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.