Kellton Tech Solutions Limited (NSE: KELLTONTEC) Q2 2025 Earnings Call dated Nov. 13, 2024
Corporate Participants:
Niranjan Chintam — Executive Chairman
Karanjit Singh — Chief Executive Officer, APAC
Srinivas Potluri — Chief Executive Officer, Americas
Analysts:
Narendra Khuthia — Analyst
Dharani — Investor
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Kellton Tech Solutions Limited Q2 and H1 FY ’25 Earnings Conference Call.
As a reminder, all participants’ lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] I would like to thank you for all joining the company’s earnings call for the second quarter of the financial year 2025.
Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today’s con-call may be forward-looking in nature. And such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on the management’s beliefs as well as assumptions made from the information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings conference call is purely to educate and bring awareness about the Company’s fundamental business and financial quarter under review.
Now I would like to introduce you to the management participating with us in today’s earnings call. We have with us today Mr. Niranjan Chintam, Chairman and Whole-time Director; Mr. Karanjit Singh, Chief Executive Officer, India; and Mr. Srinivas Potluri, Chief Executive Officer, U.S.
I now hand the conference over to Mr. Niranjan Chintam, Chairman and Whole-Time Director. Thank you, and over to you, sir.
Niranjan Chintam — Executive Chairman
Thank you, Neha. Good evening, good day to all. Thank you for joining our Q2 FY ’25 earnings call. I just want to start off with the financial numbers and then we’ll get into the operational details and then I’ll open up for Q&A.
First of all, I want to apologize, there are some slight technical difficulties. So the call started late. Also, I have a severe cold and cough, so I may be coughing in the middle, please excuse me, I want to give that heads up right away. And with that said, let me just go through the numbers.
For the Q2, I’ll start off with the quarterly numbers and the six-month numbers. The quarterly numbers, we have achieved a revenue of INR270 crores, close to INR271 crores on this quarter. Let’s say, this is a growth of about 12.4% — 12.4% year-on-year. The EBITDA margin of 12.1% and a net profit of INR19.6 crores. The PAT margin for this quarter is 7.2%, and the EPS for this quarter is INR2.06.
For the six-month numbers, the revenue is INR533 crores, which is about 8.7% growth year-on-year over the corresponding six months of the previous year. The EBITDA is INR65 crores, EBITDA margin is 12.2%, net profit of about INR39 crores — INR39.6 crores and a PAT margin of 7.4%. The EPS was about 4.1%, again, comparatively, if you look at it on a year-on-year basis, it has gone up significantly.
Now coming to the operational highlights, we have about five client wins. I’ll let Karanjit talk about the client wins for this quarter. Karanjit?
Karanjit Singh — Chief Executive Officer, APAC
Thank you, Niranjan, and hello, everyone.
So we — I’ll just give a little bit of color of the kind of client wins we had this quarter. So we’ve been selected by a major gaming client to modernize their existing enterprise data warehouse and migrate it to the cloud, specifically to Snowflakes. So this is something that they want to seamless cutover maintaining the same architecture. So this is a pretty significant project for them, and we are glad that we’ve been selected for it.
Similarly, we have been selected by a very major contract food services client to build a critical kitchen operation system for them. So this is something that we are completely building from the ground up for them. And the idea is to ensure that we build a scalable performance application with great user experience that helps them to align with their clients’ expectations.
The other one that we have is an SAP client, which — it’s a client, which has basically selected us to enhance their SAP warehouse management system. And is something — this is something that will be leveraging the core SAP with that kind of expertise to facilitate the — first, the development and then the deployment of the system.
The other one that I would also like to mention is a major manufacturing client, a global client for whom we will be developing a system, which will help them streamline their sales and inventory management for about 2,000 SKUs. So this obviously is again a data project. So this integrates with multiple internal sources as can be expected of any large global enterprise. And this will help them get visibility and timely data and insights that will help them enhance their efficiency.
So yeah, these are the client wins and a little bit color on the kind of work and the solutions that we will be helping these clients to implement.
Thank you. Back to you, Niranjan.
Niranjan Chintam — Executive Chairman
Thank you, Karanjit. Srini, I know everybody probably is curious about what’s going on with U.S. elections and the impact on Kellton, our IT services in general. Can you just take that and answer it upfront so that people get to understand what it means?
Srinivas Potluri — Chief Executive Officer, Americas
Sure, Niranjan. Hello, everyone. So we have been waiting for elections to get done so that the dependency and who is going to come, who is not going to come is all sorted out. So before we go into what Trump’s presidency might look like for Kellton, I want to say that there were about four or five opportunities that we were going to sign last quarter, but due to the uncertainty of the elections and so on, customers have pushed them to the right. So we expect to close all of them in this quarter and hopefully start some of them before the holiday season in December.
So having said that, obviously, Trump has come with a rolling majority, he wants to provide deeper tax cuts for businesses as well as individual and his campaign has actually proposed lowering the corporate tax rate to 15% from its current 21%. What does it mean for business in general? The economy will initially grow slightly faster under Trump’s plan to cut the corporate taxes. But over a long period of time, that might fade, but the initial reaction would be that there will be a lot of spend from businesses and corporations. And we expect to take advantage of that from an IT perspective, from an implementation perspective.
So that is an immediate impact you might have seen that the S&P has jumped up 2.2% immediately after the declaration of Trump’s win. So obviously, all of these are indicators that the initial phase of Trump’s presidency, we will see some growth happening in the U.S. economy.
Niranjan Chintam — Executive Chairman
Thank you, Srini. So now I want to open up for questions. Neha, can you open it up for questions?
Questions and Answers:
Operator
Yes sir, sure. Thank you very much. We will now begin the question-and-answer session [Operator Instructions] The first question is from the line of Narendra from RoboCapital. Please go ahead.
Narendra Khuthia
Yes, am I audible?
Niranjan Chintam
Yes, Narendra. Go ahead, Narendra.
Narendra Khuthia
Thanks for the opportunity and congratulations on a solid set of numbers. So my question is, post the outcome of the election in the U.S., right? So how achievable does the $200 million target that we had set? How achievable does that look? And what is the time frame that we are looking at? Because I believe the order inflow should start picking up going ahead.
Niranjan Chintam
So let me answer it a different way, Narendra. Like Srini pointed out, right, some of the decisions that were pending for closure or sign-off will be accelerated now. They were just waiting because clients were uncertain about or wanted to get this election over with. They want to know who is going to win, what is the impact of the business is going to be because both these personalities had different visions of what the taxation is going to be, what it means for businesses and all that stuff. Now that is sorted out. Everybody knows what Trump is and what his agenda is.
We are hoping that the economy is going to be opening up, interest rates will open up and taxation, like Srini said, taxation will be reduced. That means that there will be a quicker acceleration in the initial phases, like Srini was talking about. So our thing is we have put ourselves certain targets for next year. And with this in line with whatever we are progressing now, we will be in a similar path to get to the $200 million, it will be slightly, let’s say, aggressive target we can take for next year compared to what we had earlier. But to answer your question, probably we are looking at two years is what it’s going to be — two financial years is what it’s going to be — I’m not pointing this financial year is when we should be able to achieve those numbers.
Narendra Khuthia
And then would be a fair assumption, ’27, we be a $200 million company?
Niranjan Chintam
Yes. It should be in the calendar year ’27, yes.
Narendra Khuthia
Okay. Okay. Great. Great. Any other headwinds you see? And also, what kind of margins are we looking at when we hit that $200 million target?
Niranjan Chintam
Yes, I don’t want to give a specific number. But as you’re seeing, right, quarter-on-quarter, we have been improving our margins because we did some realignment of our brands, realignment of some of the business offerings that we’re doing. We are also targeting that this is something that for the financial year, we are looking at probably — not probably, I’ve given a target to all our CEOs, operation sales related leadership that we want to reduce the number of customers while increasing per customer revenue. So that also reduces some of the overhead. So we anticipate that EBITDA number is going to be much better than where we are today for the next following years.
Narendra Khuthia
Any other headwinds that we see going ahead that could impact us —
Niranjan Chintam
There is always going to be uncertainty, right? You can’t expect what is the unknown at this point, I don’t know. But initial buoyancy we’ll see starting the calendar year, I want to say, 2025. I want to make sure that I’m differentiating between the financial year and the calendar year is when Trump’s presidency takes off, and there’s a lot of buzz around the industry because there is going to be some wait and watch is from whatever the campaign promises made to implementation, right? We want to see how that happens and then we believe that it’s going to be stabilizing and business should improve. People have been just waiting and holding back on spending, now they’ll open up.
Narendra Khuthia
Just final one clarification. So if everything goes as promised by Mr. Trump, right, so it should — everything should be positive for us, if I’m not wrong, just clarifying that.
Niranjan Chintam
That’s correct. So the only headwinds that we face is Europe. Europe is still struggling, right? While it’s still struggling, we don’t know when it’s going to come out of it. The baggage of Ukraine, how long it will continue on in Europe, we don’t know. We’ve been on a — whatever lack of a better word, we are on a flat line when it comes to Europe. We had so much of growth that we anticipated as well as pipeline that we anticipated has never materialized because of the Ukraine war that happened and the economy is shrinking there rapidly. What does that mean? Would Europe step up and take the whole baggage that U.S. is taking? We don’t know. So at this point, that’s the only headwind that we see.
Narendra Khuthia
Okay great, sir. Thanks for answering all my questions and all the best.
Niranjan Chintam
Thank you, Narendra.
Operator
Thank you [Operator Instructions]
Niranjan Chintam
Neha, if nobody else is there, we’ll wrap it up. My throat is also not working. Just give it another 30 seconds. No other question comes in and we’ll just wrap it up.
Operator
Okay. Yes, sir. We have one more question. It’s from the line of Dharani [Phonetic] an individual investor. Please go ahead.
Dharani
Hello?
Niranjan Chintam
Hi.
Dharani
Yeah my question — the promoter stake has been increasing over the quarters. Like it has reduced from 51.68% in the last quarter to 40.82% in the September quarter. So I just wanted to know the reason why it has been reducing. And over the years, if I look at it, it has reduced from around 60%, 62% to 40% currently. Yeah.
Niranjan Chintam
Thank you for your question. Apologies, I’m going to be coughing. Please forgive me. We did do some selling of our shares in last quarter, that’s a reflection — partly reflection of that and partly reflection is related to some of our reporting requirements, we have done it, okay? Other than that, there’s nothing else. To answer your question about 60% to where it is now? That is we’ve been reporting that consistently. It’s nothing that we have not reported. Everything has been reported. It’s just over a period of time. There were some sales that happened and that is reflected and also some dilution because of employee stock options that were issued. So there’s a dilution because of that.
Operator
Thank you [Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Niranjan Chintam for closing comments.
Niranjan Chintam
Folks, sorry I apologize, again. I’ve been coughing on the call. Thank you for joining this quarter two earnings report. So we’ll be happy to get you on another call in the next quarter or if you are in Hyderabad and Gurgaon, please look us up. We’ll be happy to talk to you and answer any further questions you might have. Thank you again. Goodbye.
Operator
[Operator Closing Remarks]