of different set of growth vectors for us. So we’ll continue to drive such opportunities thoughtfully and with disciplined manner over a period of time and continue to report against them. And then again, last but not the least, I want to report out some recognition from the industry. Happy to note that our CFO Rishia has been awarded the best woman CFO by Business world. And also we were recognized for significant success in the acquisitions organization category for our purity deal. And then this one is a very important vector where we’ve been working very hard on making our employee experience unique. And happy to note that I think not only do we have recognition, but we’re actually at a point where I think our employee turnover is at an all time low from the history of IKs. So with that all in all a strong quarter. Continued progress along the dimensions that we have said. And I’ll now turn it over to Lithya to talk us through some financial details of the quarter, after which we’ll open up for questions.
Questions and Answers:
Unidentified Speaker
Thank you Sachin. Good morning everyone. We have already covered the highlights on this slide, so why don’t we dive straight into our cash flow metrics. Aranch, if you can go to the next slide. In terms of operating cash flow we ended the quarter at 165 crores, and free cash flow came in at 137 crores.
These numbers are net of an upfront performance guarantee we have extended to the tier of $5 million to a multi specialty primary care organization, one of the market segments that Sachin has highlighted earlier in the call. Today, with our continued strong cash generation, our net debt position continues to improve.
As you can see by the end of the quarter a LED debt positioned to that 448 crores. And with continued cash generation in the future quarters as well, we will continue to see this number improve. If you can go back to the previous slide, our EPS for The quarter stood at 9 rupees which represents a 58% growth year on year and a 2% growth quarter on quarter.
Our return on equity metrics again remain very healthy and very strong for the quarter. A written on equity metric stood at 31%. Next slide. So I call out a few highlights on this slide. In terms of forex impact, it was quite insignificant and minimal in the quarter. Our employee benefit expense in the quarter stood at 52.3% of revenues compared to 51.8% of the previous quarter.
This increase is despite the net reduction in employee count because we do continue to invest in technology as well as increments. And despite this employee benefit expense increase, our EBITDA for the quarter came in at 32% which is a meaningful 90bps improvement from Q4 where we reported 31.42%.
Looking at PAT, PAT came in at 20.5% or 151 crores. Again. The growth in PAT is in fact even faster than a bigger growth largely because the finance cost continues to come down. You will note that the number was actually 26 crores in Q1 of last year versus 18 crores in the current quarter and that is reflective of our debt repayment as well as the lower interest rate.
Our EPR for the quarter stood at 22%. We have lost tax breaks in one of the FEV units that we operate out of. For the full layout it’s likely to remain in the.
Unidentified Speaker
Our adjusted profit for the period, adjusting out amortization of intangible asset,s stood at 22.7%. That answer if we can go and look at the next slide where we talk about our important cpi. I just said we build up an employee annualized number continues to improve quarter on quarter. As you can note that. As you can note it was in the quarter our revenue from top 10 as well as top 5 customers continue to improve with continued winning of client deals that you would have noted both in Q4 as well as Q1 now aging of top 10 and top 5 customers. Again, the vintage remains very, very strong at more than five years in both these categories compared to Q4.
The slight dip is in fact due to the fact that some of our newer customers have ramped up much faster than what we have historically seen and we continue to expect to report healthy numbers in the future quarters as well. Thank you. Sachin, over to you.
Sachin K. Gupta
Great. Thank you Nithya. Again excited about our performance this last quarter and what it means for the future. Also in line with continuing to build both best in class governance as well as surround ourselves with some of the wisest and most contextual minds in healthcare. Happy to note that we’re adding Dr. Garhi Kong to our board.
Garhi is quite an exceptional professional and leader with undergrad degrees From Stanford and MD, PhD MBAs from Duke. But equally importantly, after a flourishing career in Consulting, Juliet McKinsey, he started his own fund, HealthQuest Capital, which now invests across the entire spectrum of deals from startups to publicly traded companies.
He’s deploying director on large public trade companies like LabCorp and also happens to be on the board of the Duke University Health System. So tremendous, tremendous context and leadership and we’ll continue to see that we will do whatever we can wherever it makes sense to surround ourselves with thoughtful leaders that can keep us both grounded but continue to expand our aspirations in the marketplace.
So excited to have Varen with that. I think that concludes our prepared remarks for the quarter. Again, very excited about our performance last quarter. The team has worked really, really hard and you know, happy to take questions from you. Over to you operator.
Operator
Thank you very much sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press Star and one on the Touchstone phone. If you wish to withdraw yourself from the question queue, you may press Star and one. Participants are requested to use only 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 Sagar Dhawan from Valuequest. Please go ahead.
Sagar Dhawan
Thank you and congratulations on a good set of numbers. My first question is on the strong growth that we are seeing in the top five client bucket. Just wanted to understand better what is driving this. Is this sort of just sort of one client scaling up or is it more broad based, is it other ideas which I thought I was assuming was is it due to cross selling of equity into the cross selling to a new equity client or is it more outsourcing by some of the clients?
So just wanted to understand what is driving this and how sustainable is this? I mean in the near term should we assume that such kind of growth will continue in the near term as well?
Sachin K. Gupta
So great. Thank you for the question Savar and thank you for joining this morning. Yes, look, I think our top five customer trend is healthy and I think the answer lies in all of the above in the points that you noted. There is momentum being seen on the cross sell opportunity in one of the customers.
There is these large platform deals that we signed that have kicked in into that top five. And the reality is if you think about it, when I look at the wallet of our top five customers, the wallet potential for our platform, we are nowhere near 100% moment. So I think one, it’s a great sign that the top five customers are growing.
And sure, if we continue to execute like this, there is no reason to believe that the top five customer growth should be heading. Now you might not see it linearly like this in every quarter but when you look at it over a significant time horizon, given the wallet opportunity of our top five customers and the strength of our platform, there’s absolutely reason to believe that that growth should sustain.
Sagar Dhawan
Understood sir. And just on the Palomar deal, if you could provide an update on how it is scaling up because it’s been like eight, nine months now. Are you seeing the upsides that you had thought about?
Sachin K. Gupta
Yeah, thank you for asking again. Yes, I think we’re ahead of plan actually I can’t go into the specifics here but I’d like to say that so far we’ve been delighted. Our team has executed tremendously on the DLAC even as we are not even fully implemented on all the features of the platform. Our financial pro forma six months in. Is better than what we thought it was going to be even though we’re not fully implemented. So we continue to be really optimistic about what the Palomar deal will produce for us and at what pace. Also, as you know now, the one concern that some of you had about the financial future of Palomar, that continues to be looking a little bit more constructive and that creates its own additional opportunities depending on which system eventually ends up with them. So yeah, very positive on the paranormal.
Sagar Dhawan
Yes. Got it. Understood. And one last question from my side is on the tail cutting that we’re doing on the equity side. It’s only to understand how meaningful of a drag that has been on the growth in this quarter and what could have been the growth if the tail cutting was not happening.
Sachin K. Gupta
Yeah, Sagar, I think I’ll refrain from providing those specifics, but I will say that it’s material. I’m comfortable saying that the drag is material and that is why even as we are continuing to be intentional, we are trying to manage the drag in a manner that the cutting of the tail is real.
Because the reality is that cutting of the tail is also helping with margin growth but at the same time it’s not so dramatic that it offsets our organic growth which I think is returning back very strongly. So material drive, but managed to the best of our abilities.
Sagar Dhawan
Got it. And when is this process going to continue? You want to reach about 500 clients by just a rough timeline as to by when this process could be completed.
Sachin K. Gupta
That’s a tough one, Sagar. Look, it could be as much as another two to three quarters because like I said, it’s easy for us to. There’s two factors here, right? One, even as you want to cut the tail, we don’t want to let the customers down. They have been relying on us for performance. So we can’t just sort of nude you coming out of it.
And second, the reality is you don’t want it to have a dramatic drag in just one or two quarters. And so I think perhaps another two to three quarters is the way to think about it and we’ll let you know if sort of that changes.
Sagar Dhawan
Understood. 150 odd customers. Got it, sir. Thank you for taking my questions and all the best. Thank you.
Sachin K. Gupta
Thank you. Sadhguru.
Operator
Thank you. The next question is from the line of Srinath V from Bellwether. Please go ahead.
Srinath V
Hi. Hi Sachin. Taking on the same kind of Paloma discussion, you know, want to understand what is the path of the full implementation of the Care enablement platform. How does this whole thing work and want to understand. Let’s say we assume they have 100 physicians. How many of their, you know, roughly how many of their physicians have like partially taken, you know, one of the main suites of products of ours, you know, what percentage of the physicians have actually taken the full, you know, platform. And would it be fair to assume that somewhere in this, you know, financial year we would reach peak revenue potential in parallel just on the qualitative understanding?
Sachin K. Gupta
Yes. Great. Thank you Srinath, Great question. So first of all, the commitment as a part of the deal is for 100% of the physicians to take the full manifest of the platform. So that is the definition of the full implementation. And the way we are rolling it out is there are some features that are already centralized in the way they operate.
Those are the features that we implemented first. Because what is already centralized is easy to, is easier to drive as a part of the platform and the goals have been clearly implemented already and the others are well on their way. It is totally fair to assume that perhaps by the end of which is fiscal Q2, it will be fully implemented across all the features, across nearly 100% of the physicians at Palomar.
And so yes, we would have reached our peak revenue potential at Palomar at that point. Now again, our peak revenue potential is, as you know, driven by two aspects. One is the platform fee. But then really the kicker comes in the upside. And so those upsides will obviously be evident in our numbers, in our accounting numbers at the end of the year because that’s when they are calibrated.
But yes, on the platform fee, the peak would have been achieved by the end of fiscal Q.
Srinath V
Perfect, Perfect. I would like to understand. No, no, please go ahead, Please go ahead. Kachan. Sorry,
Sachin K. Gupta
You’re asking about how long does it typically take? You know, so it’s a, it’s a work in progress. You know, it depends on the change management sophistication in the organization. It depends on how much is already centralized versus not centralized. How good are the position champions in the organization that are able to Dr. Drive the change?
How long does it take us if it’s an EHR where we already have integration versus an EHR where as a part of the deal, we have to build the integration. So there are three or four factors that go into defining how long the full platform implementation might take. But of course our objective is an overall basis eventually to get to a point once it’s more mature where over 120 to 150 day period, we can have the full platform implemented across the entire position base of the customer that we are committed to.
Srinath V
Perfect. Perfect. Wanted to understand given if Aloma does get acquired by one of the other players. This is a very it question. You know, bear with me on this. There’s normally some sort of vendor consolidation that takes place. You know, how have you assessed this? Would it be fair to assume since we are so well integrated into Paloma, that we are somewhat safe from, you know, vendor consolidation? Any broad views that you have on this, that would be great. Yeah. Yeah. So given that we were potentially anticipating a change of control even when we did the deal, we are already built a no out in the event of change of control.
Sachin K. Gupta
So first of all, there’s a very, very little contractual protection that will probably be a huge deterrent. But we don’t like to rely on just the contractual protection. So the real value is the excitement that we are experiencing from the Palomar physicians. And what we are most excited about talking as CEO, is the fact that if you’re able to demonstrate the type of ROI that we are talking about, I think it will be like impossible to imagine that whoever the acquirer is, whether it’s cheesy San Diego or one of the other two systems, they would not want to adopt some manifest of such an approach in their employee physician base, which are their employee physician base is 10 times the size of Talamore’s employed position base.
So we. You never know what exactly will happen. But one, I think we are contractually totally protected. And second, I think there’s more opportunity than risk in Palomar integrating with one of the large systems in the area.
Srinath V
Perfect. This is the last question on equity. Want to understand what percentage or anything you can share on equity customer migration to the ambient AI its product, given that it delivers significantly more value at a significant lower price, one would assume that within one year, which would be a standard contracting cycle, then a large part of customers would have migrated.
But I don’t think that is the case. So one understand, where are we on the migration? Is it 30, 40, 50% of the customers? And if there’s a bottleneck, what would be the bottleneck? And thanks a lot for answering all my questions in great detail.
Sachin K. Gupta
Sure, Srinath. No, I think, look, the bottleneck is really organizational inertia more than anything else. And so these are large health systems that have relatively long decision cycles. And so I would say that we are not near the completion of this transition. And like I was saying earlier, I think just like the cutting of the tail perhaps has another two to three quarters of Runway, I think the remainder of this fiscal year is probably a good way to think about when that transition might get completed.
Different customers are in different stages of that transition and. And remember, the transition is in two features, not just clinical documentation, but we’re also driving that transition in medical coding. But again, medical coding, very, very heavy human LED stateside human LED model. And now with our autonomous coding across two specialties and our superior global execution coupled with autonomous coding, we’re also driving transition there. So I’d say perhaps a fair way to think about it is over the rest of this fiscal we should have largely completed that transition, which is why.
Srinath V
Thanks a lot Sanjeev.
Sachin K. Gupta
By that time we would have gotten our operating margins or EBITDA to a place that could perhaps be called sort of steady state. Perfect. Thanks a lot. I’ll get back into the question too.
Srinath V
Thank you.
Operator
Thank you. The next question is from the line of Ruchi Mukeeja from ICIC Securities. Please go ahead.
Ruchi Mukhija
Thank you for the opportunity and congratulations team for a great set of numbers. First question, we are now in 18 month journey of transitioning activity business. Also the loss of large client and the start of last fiscal is in the base. So is it fair to assume that as we transition to different quarters of finance we should see the YY growth momentum of our business accelerate and move more closer to what we used to do prior to activity move like a 20% growth.
Mark.
Sachin K. Gupta
Hi Rushi, thank you for the question. As you know we don’t give guidance on future growth, but I think the cues lie in the answers that I sort of tried to give earlier, which is I think we still have two to three more quarters of acuity customer tail reduction as well as acuity margin optimization.
And so perhaps fair to assume that the headwinds in revenue associated with those two endeavors should be completed by towards the end of this fiscal, let’s say fiscal Q4. Certainly fiscal Q4. So I think that probably is the is the timing to think about the return to pure growth margin pure growth versus sort of pure organic growth being offset by some of this intentional headwind that we are driving to try that sort of balance between revenue growth and margin growth.
Ruchi Mukhija
Got it Clients. Looks like the Palomar Beam has scaled up and now we have different set of five top five clients. It would be great if you could talk about the transition time for Palomar and do we expect similar transition time for the Western Washington Medical Group with two to three quarter transition? Should that also lead to change in our top five customers?
Sachin K. Gupta
Good question, Panamar. Like I was saying in my earlier question, I think by the end of this fiscal, this quarter, the current quarter that we’re in, we should have completed the full implementation on Western Washington. Yeah, I think it’s a fair assumption that in about 120 odd days from now we should be fully implemented. It’s subject to us getting the full EPIC integration going which we are working on.
That’s the only sort of bottleneck there and we’re working through that process. So perhaps another 120 odd days. Whether or not Washington enters our top five, I can’t tell you Ruchi, right now because it’s also a function of what happens to the current top five and how quickly they grow over the next 120 to 150 days.
But obviously it will become a substantial customer and certainly in the top 10, perhaps in 120 to 150 days from now.
Ruchi Mukhija
Got it. And lastly, could you highlight to us how the cross sell these or partial activities panned out during the quarter selling IK solution to acuity customers?
Sachin K. Gupta
Yeah, look, as I was saying earlier, I think we are still in the early innings of that journey. But the good news is that I think we figured out how to orchestrate it more or less how to work in that motion that is activated by the legacy acuity salespeople and then how they partner with the sort of overlay partner sales engine that we built that can elevate the conversation.
So I think plenty of green shoots. One, we actually announced publicly a top five health system in the country where we have driven across the motion very successfully and there’s several others in the hopper. Another one of them is a top five health system in the country.
So I’d say still early, but I feel like after a whole bunch of trial experimentation, what works, what doesn’t work, how to incentivize the sales engines appropriately. First trying to do it with a platform approach but then learning that large health systems don’t yet have the appetite for the platform approach but have much greater proclivity for point solutions, I think we figured out the motion and so. Hopefully we’ll see the fruits of that. And I can do a second tick mark on that cross sell motion in the next quarter.
Ruchi Mukhija
Got it. This one is for Nitya. You did mention that this quarter we paid $5 million as part of 1 of the deal. Do we expect such payout during the current quarter besides Western washing in any of other deals?
Nithya Balasubramanian.
Ruchi, I’ll obviously not be able to talk about what might or might not pan out in the current quarter. But I think from a more philosophical perspective, Sachin and I had mentioned earlier that in each of the market segments that we operate in, we might do one deal or two. These always, almost always tend to be full platform deals and these tend to be very, very long term deals as well.
This helps us establish the benchmark in terms of what a platform deal can deliver in each of these market segments.
Ruchi Mukhija
Got it. Thank you. And all the best.
Sachin K. Gupta
Thank you.
Operator
Thank you. Thank you. The next question is from the line of Nilesh Jain from Astute Investment Management. Please go ahead.
Nilesh Jain
Thank you for the opportunity and congratulations for a great set of numbers. My first question is on your revenue growth. Obviously top five has grown very well to the north of 70%. But when I look at your other top five clients and non top apart from top 10, it has been flat, more or less.
So how should we look at the top 10 growth apart from your top five? You know, maybe we can talk about the organic side of the growth. We can understand that over time once you cut down the team, we can expect the it should grow faster than the outsourcing industry which is expected to grow at 12%.
Sachin K. Gupta
Yeah, I think again I’ll say that first of all, you know, on a quarter, on quarter basis it’s not easy to. I wouldn’t call one quarter a trend where the top five are growing and the top ten, the next five which are the top ten are not growing so much that now that’s a trend. I wouldn’t go so far as to say that. Let’s play it out right now.
I can tell you that we’re seeing fairly secular growth across existing customers and the new pipeline. And as you can imagine, given that the cutting of the tail and the transformation of the accuracy book and. Has a drag on the revenue growth. And I said it’s a bit of a material drag. You can estimate what the organic growth really looks like. And that’s what I would say very hard for me. And I’m deliberately not trying to not answer your question. But I don’t want to give guidance. I can’t give guidance number one. And number two, I continue to believe passionately that if you continue executing it the way we are, we will continue to grow significantly faster than the 12% pan growth.
Nilesh Jain
Probably. Maybe you can just help me with the organic growth. You know, just a rough range that will be helpful if you can share what do you mean by organic growth? So last year base would have equity number as well. Right. Which might not have grown as compared to IK’s legacy clients.
Sachin K. Gupta
Yeah, but now see, by the same quarter last year, the integration was complete. So all growth compared to Q1 FY25 is all absolutely organic growth. So because there is growth in some acuity customers as well. If you are asking me to tell you what is the reduction of revenue in acuity and increase in icares that unfortunately I can’t do because we are really operating like one company now.
There is no longer an acuity account or an IQF account. There are so many accounts that where we have already activated a cross sell motion and so those accounts are joined customers. So I don’t know whether to account their revenue in legacy acuity or legacy its. I don’t know how to strip those out together. But again, I think if you just do broad math around we have 16% growth in spite of material headwind associated with what we are deliberately doing on customer sales and revenue optimization should give you a fairly decent idea of what the growth net of that or prior to that would look like. Right?
Nilesh Jain
Okay. Okay, no problem. Thank you. Second question is on, you know, you talked about radiology partners. So just wanted to understand how is, you know, that progress going on on that side and are we looking at any GV sort of, you know, transaction day? So that relationship is interesting in that it has not yet converted to a jv.
Sachin K. Gupta
The way we have structured that relationship was that it has to go to a certain threshold at which point it makes sense to jv. The relationship has not yet grown to that threshold. So I don’t see a JV conversion happening in the next couple of quarters. But we’ll continue to track how that goes. The key there is my whole concept on the JV here on any of these JVs is. First, the customers should have fully manifested the platform in their installed base. Now they have 3,000 radiologists. There’s still a long, long way to go before a large part of their 3,000 radiologists have adopted this program. Also, we’ve already started to figure out a whole bunch of tech interventions that are changing that virtual radiology assistant model even as we were implementing them. So I, I think more to come. Not through JV yet.
Nilesh Jain
Okay, so, and my last question on Nitya wanted to understand on the employee side, obviously we have been reducing, you know, the employee count since last few quarters. So I wanted to understand how do we see the general trend in terms of, you know, are we born more or less on the rationalization of the employee side?
How you see bent my father scope there.
Sachin K. Gupta
So you’ll obviously see a balance in terms of our continued optimization of the legacy equity workforce. I think like Sachin pointed out, there’s at least another two to three quarters where we’ll continue to optimize as we deploy our technology and achieve the right balance between onshoring and offshoring.
However, we are of course growing, even as I say that in the same bed, we’re also growing significantly in other parts of a business and therefore we do need to, we do need to therefore support that growth with additional employees, both in terms of technologies as well as other administrative employees.
Nithya Balasubramanian.
So I think overall you probably see that number inch up in the rest of the year as we continue to support the growth that we’re anticipating.
Nilesh Jain
Sure. Just on the EBITDA margin. Once we reach mid-30s, do we expect to see further scope of expansion there of margins? Our time can be two to three years time frame.
Sachin K. Gupta
Look, I think we’ve said continuously that we expect to get somewhere in the early to mid 30s. As you can see, we’re already past the early 30s, almost well ahead of what we had said. And so I would still maintain that Nilesh, that was getting to early to mid-30s and we think margins should stabilize at that rate to try and say that margin could improve beyond the early to mid-30s.
I don’t feel comfortable doing that. I think our target still continues to be early to mid-30s. And as you can see from our performance, we feel very confident about achieving that.
Nilesh Jain
Thank you. And I wish you all the best.
Sachin K. Gupta
Thank you.
Operator
Thank you. The next question is from the line of Seema Nayak from ICICI Securities. Please go ahead.
Seema Nayak
Hi. Congratulations on a good quarter with the headcount down about 300Q and Q. How far are we pushing this lever? And with new deals announced, is there going to be expected going forward? And what is your ideal annualized VTA per employee that you are targeting?
Sachin K. Gupta
Yeah. Okay, so look, I think on the headcount, yes there will be quarter on quarter fluctuation based on deal ramps. But I think which is why I constantly point everyone to please look at year-on-year trends versus quarter on quarter trends. The trend that you’re seeing year on year is a real trend.
The trend that you’re seeing consecutive quarter is loaded with all sorts of noise around one customer ramp related to things happening in that customer, a new customer start. So I would suggest if you really want to trend that please look at it year on year. And that year on year trend is probably the most telling factor on the EBITDA per employee look.
The way to track this is really like we said, early to many Ebitdas at the corporate level, because also remember that we were traditionally 1.52%. Today we are close to 5% R&D expense and we are setting up an EIS tend to of excellence. We’re just about to announce the chief AI officer under which the center of excellence in the world then a whole bunch of things happening that are factored into our sort of general thinking of early to mid-30s.
And at least my humble belief is that with the type of growth that we are driving organically with these type of early to mid 30 margins sustained and the type of ROE, I think this is probably a good place to be and that’s how I would suggest we played out. But if there’s anything else specifically that you’re looking for in the EBITDA per employee, we can take it offline.
But I think in general I would say I’ll point you back to early to mid-30s corporate EBITDA in spite of continued investment in sales and marketing and significant continued investment in our industry.
Seema Nayak
Yeah, that’s helpful. Thanks.
Operator
Thank you ladies and gentlemen. That was the last question for today. I would now like to hand the conference over to Mr. Saransh Mundra for closing comments. Thank you. And over to you sir.
Saransh Mundra
Thank you everyone for joining the call. Please reach out in case you have any additional questions. Will be very happy to answer. Thank you.
Sachin K. Gupta
Thank you, everyone. Appreciate it.
Operator
Thank you very much, sir. Thank you. Members of the management, Ladies and gentlemen, on behalf of ICICI securities, that concludes this conference. We thank you for joining us. And you may now disconnect your lines. Thank you.