Mindtree Ltd (MINDTREE) Q2 FY22 Earnings Concall Transcript

Mindtree Ltd (NSE:MINDTREE) Q2 FY22 earnings concall dated Oct. 13, 2021

Corporate Participants:

Amisha R. Munvar — Head, Investor Relations

Debashis Chatterjee — Chief Executive Officer and Managing Director

Venu Lambu — Executive Director and President, Global Markets

Vinit Teredesai — Chief Financial Officer

Dayapatra Nevatia — Executive Director and Chief Operating Officer

Analysts:

Mukul Garg — Motilal Oswal Financial Services — Analyst

Vibhor Singhal — PhillipCapital — Analyst

Manik Taneja — JM Financial Services — Analyst

Sandip Agarwal — Edelweiss Capital — Analyst

Apurva Prasad — Elara Capital — Analyst

Mohit Jain — AnandRathi Institutional Equities — Analyst

Dipesh Mehta — Emkay Global Financial Services — Analyst

Sumeet Jain — Goldman Sachs — Analyst

Vikas Ahuja — Antique Stockbroking — Analyst

Gaurav Hinduja — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Mindtree Limited Quarter Two FY’22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand over to Ms. Amisha Munvar. Thank you, and over to you.

Amisha R. Munvar — Head, Investor Relations

Thank you, Mandith [Phonetic]. A very warm welcome to all of you to this conference call to discuss the financial results for the second quarter ended September 30, 2021. Trust all of you and your loved ones are safe and in good health.

Today, on the call we have with us Mr. Debashis Chatterjee, Chief Executive Officer and Managing Director, Mindtree; Mr. Venu Lambu, Executive Director and President, Global Markets, Mindtree; Mr. Dayapatra Nevatia, Executive Director and Chief Operating Officer, Mindtree; and Mr. Vinit Teredesai, Chief Financial Officer, Mindtree.

We will begin with a brief overview of Company’s quarter two performance, after which we will have the floor open for Q&A. Please note that this call is meant only for analysts and investors. Our friends from media are requested to please disconnect as we have already concluded the media briefing.

Before I hand over, let me begin with the safe harbor statement, during the call, we could make forward-looking statements. These statements are considering the environment we see as of today and, obviously, carry a risk in terms of uncertainty, because of which the actual results could different from those outlined in the quarterly financials available on our website. We do not undertake to update those statements periodically.

With this, I now pass it to Debashis for his remarks.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thank you, Amisha. Good evening and good morning to everyone on the call. I hope you and your families continue to remain safe. We are delighted to report yet another quarter of outstanding performance. Here are few highlights: quarterly revenue of $350.1 million, up 12.7% sequentially as a result of broad-based growth; year-over-year revenue growth of 34.1%, our highest-ever for a quarter in decade. Organic quarter-on-quarter revenue growth of 12.1%, again, our highest in a decade. Revenue run rate of $1 billion in North America and $250 million in Europe and UK together. Aggressive investments in strengthening our capabilities and partnerships while maintaining EBITDA margin at 20.5%.

Challenges bring opportunities, our robust performance through a global pandemic shows that this is true in case of Mindtree, as well as our customers. As disruption caused by the pandemic ease with growing vaccination, fewer cases and improved customer sentiment, a clearer view of the demand landscape is emerging. There is growing appetite and urgency among organizations across industry sectors to tap into digital and cloud technologies and that too to do so very fast. This trend is fueling continuous innovation in business models, processes, operations, products and services with a focus on, not just optimizing costs, but maximizing revenue, operational excellence and business resilience. Organizations are looking for strategic partners who can quickly align with their vision, understand their strategic priorities and mobilize technology and business capabilities for them to drive superior business outcomes and customer value. For us, this is translating into more opportunities. We are capitalizing on these opportunities with cutting-edge capabilities, operational discipline and organizational nimbleness. In a rapidly evolving marketplace, we believe these attributes give us an edge.

Thanks to the confidence placed in us by our customers and partners and the hard work of Mindtree Minds. We are proud of how we have built upon our solid start to this financial year to deliver all-round performance in the second quarter. For the quarter, our revenue was $350.1 million, up 12.7% sequentially with all industry segments, service lines and geographies reporting healthy growth. Our order book comprising a healthy mix of annuity and transformational deals stood at $360 million, up 18.7% year-over-year. Our ability to maintain our EBITDA margin at 20.5%, even while investing significantly in the business and our people, speaks to our operational rigor and efficiency. There is a visible uptick in spend on emerging technologies and services. Our aggressive focus on client mining to tap into cross-sell and up-sell opportunities is working very well.

Now, let me provide some color on growth of various industry segments. Our Communications, Media and Technology business grew 5.4% sequentially on the back of strong demand in core modernization, digital product and platform, digital marketing, omnichannel experience and cybersecurity. For a leading telecom company, we rapidly built a suite of high-performing employee applications on a low code/no code platform reducing the capex for building the applications by half while enabling 3 times faster rollout. For one of the world’s top business schools, we’ve built a consolidated Cross-Cloud platform that provides a 360 degree view of students’ progress, helping better management of the end-to-end learning lifecycle. A leading global technology company selected us to envision and execute their strategic modernization program. We also won deals with leading multinational information services and telecom conglomerates.

Our Retail, CPG and Manufacturing business grew 29.7% sequentially. A part of the demand traction was seasonal due to businesses opening up for retail and in-person shopping after an extended lockdown. Customers are looking to build and scale connected ecosystems of products, experiences, factories and operations using cloud and digital technologies. We expanded our work with leading brands in consumer goods, household appliances, sportswear, automobiles, personal care products, container shipping services, among others. Given today’s pervasive connectivity, many customers are combining smart products and associated services to unlock new revenue streams and better monetize their services portfolio. For example, we are helping an industrial equipment distributor, pivot from selling discrete products to selling throughput or outcomes. We are helping an electronics retailer re-imagine its go-to-market strategy and leverage an omnichannel approach to increase basket size. The IoT capabilities of Mindtree NxT have helped us win transformational deals at leading multinational manufacturers of consumer goods, industrial products, building materials and automobiles in the US, Europe and Asia Pacific.

Our Banking, Financial Services and Insurance business grew 8.9% sequentially with customers increasingly looking for flexible, nimble and transformation first partners to drive core modernization, accelerated product rollouts, continuous transformation, digital engineering and experienced disruption. During this quarter, a large credit card agency selected us to help it embrace the product IT operating model. We also signed contracts with asset managers for critical ESG-related data initiatives and with Tier 1 banks to strengthen regulatory compliance. We are enabling a life and annuity’s carrier and a credit card issuer to re-imagine core process for improved customer experience and also for carrying out end-to-end core modernization for a property and casualty carrier.

We are leveraging our NxT capabilities to help our Tier 1 insurance carrier to drive IoT. IoT-related product innovation and also providing product engineering services to the European arm of a large FinTech company using a broad-based approach. We are leveraging our partner ecosystem to enable several customers, including investment in insurance and asset management companies in the US and UK to drive their cloud and data strategies, improve time to market for new products, re-imagine direct-to-consumer model and optimize costs.

Our Travel, Transport and Hospitality business grew 14.2% sequentially. This is the fourth consecutive quarter of double-digit sequential growth for this business led by increased focus on core modernization and digital transformation. Our strategy to diversify our growth is working well. This quarter, a global cruise holding company selected us as a digital engineering partner for return to service initiatives to help them re-engineer and modernize their passenger mobile channel. We are also going after opportunities in the food and beverage and surface transformation sectors. For example, we are developing solutions around Mindtree’s NxT offerings in railroad. Our innovative Digital Health Passport has received tremendous interest from our customers and some leading airlines to looking — and some leading airlines are looking to integrate it with their applications to further improve customer experience.

Healthcare, our most recent industry growth contributed $3.7 million to our revenue. We continue to invest in accelerating our growth across the identified segments of the healthcare market by synergizing our service line capabilities.

In terms of geographies, North America contributed 72.8%, Continental Europe, UK and Ireland contributed 19.6% and APAC and Middle East contributed 7.6% of our revenue during the quarter, while our North America business hit the $1 billion revenue run rate this quarter. Europe and UK together crossed the revenue run rate of $250 million. We recently expanded our leadership in Europe and Asia Pacific with industry veterans and we’ll continue to dial-up investments in these markets to accelerate growth. Among our service lines, Customer Success contributed 43.2%, Data & Intelligence contributed 14.3%, Cloud contributed 18.7% and Enterprise IT contributed 23.8% of our revenue for the quarter.

Future-ready capabilities and better access to talent are among the key reasons why we as a partner of choice to our customers. In a competitive talent market, we are proud of the way we have differentiated ourselves with our people-focused, purpose-driven culture and cutting-edge carrier and development opportunities. We onboarded more than 4,400 Mindtree Minds this quarter, taking our headcount to more than 29,700. To build additional supplies of in-demand technology skills to meet our growth needs, we launched our unique learn-and-earn program for BSc and BCA graduates in collaboration with BITS Pilani, a premier higher education institution. As part of this work, integrated learning programs called Mindtree EDGE, we will hire fresh BSc and BCA graduates and provide them with a fully funded opportunity to pursue an MTech degree in software engineering firm BITS Pilani while working on cutting-edge customer projects at Mindtree. Our learn anywhere, anytime approach to delivering quality learning at scale led to a well over $0.5 million [Technical Issues].

Our success in providing an outstanding people focus workplace despite challenging circumstances [Technical Issues] won several prestigious accolades. We were recently certified [Technical Issues] Place to Work in India for 2021. This certification is [Technical Issues]

Venu Lambu — Executive Director and President, Global Markets

Amisha, is it only me who can’t hear DC?

Debashis Chatterjee — Chief Executive Officer and Managing Director

At this year’s Brandon Hall Group awards for Human Capital Management Excellence, we won three awards for innovative leadership development, HR data analytics, and employee benefits, and wellness. For the quarter, our LTM attrition was 17.7% while we do not expect this phenomena to continue for long, we believe our people engagement, compensation, job rotation, reskilling and rewards and recognition programs are well positioned to make a difference.

I will now turn over the call to Vinit for Q2 financial highlights.

Vinit Teredesai — Chief Financial Officer

Thank you, DC. Good evening and good morning to everyone on the call. Our all-round performance in the second quarter validates our strategic focus and meticulous execution. Our consistent performance demonstrates our ability to deliver profitable growth despite unprecedented times. In line with our vision to sustain EBITDA margin, we reported EBITDA margin of 20.5% this quarter compared to 20.3% in Q1 FY’22. 20 basis point expansion in the EBITDA margin over the prior quarter was primarily due to 190 basis point from the business growth and operational efficiencies, offset by 140 basis point impact of wage hikes and 30 basis impact of cross-currency movements. Our reported EBIT margin for the quarter was 18.2% compared to 17.7% in the preceding quarter.

The effective tax rate for the quarter was 25% compared to 26.2% in Q1. Net forex gain for the quarter was $3.9 million [Phonetic]. Profit after tax margin for the quarter was 15.4% as compared to 15% in the previous quarter. PAT in absolute terms was $54 million resulting in an EPS of INR24.20 for the quarter as compared to INR20.80 in Q1. Our DSO for the quarter stood at 63 days.

For the quarter, EBITDA to operating cash flow [Technical Issues] percent and free cash flow to EBITDA was 52.6%. Annualized return on capital employed for the quarter is 41.7% and return on equity is 34.2%. Our utilization in the quarter was 82.9% compared to 83.2% in Q1. Our contractual pricing for the quarter remained stable.

As of September 30, 2021, our cash flow hedges were at $1,279 million. Hedges on the balance sheet were $129 million and options of $12 million. We continue work on refining our purpose and ambition for 2025 around the triple bottom line of profit, people and planet. Board of Directors at its meeting held on October 13, 2021 has declared an interim dividend of 100% that is INR10 per equity share of par value INR10 each.

And now, I’ll hand it back to DC for the business outlook.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thank you, Vinit. For enterprises across industries, the new normal has embedded technology even deeper into competitive strategies around customer experience, market relevance and business resilience. They are doubling down on modernizing legacy environments, scaling digital and cloud transformation programs and reimagining businesses around hyper-personalized experiences while driving cost efficiencies. They will continue to create more opportunities for us notwithstanding the transient impacts of labor or supply chain issues during economic recovery. We have a very clear strategy and roadmap to capitalize on these opportunities. We continue to invest significantly in adding to our domain, digital and marketing capabilities. We have further expanded our portfolio, diversified our customer base and re-engineered our recruitment engine.

We are driving innovative, more rewarding deal constructs around business outcomes and deepening our partnerships with hyperscalers to broaden our value proposition. Our ability to up-sell and cross-sell in our existing engagements while going after new logos is delivering remarkably well. We are pleased with our Q2 and first half FY’22 performance. It has further reinforced our confidence in our ability to deliver profitable and industry-leading growth in FY’22.

With that, let me open the floor for questions.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] First question is from Mr. Mukul Garg.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Yeah, hi. Good evening, everyone. DC, exceptional quarter. It clearly looks like these transient of side issues are really not having any impact on your growth whenever it to grow in double-digit on an organic business. But just to kind of dwell a bit deeper into it, you have attrition, which is — which has jumped up quite a bit this quarter, your utilization rate, although is still within control. Do you think there can be a scenario where you can pull a bit more on the utilization side while you tied over the near-term impact on attrition and that can keep your growth momentum going on without being impacted by the supply side constraints?

And secondly on — in terms of growth environment in the near-term, clearly, we have not seen double-digit organic Q-o-Q growth for a really long time. Do you think this is something which was more of a one-off this quarter or is this something high-single to low-double-digit Q-o-Q growth is something which can be repeated, given the demand environment?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yeah. Thank you, Mukul. I think, first and foremost, let me answer the second question first and then move to the utilization, etc. See, as far as growth is concerned, every quarter is different and there are — there will be seasonal, it is in some quarters, but the demand environment that we see right now, I feel that the growth momentum that we have developed, the momentum at a broad level will continue. So, you have heard our commentary before as well that we were very confident that we should be able to do a double-digit growth for this quarter, which obviously, we can see that for this fiscal, which you can see that we have been progressing very well. So it is very — it is difficult to call out specific quarters but at an overall level I can say that the demand environment is very good, and our focus is to continuing the momentum in terms of all the machineries that we have to ensure that we can meet — we can fulfill the demand and we can continue on our growth trajectory.

Specifically coming to utilizations, etc., so look, there are definitely challenges, but then we have to find our own ways to mitigate those challenges. You heard about the EDGE program that we talked about, that is something which we designed, looking at the future, how do you look at the various aspects of the business. So, I would say that, utilization is only one aspect of the business as we look at the overall the supply side. But there are lot of other things also that we are doing apart from utilization, which will help us to continue the momentum. But at this point of time, I think what you see in terms of utilization is something which is a nice balance, but it may go a little up and down depending on the situation, but there are lot of other initiatives going on within the organization, which is actually helping us in terms of tiding our — tiding over the current situation.

Anybody wants to add, Dayapatra?

Mukul Garg — Motilal Oswal Financial Services — Analyst

Great. Thanks for answering my question and congrats again on the quarter.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Next question is from Vibhor Singhal.

Vibhor Singhal — PhillipCapital — Analyst

Hello? Am I audible?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yes.

Vibhor Singhal — PhillipCapital — Analyst

Yeah. Hello, DC. Hi. Hello, team. Congrats on a great set of numbers. It’s just quite ironic that a couple of years — I mean, the kind of growth rate that we’ve reported in this quarter. I think the industry was struggling to report that kind of a number on Y-on-Y basis couple of years back, and now we are kind of reporting that number on a Q-on-Q basis. So, a very strong performance indeed and congrats to the entire team for that. So DC, just two questions on this basically. I think in this quarter one is, we saw the top line remain flat Q-on-Q and I remember you mentioned this, thereof, you’ve been saying this for a long period of time that we expect growth to come and we expect the concentration of the top line also do basically reduce over a period of time. We expect more tail accounts and other accounts to continue to grow. So basically, just wanted to pick your brains on this that, is this a part of the strategy that we are looking at in terms of basically making sure that the top client concentration remains — does not overshoot a specific number, which in part of the business risk or do you see there could be some temporary slowdown in the top account itself, maybe temporary or maybe we hitting a ceiling of that kind, is that something that we should be looking out for?

Second question to Vinit is on the margins. Vinit, I think a strong performance yet again on the margins front. Despite salary hike, we’ve been able to expand our margins on a Q-on-Q basis. So — and I think we’ve seen a improvement in margins on a — at a gross margin level also, not just EBITDA level. So just wanted to basically, again, dwell a bit deeper into that, that as we go forward with this supply side challenges, salary hikes and probably travel cost and marketing cost returning back in the second and third half of the — I mean, the second half of the year and maybe the first half of next year. Do you believe these kind of margins are going to be sustainable? and if yes, then what would be our levers to maintain those margins apart from, let’s say, the growth that we are reporting a very strong number?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thanks, Vibhor. So let me just answer the first question in terms of top client and I want to just give you some perspectives. See, we have always been saying that we want top client to grow and at the same time we want the next set of 20 clients to grow faster, so that we don’t — we automatically reduce the overall concentration. So, if you look at the top client, though, the sequential growth has been not that much because there are seasonalities even within that portfolio. But on a year-on-year basis, the top client still grow around 12.8% and we feel there is a lot more opportunities in terms of growing the top client. But the interesting thing is, if you look at the 2 to 10 segment, quarter-on-quarter, the 2 to 10 clients, they grew at 16% and the 2 to 20 grew at around 19%. So, which is kind of tallying with the vision that we have laid out that with the strategy of cross-selling and up-selling into our top clients where we want to really mine those accounts. I think that strategy is working out very well and that is how you see the picture shifting a little bit and that’s visible in this particular quarter.

So Vinit?

Vinit Teredesai — Chief Financial Officer

Yeah. So, Vibhor, as we mentioned at the beginning of the year that our endeavor is to continue and maintain our profitable growth story and in that we had said that we are confident that we will be able to sustain 20% plus EBITDA margin on a year-to-year perspective. At this point of time, I would say, yes, there are challenges. There is a cost pressure that is going up because of the cost rising cost of talent. However, we continue to also offset it with our operational efficiencies. One, important part what you are seeing as a part of our growth story is our growth is happening is in line with the profitable growth story. So, all the new additions the growth is coming at a pretty, fairly decent margins.

Second, we are able to also add a lot of fresher community to our balancing the pyramid, and this, I think so is one of the important highlight that compared to the past years. If you look at between the last two quarters, we have added more than 2,000 freshers and they continue to get built and offset the sort of attrition and the high cost that is coming in. So that we will continue to invest more into that and continue to help get this leverage in our favor.

Third, there is also, as you would have seen that, our dependence on the subcontractor as a long-term model, we are very cautiously monitoring that and ensuring that it is rightfully managed and maintained so that it helps us in terms of delivering the right delivery. But at the same time, not negatively impacting our margin story. So yes, we are confident of the 20% margin story. You may see some quarters up and down, but on a overall long-term note we are confident of the story.

Vibhor Singhal — PhillipCapital — Analyst

Sure. Great. Thanks a lot, Vinit. Thanks a lot, DC, and wish you guys all the best.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Next question is from Manik Taneja.

Manik Taneja — JM Financial Services — Analyst

Hi. Thanks for the opportunity and congratulations for very solid performance across the board. I just wanted to get your thoughts on a couple of things, DC. Number one thing is that, you’ve seen a very strong sequential growth performance on the manufacturing and retail side and that couples with the solid revenue traction even in Continental Europe. So does — is there some element of one-offs there? And do the two things relate with each of them? That’s question number one.

The second question is that, when I see your client metrics, for the first time since the ownership change in the organization I have seen the number of clients go up. So do you think now we are well past that stage where we are rationalizing the tail accounts and we should probably see this number go for — go up further? Thanks.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Okay. Thank you, Manik. So let me address the first question. So you’re spot on, I think the — if you — you have heard me talk about the fact that we wanted to double down on Europe. We have been investing in Europe for the last 12 months or more. And that is manifested in terms of some of the growth that is coming in Europe and they happen to be in the manufacturing and the retail segment so that’s where you’ll see some uplift over there. So they are definitely connected and related.

In terms of client metrics, yes, we are at [Technical Issues] and we are also very carefully adding new logos which are strategic for the business. We — I would say that, yes, the long-term rationalization has been going on for a while and I think there will be an opportunity to rationalize a little more, but we are not in hurry to do that. So we’ll do that slowly at an appropriate time. But I’m also glad that overall this is the first time you’re seeing the number of clients going up.

Venu, do you want anything? And you have to unmute yourself.

Venu Lambu — Executive Director and President, Global Markets

Sorry. Yeah. So, look, I think just on the commentary with regard to the particular quarter having a large percentage, it’s also because, in this quarter, after the lockdown, especially in the retail and the CPG and even manufacturing customers have started the business with a bit of an hybrid model with more in-person shopping kind of experience. So, without diving the commentary on sustainability on the growth on that sector, I think this quarter was also is aided by certain backlog of projects, that comes in when you open up your in-person shopping experience as well.

Manik Taneja — JM Financial Services — Analyst

Okay. And I had one more question for DC, if I may. DC, basically, just like customers have adopted global delivery much more aggressively over the last 12 to 18 months’ timeframe, do you see customers actually experimenting with newer engagement models as well as they get much more open to global delivery?

Debashis Chatterjee — Chief Executive Officer and Managing Director

We are seeing that, Manik, and I think I can only say that customers are much more open right now to look at more longer-term transformational opportunities than what it used to be before. And so, I’m very hopeful that there will be more interesting models that will emerge as we go along because the demand environment is extremely strong.

Manik Taneja — JM Financial Services — Analyst

Thank you and all the best for the future.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Next question is from Sandip.

Sandip Agarwal — Edelweiss Capital — Analyst

Hi. Good evening, and thanks for taking my question. DC, are you able to hear me?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yes, I can.

Sandip Agarwal — Edelweiss Capital — Analyst

Yeah. So, congratulations on a very good set of numbers and excellent execution. DC, I have a little longer-term question and I don’t want any numbers from you. But — and I firmly believe in your story. I wanted to understand that if you see what has happened in the western markets on — in various industries where you know on one side products are getting upgraded, some future products to smart products across manufacturing space, retail industries, moving from off-line to online in a very aggressive way and there is a few conformation which has happened on that front. And on the third front, all these things has pushed demand for agile data in terms of storage, in terms of computation, in terms of processing capabilities and all.

So if you combine all these three things and if you see the pandemic, along with it, it looks like that while the demand environment has completely changed and it will need lot of spend on technology and upgradation and as you know, in technology, nothing can happen in one, two, three, four quarters, it takes three, four years minimum to change basics. So then, is it right to say that, while the demand environment currently is looking good but actual growth will follow in the future, three, four years, the real growth, because all these things are at very nascent stage of either implementation or even deciding. So, do you share the same view that the demand environment, which we are saying right now or the numbers, which we have posted in last two, three quarters, four quarters, it’s not even the 5% of what the industry or the cycle should be, and we will have a long upcycle ahead. Is my reading correct or you think right now it will be too early to comment on it?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Sandip, that’s a great question. I think it is probably a little too early to comment on such a long-term view. But let me tell you the immediate view that I can share and I’ll let my colleagues also join and chime in. See, what has happened is, the pandemic has — if there is one area, which has been helped by the pandemic is technology. And many of the industries have realized that if you are on the cloud and if you can accelerate your journey to the cloud then you can probably tide over some of these things much better in the future. So what clients had planned in terms of their transformation, they have preponed their transformation and that’s where see that acceleration. So that’s number one.

Number two is, since everything is moving on to the cloud and the cloud adoption has been extremely high, it also automatically lends itself to doing more innovation at the front end, to do more — develop more functionality and capability as we go along. So, which will also result in more opportunities as we go along. So, though, it is — I can probably say that on the short- to medium-term as we see, I think I’m very certain that the demand environment is very good. There is a lot to be done still. And without getting into too much of long-term, I think technology is in a very nice place and every client is looking at technology to be absolutely central to their strategy.

I don’t know, Venu, Dayapatra, do you want to add anything?

Venu Lambu — Executive Director and President, Global Markets

Yeah. I’ll just add one comment, DC, which is, look, as this is essentially talking about the technology trends, right, let’s keep the demand outlook commentary as DC explained. But just specific to talking about the technology. I think as a technology — the role of technology changes from an efficiency gain to revenue maximization gain. Adoption of technology will only increase with time, right? I mean, when the technology was used all these years more to get the efficiency out of the enterprises and now, the technology is getting used to actually maximize the revenue of the enterprises. So, as more and more technology gets exploited, I think the adoption of technology, the need for technology services will only increase with time.

Sandip Agarwal — Edelweiss Capital — Analyst

So if I can ask one more question because I just asked one is that, okay, let me reframe my question that if you see what the work which you’re doing for your clients today and if the work, which you are already doing and if that work needs to use over next three to four years, will it entail much more acceleration in technology spend from the client from here on, or will it be like more of a incremental spend?

Venu Lambu — Executive Director and President, Global Markets

Should I take that, DC?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Sure.

Venu Lambu — Executive Director and President, Global Markets

Yeah. Look, I think the time has come to look at technology in two areas. If you’re looking at technology as an enablement, which is like a classical IT spend, the endeavor from most of the enterprises in global markets will be actually keep reducing. This is an natural thing to do for any enterprise, right, whether you are growing and not growing, you want to keep your cost of enablement always going lower and that essentially is to address the cost reduction mandate and that trend will either remain stagnant or will grow in a smaller proportion if I may say. But if you look at the technology as a phase of redefining the business models, right, and you spoke about a few examples of manufacturing and retail evolving into a different business model. So if the technology is used to redefine the entire business model, then we’re in the beginning of that adoption because not every businesses have transformed into a full-fledged business models of digital, right? So as their evolution happens and it doesn’t happen overnight, it happens over a period of time and in phases, as their evolution happens, technology plays a critical role on that aspect of digital transformation. So hence I feel when you look at technology for revenue maximization and technology for enablement, which is a cost or efficiency this thing, it has a two different narratings. I hope that answers.

Sandip Agarwal — Edelweiss Capital — Analyst

Thanks a lot. Yeah, yeah, definitely. Thanks a lot, and best of luck for next quarter. Thank you.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Next question is from Apurva Prasad.

Apurva Prasad — Elara Capital — Analyst

Good evening. I hope I’m audible.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yes.

Operator

Yes.

Apurva Prasad — Elara Capital — Analyst

Okay. So, thanks for taking my question and congratulations from my side to you on the quarter. I had a question on the Customer Success service line, which is driven bulk of the growth. And my question really is that, do you see deals in this service line getting bigger, deal sizes getting bigger rather or are there more volumes in this? And is that assumption correct that a lot of this is driven by the partnerships solutions around Salesforce, Adobe, so with that ecosystem be contributing to a large part of this growth?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Venu, do you want to answer?

Venu Lambu — Executive Director and President, Global Markets

Yeah. Sure. You’re absolutely right, I think firstly the customer success traction is enabled by the partnership and the confidence you build around the partner platforms, right? I mean, everything that’s happening in customer success is essentially to transform our customer’s customer experiences. So — and that is where you see a significant investment happening with the hyperscale of companies as well. You mentioned about Salesforce. There are many other partners that we have in that area. So, yeah, you’re absolutely right, I think the customer success is an area, which is a hyper-growth area and we will see a good traction over there. Whether the deals will be big or small? I think it depends on the size of the companies who adapt customer success transformation, right, and depending on the sector, too. If I look at BFSI, as an example, I think it will be a multi-year kind of transformation program and same with retail and CPG, it will be a multi-year transformation program on customer success, but there are midsized probably manufacturing companies would be a short-term-based transformation program. So it depends on the sector and also the size of the enterprises in terms of how much of transformation they’re doing with their customers.

Apurva Prasad — Elara Capital — Analyst

That’s useful, Venu. Thanks for that. And my second question is, DC, on offshoring which has increased further. Now, I mean, based on the recent wins, I mean, can this number increase or remain high, especially as you mentioned that pricing is stable? Or can this number flip with travel resuming?

Debashis Chatterjee — Chief Executive Officer and Managing Director

As of now, I think our best guess is that, customers have become very comfortable in which — in the environment in which we have operated through the pandemic, and the results that we have delivered for them. So I don’t think that this number will flip significantly. But yes, with the travel starting, there could be a little bit of change in the numbers, but I think at a broad level, these numbers are going to hold.

Dayapatra?

Dayapatra Nevatia — Executive Director and Chief Operating Officer

No, absolutely, it is. Yeah. I think you’ve covered it. One is that, due to remote working, clients are lot more comfortable in letting people work remotely. Second one is, our focus on transformation and annuity deals that also is helping with the offshoring. So we expect the offshoring percentage to remain in this ballpark, what we have been sort of delivering last couple of quarters.

Apurva Prasad — Elara Capital — Analyst

Thanks. And just lastly, Vinit, for you. With the increase in DSO, any comments there or some seasonality?

Vinit Teredesai — Chief Financial Officer

No, it’s just, I would say one-off. Nothing to read into it. It’s — we have been delivering extremely good DSO till the last quarter. This is just a one quarter whereby you see. We do anticipate this to sort of come down and remain comfortable with the 62 deals range.

Apurva Prasad — Elara Capital — Analyst

Great. Thank you and all the best.

Operator

Thank you. Next question is from Mohit Jain.

Mohit Jain — AnandRathi Institutional Equities — Analyst

Hi, sir. Congratulations. First was — actually, both the questions are related to your comments made earlier. One was, can you quantify what part of the revenue seasonal, and which was included in this quarter and all of that appeared to come from UK. Is there also a part of this in the top 6 to 10 accounts?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Venu, do you want to take that?

Venu Lambu — Executive Director and President, Global Markets

Could you just repeat the question? Are you comparing the…

Mohit Jain — AnandRathi Institutional Equities — Analyst

Any anticipation from the seasonality perspective, you spoke in your opening remarks that some part of the revenue was highly concentrated in the UK and related to reopening, is it more to do with retail or manufacturing because we report clubbed revenues? That was one.

And second, some part of spillover of that revenue did — does it also account for top 6 to 10 account growth or is it totally different?

Venu Lambu — Executive Director and President, Global Markets

Yeah. So firstly, I think the sector wise, yes, it is more for the retail and CPG sector because even the CPG had a lot of peak seasonal projects that came in for the quarter as their supply chain got challenged a lot on that. So technology was used to address that. So, one is that is the and that is for the retail and CPG sector.

The second is, I wouldn’t call it as a — I think you used the deferred revenue, I don’t think that — what we say it was a seasonal peak projects that came in, in quarter, the projects that comes in a short duration, within the quarter is how I look at as a seasonal demand that comes in over there. Yes, it — part of it also came from the UK customer as well.

Mohit Jain — AnandRathi Institutional Equities — Analyst

Within top 6 to 10 bracket?

Venu Lambu — Executive Director and President, Global Markets

Of the top 6 and 50, yeah. Within top 6 and 20 kind of customer base, yes.

Mohit Jain — AnandRathi Institutional Equities — Analyst

Okay. And second was anything that you can share in terms of net addition plan for the next six months or 12 months or anything that you have in mind and you can share?

Venu Lambu — Executive Director and President, Global Markets

Do you want to take that, Dayapatra, DC?

Mohit Jain — AnandRathi Institutional Equities — Analyst

Employee addition on a net business?

Venu Lambu — Executive Director and President, Global Markets

Dayapatra, do you want to take or DC…

Dayapatra Nevatia — Executive Director and Chief Operating Officer

Can you repeat your question, please?

Venu Lambu — Executive Director and President, Global Markets

Net employee addition.

Mohit Jain — AnandRathi Institutional Equities — Analyst

I was looking for any number on employee addition from next six-month or 12-month perspective, whatever you can share with us?

Debashis Chatterjee — Chief Executive Officer and Managing Director

We were not be able to call out or pick number, but we can only say that what you heard in the commentary we have been having a very healthy headcount addition and we have been also adding a lot of — which is a combination of both freshers as well as laterals and the way the demand is continuing, we can only expect that this trend also will continue induction of both laterals and freshers and — but we may not be able to call out a specific number at this point of time.

Mohit Jain — AnandRathi Institutional Equities — Analyst

Understood. And last is on TCV, the TCV that we reported last quarter, does that include the seasonal part of it which you booked in revenues this quarter or that was something which happened during the quarter and just passed without going through the TCV?

Venu Lambu — Executive Director and President, Global Markets

Well, I think the TCV that we shared last quarter…

Debashis Chatterjee — Chief Executive Officer and Managing Director

[Speech Overlap] a bit of challenge in…

Venu Lambu — Executive Director and President, Global Markets

Yeah, I can answer that, DC. I’ll answer that.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yeah.

Venu Lambu — Executive Director and President, Global Markets

Yeah. I think the TCV that we shared — sorry.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Go ahead.

Venu Lambu — Executive Director and President, Global Markets

Okay. Thank you. I think there is a bit of a lag for that. Sorry for that. The TCV that was shared last quarter was a TCV that was booked for the last quarter, right? And the TCV that was booked — that is shared for this — for Q2 was all the contract that got closed in the Q2 quarter. So I don’t think there’s any linkage between the quarterly TCV numbers that was announced from Q1 to Q2. That’s how I look at it.

Mohit Jain — AnandRathi Institutional Equities — Analyst

I was not referring to leakage. I think what you booked at the end of the quarter would have got booked in revenues for this quarter, is that correct? Or the assignment that you were referring to came during the quarter and got completed by the end of the quarter?

Venu Lambu — Executive Director and President, Global Markets

Oh, no. It’s not just related to the previous quarter order booking, Mohit. Some of these things are a long-term. But when we talk about seasonality kind of projects, yes, part of it would come from the booking that happens in Q1 and part of it would come from the Q2. I hope that answers your question.

Mohit Jain — AnandRathi Institutional Equities — Analyst

Understood. Thank you very much. And all the best.

Venu Lambu — Executive Director and President, Global Markets

Thank you.

Operator

Thank you. Next question is from Mr. Dipesh.

Dipesh Mehta — Emkay Global Financial Services — Analyst

Yeah. Thanks for the opportunity. Couple of question. I hope I am audible?

Operator

Yes.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yes, you are.

Dipesh Mehta — Emkay Global Financial Services — Analyst

Yeah. So a couple of questions. First about the Q3 seasonality, just want to get some sense about how do we expect this year Q3 to be? Because last year we have seen good strength even in H2 financing [Phonetic], whether we will return back to normal seasonality prior to last year where we used to for those impacting sequential growth trajectory? If you can provide some perspective, how we expect our seasonality to play out in H2?

Second question is about any change in ACV — TCV dynamics in terms of, if I look your TCV growth rate, we are growing between 15 percentage to 20 percentage. But when I look at your revenue growth, now we are up 30 percentage plus. So whether we are seeing shrinkage in tenure, so despite lower kind of TCV number, but revenue conversion is much superior. So if you can throw us some perspective how one should reconcile revenue growth versus TCV tenure? Thank you.

Venu Lambu — Executive Director and President, Global Markets

Should I just take — answer the TCV one and then, Vinit, you can — after that.

Vinit Teredesai — Chief Financial Officer

Go ahead, go ahead.

Venu Lambu — Executive Director and President, Global Markets

Yeah. So look, I think — I will talk more in the context of the kind of engagements that are coming in, and that translates to the answer towards your TCV. See, while there are multi-year annuity deals that we sign every quarter and depending on the decision-making life cycle, the annuity deals are fairly longer life cycle it takes to take a decision of. So there are set of deals that comes in over that way as well. But what is also important to understand is that, as we look at cross-selling and up-selling and expanding our wallet share in our existing accounts, there is a huge amount of technology spend that is done towards enabling the businesses towards a digital business model, right? And these spend comes in more than one way. They are like a discretionary spend that will come in terms of bringing AI capabilities, migrating into cloud, delivering the customer success transformation, or data modernization and so and so things. So a lot of them may not be multi-year or of that nature where there might be projects which are a year to 18 months or 24 months kind of a stuff. Then you have the run kind of contracts, which are three years and a five-year kind of a contract. So, since we have a good mix of both so hence the direct correlation between the TCV numbers and the revenue growth may not be — may not give you that answer unless you slice it and look at what is the discretionary spend that is coming in for the quarter and what is the annuity spend that is actually flowing in from quarter-to-quarter.

Vinit Teredesai — Chief Financial Officer

Yeah. I think so, Venu, [Technical Issues] TCV and ACV part, see, we have many, many annuity deals that are being signed for two years, three years [Technical Issues] but certain customers do insist on our sort of giving you sort of a six months or a one-year sort of a milestone-based SOW, which sort of then gets you into the next level. So, it does not mean that there is actually a separation between that TCV and ACV [Technical Issues] to that extent because what happens is [Technical Issues] our total contract value, you may see that — that’s how I look at it.

Venu Lambu — Executive Director and President, Global Markets

Yeah, I think there is some problem in the connectivity over there, Vinit, looks like you’re breaking up in between. But I think we sort of answer it, I hope. It was clear. Or I could repeat it?

Dipesh Mehta — Emkay Global Financial Services — Analyst

That’s fine. I get some sense. If you can touch upon about seasonality Q3?

Venu Lambu — Executive Director and President, Global Markets

Yeah.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yeah. Can you hear me? This is DC, here.

Venu Lambu — Executive Director and President, Global Markets

Yes, DC, we can hear you now.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Okay. I think there is some issue with the connectivity. So, see from a seasonality standpoint, I mean, at a broad level, macro level, given the portfolio of clients that we have, I think we are very confident in terms of continuing the momentum that we have developed in the business. I mean, if you look at the last four quarters, we have been having a steady growth in terms of quarter-on-quarter. But having said all these things, Q3 is always — there will be holidays and furloughs, so there are — there is a seasonally in Q3, which is always there. And that’s very normal in our type of business. So we have to just see how much it impacts. But overall, we are very confident that from a full-year standpoint and as well as going forward, the overall demand environment is pretty solid.

Dipesh Mehta — Emkay Global Financial Services — Analyst

That’s helpful.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Does it answer your question, Dipesh?

Operator

Dipesh, your network, that’s an issue. We are going to the next question. Next question is from Mr. Sumeet Jain.

Sumeet Jain — Goldman Sachs — Analyst

Yeah. Hi, gentlemen. Am I audible?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yes, you are.

Operator

Yes, yes.

Sumeet Jain — Goldman Sachs — Analyst

Yeah. Great. Firstly, thanks a lot for the opportunity and congrats on a great quarter. So, I guess, again a repeated sort of a question which has been asked multiple time on this call. I guess, half of our revenue growth this quarter was driven by retail, CPG, Europe and enterprise IT. So want to understand how much of that is sustainable in nature and how much of that was on account of seasonality because of reopening of Europe and UK, which may not repeat again in the next quarter? So I just want to understand what is the duration of those contracts? Are they sustainable into coming quarters as well or will they slip off in the existing quarter itself?

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yeah. So, Sumeet, I think, let me give some commentary and then let, Venu, chime in is, I can only say at a broad level the — as Venu explained sometime back that the kind of work that we’re doing for clients, some of them are in a typical efficiency and cost take out and some of them are — how do you — how do customer kind of support their customers and which are all revenue-earning opportunities for the customers. So, I can only say that much of the work that you talked about just now is in the segment of where we are working on customers front end applications and working on direct-to-consumer those kind of initiatives, which will only help customers to sell more to their customers. So these are all revenue-earning opportunity. So I don’t think as long as these things are beneficial to the customers, I think we will generate more momentum in these areas as we go along. Venu?

Venu Lambu — Executive Director and President, Global Markets

Yeah, sure, DC. I just wanted to add the additional comment that the growth was not necessarily only from retail and CPG, I’m sure if you look at it around, it was there in BFSI side, TTS fourth consecutive quarter of more than double-digit kind of a growth. And also on the service line point of view, it was customer success which actually grew by more than 20% because that’s — because of the reasons that I explained in the context of the earlier question. So, I think it’s — one is, it is the growth has been manifested in all the sectors and it is also there beyond enterprise IT. It has been there on the customer success and cloud and so on. And since we are in the beginning of those transformation journey, I think we’re still confident about sort of addressing all those opportunities that lies ahead of us in the next few quarters. So they are definitely not one-off or anything related with — yes, to some extent, the economy unlocks it, you get a seasonal peak demand short time of it. But there are lot of programs that we are doing are fairly long-term engagements.

Sumeet Jain — Goldman Sachs — Analyst

Got it. That’s very helpful to, Venu. And the other question I want to understand is, if I look at your net addition of headcount, that has slowed down this quarter compared to the previous quarter. And, of course, there is a seasonality in your order book as well, and plus there is obviously furloughs and holidays in December quarter. So if I combine these three metrics, net addition of account, order book, as well as the seasonality, any guidance you would like to throw for your December quarter, given that you had a phenomenal quarter in September?

Dayapatra Nevatia — Executive Director and Chief Operating Officer

So I won’t say that net addition this quarter which has slightly come down compared to last quarter has anything to sort of indicate in terms of how the future is going to look like. This is a factor of multiple things, one is, ahead of time the proactive hiring that we do looking at the demand environment. When the people get onboarded, especially the freshers, etc., and therefore, there is a seasonality and there is a — there are the numbers which come down, sometimes they go up quarter-to-quarter. But in terms of trend, the additions continue. They’re very robust and we continue to hire at the pace at which we were hiring in quarter one.

Sumeet Jain — Goldman Sachs — Analyst

Got it. That’s helpful there. And one last question, if I look at the travel expenses, they have actually come down on a quarter-on-quarter basis. So anything to read out there like currently [Phonetic] the economy is opening up both in India and globally. So any reason why travel expenses were down Q-o-Q?

Vinit Teredesai — Chief Financial Officer

Sumeet, you know right now, hardly any travel is happening. So we do anticipate that the travel expenses will remain low for probably another — at least for the next quarter. Maybe from the beginning of the next calendar year you may see an uptick happening on travel.

Sumeet Jain — Goldman Sachs — Analyst

Got it. Thanks a lot, gentlemen, for answering my questions and all the best.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Next question is from Vikas Ahuja.

Vikas Ahuja — Antique Stockbroking — Analyst

Yeah, hi. Congratulations on a very solid quarter. I have two questions, now with this back to office scenarios, most of your customers are looking to, or maybe already working from office, do we think that spending momentum will improve from here? Or do we think there could be some tapering on what is a very, very strong momentum? Similarly, how should we look at the bookings? One of your larger peers have called out that the bookings should only improve going into next quarter. Do we share the same view?

Debashis Chatterjee — Chief Executive Officer and Managing Director

I mean, if I understand your first question, from a back to office scenario, I can only say that we are absolutely ready to kind of — we are already figuring out various models in terms of how do you look at back to work and — but whatever we do, we’ll do in consultation with our clients and we have a very robust strategy in terms of coming back to office. But in terms of clients’ spends as such, I don’t know whether there is any connection as such because the demand is strong, the clients are still looking at significant discretionary. I think that will continue.

In terms of bookings, I can only say that the kind of momentum we have and the kind of robust pipeline we have, definitely our bookings, at an overall — our fiscal level will be definitely better than what used to be last fiscal, but there could be some quarterly up and down, but I don’t think we read too much into it. But overall we are confident that for the full fiscal there will be very good bookings.

Vikas Ahuja — Antique Stockbroking — Analyst

Thanks, DC. That’s very helpful. Just one follow-up, any early indications you can share talking to clients, how the budgets for next calendar year would be? Any color would be great? Thanks.

Debashis Chatterjee — Chief Executive Officer and Managing Director

It’s a little too early. We have to probably wait for one more cycle because that’s when the clients will start looking at the overall environment. But as I said, whatever conversations we are having with our clients right now, looks like in most of the situations, the initial overhang of the pandemic seems to be slowly getting over with all the vaccines and all these things coming in play. But still we have to wait for a little while to get the concrete feedback.

Vikas Ahuja — Antique Stockbroking — Analyst

Sure. Thanks a lot, and best of luck.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Thank you.

Operator

Thank you. Next question is from Sulabh Govila.

Amisha R. Munvar — Head, Investor Relations

We can move to next question, Mandith, if Sulabh’s line is busy.

Operator

Yeah. Next question is from Gaurav Hinduja.

Gaurav Hinduja — — Analyst

Yeah. Thank you for taking my question. I have just one question actually on the TCV. So we’ve noticed a little bit of correction in the TCV as compared to the previous quarter, although it’s normalizing a little bit. So my question is, basically, any — on the deal pipeline if we have any visibility on any large deal wins and adding clients in the larger black brackets sort of any pipeline on the — any view on the deal pipeline would be of very helpful? Thanks.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yeah. So, Gaurav, I think we — I can only say that we have a very robust pipeline. We don’t give specifics about pipeline. But just from an order book perspective, I can say that last quarter we had quite a few renewals, that’s why you saw, and this is the phenomena, this is a seasonal thing that happens in the Q1. But if you look at the overall order book for the first half of the fiscal, it’s like $860 million, which is 24.5% up for the same period last fiscal and even the quarter two order book which is $360 million is up 19% year-over-year. So overall, I think the quarter book — I mean, the order book is quite healthy from — it’s very satisfying for us. So we are pretty confident that we’ll follow the trend of having a good order book for the full-year.

Gaurav Hinduja — — Analyst

Yeah. Thank you. That’s really helpful.

Operator

Thank you. As there are no further questions from the participants, I now hand over to DC for closing remarks.

Debashis Chatterjee — Chief Executive Officer and Managing Director

Yeah. Thank you, everybody, for joining the call. I have one more announcement to make. I would like to take a moment to welcome Vinay Kalingara to Mindtree as the Head of Investor Relations. He brings more than 25 years of experience spanning investor relations, technology and entrepreneurship. Vinay is taking over from Amisha Munvar, who has decided to pursue the opportunity outside the Company. On behalf of Mindtree, I tank Amisha for her contribution to the Company and wish her all the best.

With that update, let me hand it back to Amisha.

Amisha R. Munvar — Head, Investor Relations

Thank you so much, DC. Thank you, everyone, for joining the call with us today. Have a nice evening. Bye.

Venu Lambu — Executive Director and President, Global Markets

Thank you.

Operator

[Operator Closing Remarks]