Mphasis Ltd (NSE: MPHASIS) Q3 2025 Earnings Call dated Jan. 24, 2025
Corporate Participants:
Nitin Rakesh — Chief Executive Officer and Managing Director
Aravind Viswanathan — Chief Financial Officer
Analysts:
Sudheer Guntupalli — Analyst
Nitin Padmanabhan — Analyst
Abhishek Kumar — Analyst
Vibhor Singhal — Analyst
Sandeep Shah — Analyst
Rishi Jhunjhunwala — Analyst
Dipesh Mehta — Analyst
Shradha Agrawal — Analyst
Manik Taneja — Analyst
Abhishek Shindadkar — Analyst
Presentation:
Operator
Please wait while you are joined to the conference. The conference is now being recorded good morning, ladies and gentlemen, and thanks for joining the Emphasis Q3 FY 2025 Earnings Conference Call. I am, your moderator for the day. We have with us today Mr Nitin Rakesh, CEO of Emphasis; Mr Arvind Vishwanathan, CFO; and Mr Vinay Kalangara, Head of Investor Relations. As a reminder, there is a webcast link in the call-in white mail that Emphasis management team will be referring to today. The same presentation is also available on the emphasis website, www.emphasis.com in the Investors section under Financial and Filing as well as on both the BSE and NSE websites. Request you to have the presentation handy. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. Before we begin, I would like to state that some of the statements made in today’s presentation may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q3 results release that was sent out to all of you earlier. I now hand the floor over to Mr Nitin Rakesh to begin the proceedings of this call. Thank you, and over to you, Nitin.
Nitin Rakesh — Chief Executive Officer and Managing Director
Thank you, Robin, and thanks everyone for joining us today. Hope you had a great start to 2025. We appreciate your interest in Emphasis. Thank you. As our AI thesis is starting to play-out, over the past few years, we’ve spoken about service-led transformation, AI platforms such as Emphasis and as well as AI. We are now implementing many AI projects that are fast-moving beyond pilot or POC stage. It is starting to scale and accelerating primarily due to paradigm shifts based on the following key factors ability to super size deals because we can now bundle ADM, AMS and IMS together with the service-led transformation and also presenting vendor consolidation opportunities using the same approach. Second, we are able to augment AI with human capabilities, which changes the ROI economics of many deals. Clients are able to achieve quicker transformations, which leads to unlocking of modernization opportunities, for example, that were previously prohibited for clients to undertake. Our ability to compete and winning more opportunities, leading to an expansion of our total addressable market is also helping expansion. And finally, the infusion of platforms and productivity gains offered earns us a seat at the transformation table. The infusion of platform-led approach is increasingly stable stake for many programs, especially around modernization, ADM and AMS to use. We have multiple implementation for large-scale financial services customers. Emphasis’ platform accelerates re-learning productivity much faster and more broadly than was previously possible, completing re-learning in a matter of days versus weeks. On the other hand, is an integral part of all New pilots to do forward engineering from relearn business rules, data dictionaries and business capabilities. We’ve completed two implementations with nine more in the works. We’ve seen productivity gains of 30% to 60% across different phases of the, including improvement in code quality, generating unit test cases and code documentation, thereby accelerating implementation and reducing project risks. Our clients who have signed-up for this exciting journey are spread across all our talent industry verticals. As called out in the last quarter, there is significant visibility in pipeline growth and we are increasing the number of AI ops, for example. I’d like to highlight a few things on the PCV chart. BFS pipeline was up — is up 58% Y-o-Y and non-BFL pipeline is up 44% year-on-year. Large deal pipeline is up 49% sequentially. Significant increased traction in AI archetypes, including AI and modernization, including core. We have over 20 large deals where and trucks are in play as well. Q3 saw a high share of proactive deal wins as we stayed focused on remaking. PCV closure for the quarter was $351 million, which is the highest in the past six quarters. We have five large deals in Q3 FY ’25 and 11 large deals for YTD FY ’25 as well. TCV deals are across verticals, plant pyramid and types. There is also an increasing pace of conversion of TCV to revenue and we continue to be structurally forward-leaning, making investments where we expect demand. In addition to Q3 TCV wins, we have closed an additional $100 million deal in the BFS vertical in January of 2025. This will reflect in the Q4 FY ’25 TCV wins. Two of the large deals that we won in Q3, a large wireless network operator in the US selected emphasis to provide scalable and differentiated multi-year services across design, experience and quality engineering. Emphas leveraged strong capabilities in diverse areas like US, research and quality engineering. Second, a technology major engaged emphasis to contribute to digital experience innovations, architecture and their technical roadmap. The client engaged us because of our strong capability to support their future projects in AI and Salesforce broke agent integration with their existing systems. Third, a large BFS client engaged emphasis for application development and cloud transformation across product lines and business lines. Just a few examples of the large deals we signed this quarter. We’ve also made significant investment in GTM, including current acquisition and we appointed ahead of our strategic engagements team, Mike, as we announced earlier during Q3. Mike will experienced strategic deals in collaboration with various business units, enhancing overall growth, alignment and effectiveness. He is also responsible for pipeline development along with the end-to-end sales cycle management to optimize market opportunities for high-value contracts. In addition, we also inaugurated a cyber fusion center in Bangalore, which is a state-of-the-art facility representing significant milestone in our commitment to enhancing cyber security solutions for our global clients across industries. The center is providing 24×7 advanced threat detection, incident response and continuous threat monitoring, leveraging cutting-edge the IML and automation capabilities. This will not only improve our efficiency in responding to cyber threats by over 3%, but also reduced our attack surface by 45%, ensuring high-visibility of threat landscapes across IT and operational technology platforms. Going to performance by segment, we continue to push revenue growth, which is anchored in our strong client mining model and tech-led offerings. Our Q3 revenue came in at $419 million on a spot basis, a growth of 0.2% sequentially and 4.6% Y-o-Y in constant-currency terms. Our direct business accounted for about 96% of our overall revenue in the quarter. We expect the pace of revenue and conversions to remain strong, propelled by the savings transformation themes I just talked about. Our direct revenue for the quarter increased 5.2% sequentially and by 5.1% year-over-year in Q3 FY ’25 in constant-currency terms. Our
Growth momentum in-direct continues despite the seasonality impacting Q3. For the quarter, our anchored US grew by 0.6% sequentially and 6.3% Y-o-Y in-direct. EMEA region declined sequentially by 5% in constant-currency terms, following primarily the seasonality impacts. Rest of the world grew 3.3% sequentially and 14% Y-o-Y in constant-currency terms. Our core service line, Enterprise app, constitutes about 72% of revenue and the revenue contribution from this service brand continues to grow. We grew about 0.7% sequentially in CC terms indirect apps. The BPS segment grew 0.4% sequentially and 3.7% on a Y-o-Y basis as projects continue to ramp-up and we see continued uptick in our mortgage business as well. Going to performance per vertical, our BFS and GMT verticals continued the growth momentum. At an overall company-level, BFS was up 1.6% sequentially and 8.6% year-over-year in Q3 FY ’25. And specifically in-direct, BFS was up 1.8% sequentially and 9.5% year-over-year. BFS growth has largely been driven by wallet share gains in existing accounts and strong execution in new account wins, including the accounts that were opened in the recent few quarters. Insurance vertical grew 4.4% sequentially. TMT vertical grew 2.9% sequentially with direct AMP growth at 15.7% Y-o-Y, driven by continued deal wins and conversion of recent large deal wins to revenue. Our client continues to improve across-the-board. Sequentially, we’ve added one client in the 75 million-plus range and two clients in the 20 million-plus and 10 million-plus categories, respectively. One of the new BFS clients we signed last year has already ramped-up to 20 million-plus account. Also on a quarterly annualized basis, we have a BFS client crossing 100 million account as well. New accounts in TMP are also showing good traction. With the recent large wins, in the last 3/4, we ramped-up a high-tech account from an approximately 50 million annual revenue run-rate account. Our top-10 accounts declined 0.8% sequentially and 11 to 30 grew 0.6% sequentially. On an basis, 11% to 30 grew at 3.1% Y-o-Y. Coming to our financial metrics, we delivered our philosophy of maintaining margin in the stated bank while making investments for growth. Despite the seasonality impact, our EBIT margin remained stable at 15.3%. Reported operating profit for the quarter grew 0.2% sequentially and 9.7% year-over-year. EPS of INR22.6 for this quarter represents a 1% sequential growth and a 14.14.1% year-over-year growth. Operating cash-flow generation continues to be strong at $55 million and for the quarter, 110% of net income. DSO of 72 days improved one day sequentially aided by better collections. Summarizing our Q3 ’25 performance, we are seeing broad-based pipeline growth driven by large deal opportunities. We’ve had traction in the AI archetypes, including AIOps modernization, continued higher share of proactive deals as we’ve been calling out, the improvement in TCV closures across the verticals and continuing to gain across the client pyramid with our tech-led account focused strategy. The growth has definitely been led by BFS and verticals and execution delivered stable margins within the target band of 14.6% to 16%. Coming to the outlook for the remainder of the year, few key messages. We continue to execute in an environment steadily moving in the right direction, focusing on the micro as the AI-led opportunities play-out. The macro continues to turn-in a favorable direction for BFS, while there are still some things to be sorted through. We see — we see some recovery in discretionary spend continuing, while there are signs of uptick visible in the mortgage business despite the uncertainties. We’ve seen visible momentum in pipeline conversions and expect to be above industry growth for the full-year, gaining from improving TCV revenue conversion and strong TCV wins, while at the same time targeting sustainable margin within the current band of 14.6% to 16%. On that note, let’s open the call for questions, operators.
Questions and Answers:
Operator
Thank you. Certainly, sir. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles we have the first question from the line of Sudhir from Kotak Mahindra AMC. Please go-ahead.
Sudheer Guntupalli
Yeah, Nitin, thanks for the opportunity. Good morning. So to remain above industry average growth for FY ’25 and industry average can be broadly assumed to be in the range of around 4.5% to 5%. So we should be able to clock 3%, 3.5% kind of growth or thereabouts in March. So what gives us the confidence on that run-rate apart from the deal wins, my question is broadly, is there any other leakages that you’re worried about or the portfolio can be assumed to be largely stable with incremental to revenue conversion becoming faster?
Nitin Rakesh
Yeah,, I think the math is the math, you’ve done the math already. I think we do expect Q4 to be, I would say, the best quarter in the last three years from a sequential growth perspective. And I think you’ve already displayed some of the math skills. From the point-of-view of the portfolio, I think we are fairly power leaning, as I mentioned, to making sure that the pipeline continues to convert to TCV. We’ve seen some — again, a six-quarter high in TCV in this quarter. In addition, we signed a large deal already in Q4 within the first two weeks. So that actually gives us some boost to converting some of that into in-quarter revenue as well. So all things put together, puts and takes, there is always going to be portfolio approach. At this point in time, I think we are fairly comfortable with where we stand, especially as it relates to the remainder of the year. As we get into FY ’26, we’ll probably give you more color. There is always work to be done, whether it’s in some client segments, some verticals, some geographies. I mean, we called some of those things out in the script as well. But more importantly, I think staying very focused on conversion of both pipeline to TCV and TCV to revenue.
Sudheer Guntupalli
Got it, Nitin. And the sharp decline in logistics vertical that we had seen this quarter, is this one client-led or this is more broad-based and industry vertical-specific? And a related question is, any update on the logistics client where there is a big speculation that this — that you may have lost this client and so on and so forth?
Nitin Rakesh
So Sudhir, I think firstly, this is not linked — the plan you’re seeing is not linked to any one customer. Some of it was expected, but it’s not just one customer-led. I don’t think we will — I don’t think it’s true. It is constructive to over-index the conversation on a customer. As I said, right, we are aware of all the speculation and the rumors. It’s very difficult to address each one of those on, especially on unfounded or ability to name customers and discuss them gets very limiting from a management standpoint, given the broader context of competitive intensity, customer relationship, considerationality contracts and so on and so forth. So I think take it for what we are giving you, which is the ability to drive growth through the remainder of the year, the ability to focus on pipeline and conversion. And the confirmation that the decline you’re referring to in Q3 is not linked to any one single large decline. Again, if you triangulate it right if you guys have all looked at the numbers. If that was the case, the US would have had a bigger decline than euro, just to give you some context. So I think sometimes it’s good to triangulate data points versus focusing on the narratives that you hear from the market or from our competitors.
Sudheer Guntupalli
Got it, Nitin. And just last question, what might be the impact of furloughs this quarter, if you can call-out?
Aravind Viswanathan
So it’s pretty similar to what we experienced last quarter, right? And last year,
Nitin Rakesh
Last year.
Aravind Viswanathan
So I think the number is around 2% is what you can consider as the furlough impact for the quarter.
Sudheer Guntupalli
Yeah. And sure, Ravin. And most of it is expected to reverse in the March quarter or are you seeing any peculiar impact of extended furloughs or something of that of?
Nitin Rakesh
Yeah, I think there are two-parts to that answer. Firstly, I mean, the nature of the business is such that there is no automatic reversal of furlough in the following quarter. So we have to make sure that we continue to work at a client level and account level to recover as much as we can recover back because there’s a logical reason for that year-end action, if you look at budgets getting close at the end-of-the year and that also leads to certain action in Q3. Seasonality comes from furloughs and some of those actions. Because if the — if reversal was automatic, then almost every peer of all would report growth in Q4 and that’s not the case. So we are expecting to recover a portion of it back for sure. I would say a good healthy portion of it back. We are not seeing any material extension of the furlough into Q4. We probably saw some of that over the last two years. This year seems to be a little bit better. And hence that’s also going into the confidence that I gave you on our Q4 performance.
Sudheer Guntupalli
Thanks, and. All the very best for the future.
Nitin Rakesh
Thank you.
Operator
Thank you. We have the next question from the line of Nitin Padmanaban from Investec. Please go-ahead.
Nitin Padmanabhan
Yeah, hi, good morning. Congrats on the solid deal wins. Nitin, two questions for you and one for Arvind. So one is that I think a peer basically talked about how they’ve had to pass-on a lot of AI-led productivity benefit to a very large customer. So are you seeing that and how are you thinking about that in terms of how much you’d be able to relatively retain? So that’s one. The second is, I think if I look at the portfolio, it looks like you know, BFSI, TMT, all of those are you leaning towards high single-digit year-on-year growth rates. But the only drag is from a logistics and transportation perspective. Now here, if you think about it, is the current quarter more furlough driven impact and do you expect that to come back? And second, when you look at the deal pipeline and the order book within that vertical, do you see things improve? So those are the two questions for you, Nitin? And there’s one for Arvind, which I don’t ask it.
Nitin Rakesh
Yeah, you get to Arvind once I’m done because I forget my questions. I think the first question around AI-led productivity. I think the — it’s a — it’s a fairly nuance answer because if the — if the expectation is to implement it in a current portfolio where you’re either doing a large debt program or a large run program and you have to protect your turf, then you obviously have to be fairly, you know, sharp about how much of that can you reach in and how much of that you have to give back. But I think if you move the conversation away from just efficiency and cost-savings to a savings-led transformation approach, then the ability to bundle either a multi-tower or AD with AMS or run with change. For example, you take on an existing application portfolio with a very strong modernization story linked to it. Then I think you have the ability to not only protect margins, but actually grow your wallet share and that’s kind of what we are seeing. I mean, I can’t comment on what somebody else said in terms of what they had to do. But in our case, we are not seeing this as any major headwind to either wallet share or margin. In fact, where we need to be, we will be very power gaining on super sizing deals using this, and that’s what I called out in the commentary. And a little bit of that definitely is playing up in the fact that pipeline is up 50% year-over-year because we are able to bundle a larger construct because that provides efficiency, certainty of outcomes and rapid deployment of some of these solutions as the three key levers besides just cost. If the focus is going to be over-indexed on just cost-savings, then it will be very hard to convince the customer why they can’t take all of that back into their P&L. So that’s kind of on the first one. I’m happy to take more questions on that if you have. On the second item, I think the pipeline is actually very, very broad-based. Some of our largest deals are spread very well across all the verticals, including L&T. So we do expect good deal activity. I don’t think this is a very large further component. Some of it may be in there. This is definitely more a question of certain client client-related project items or in some cases year-end related budgeting issues, but we do expect uptick in deal-making in that vertical. I think the other vertical has also been contributing to a decline a little bit. It’s been a little patchy in healthcare. We’ve had a couple of good quarters and then there were — there were certain other payer-related headwinds that came in. So there’s work to be done for us in healthcare as well. And again from a pipeline standpoint and from a deal closure standpoint, I think there is good activity in that vertical also. So I think as I mentioned, a little bit more consistency needed across segments. That’s very much the focus. But good news is visibility in the pipeline very much there for all the verticals that need some growth.
Nitin Padmanabhan
Perfect. That’s helpful. Arvind, the — is there any one-off within the DNA line-item? There is a marked increase this quarter. And what — any specifics on revenue from TSQS that could accrue in the next quarter
Aravind Viswanathan
Yeah. So,, no one-timers per se, right? There are typically some marketing events that we’ve done and spends around that, that has come through. But I think if you see a three, four-quarter trend, it kind of oscillates a little bit. So I don’t think there is nothing much to read into that.
Nitin Padmanabhan
No, I was referring to depreciation amount.
Aravind Viswanathan
So on the depreciation side, as you know, we had won a deal last quarter on one of the star still, right? And as part of that deal, there was an — it was a consolidation deal for which there was a money paid-for rebadging employees. And as part of that, while the accounting follow the M&A accounting, there is no goodwill or assets taken over, the entire amount paid is amortized into the P&L as a depreciation of intangibles and that is the amount that has kind of come in. I expect that will normalize, but you have other transactions that we do and we will have to see how that comes. But it is largely driven on the back of a new deal that we announced in October. On — so yes, yes,
Nitin Padmanabhan
So should we — so should we take this as a steady-state?
Aravind Viswanathan
Sorry. You can take it as a — actually see it will oscillate. I don’t want to get into a quarter-wise forecast on this, but as we do deals like these because we won another deal, which we have talked about this quarter also as part of the consolidation. So maybe the previous one will little bit taper down and a new one will have an impact. So you know, I would say that right now you may not see a very big difference in Q4 vis-a-vis Q3 on that line-item.
Nitin Rakesh
Okay. So, I can maybe from a philosophy standpoint, what Arvind is explaining is the accounting treatment. But from a philosophy standpoint, wherever we see an opportunity to do tail consolidation or take on contracts that might be with non-strategic vendors or that gives us an opportunity to structure a large five-year deal. We would actually do that even if that means that we have to structure a transaction where it works for both the customer and us. So some of these will continue to be a one-offs that you will see primarily driven by the fact that we see opportunity we take it and we invest in the business and with the customer. And that’s how we are getting these clients to progress through the client pyramid as well.
Nitin Padmanabhan
But would we need to worry about headwinds to margins with these transactions or it should be accretive or it’s a — it’s a life-cycle how should we think about it?
Nitin Rakesh
I think these are highly-accretive deals if you look at the nature of the transactions. The tenure and the profitability. So you don’t need to worry so much about the accounting impact related headwinds, otherwise you would have called it out and you should have seen that — you could have seen that in Q3 and in our guidance for Q4. So I don’t think that’s the case.
Nitin Padmanabhan
Yeah. Sure, perfect. Thank you so much and all the very best.
Nitin Rakesh
Thank you.
Operator
Thank you. Thank you. The next question is from the line of Abhishek Kumar from JM Financial Limited. Please go-ahead.
Abhishek Kumar
Yeah, hi, good morning. I have two questions, Nitin, both on TCV. First, you said, you know, in the presentation that TCV to revenue conversion is improving and two-parts here. One, what was happening earlier? Was it just the slow conversion that was impacting the headline growth number or was it slightly elevated leakage because of mortgage and some of the other stressed top-10 accounts? And? And second, what has changed that is giving you the confidence that TCV to revenue conversion will be better going-forward?
Nitin Rakesh
Yeah. I think both great questions. There is definitely churn in the business. You — I mean, we’ve talked about at peak what the contribution from mortgage was to at bottom what the contribution was and there was a pretty big swing within four or five quarters. And that stabilized definitely at the end of 2023 when we called for a bottoming in the business. Now this is the 4th-quarter where we’ve seen sequential growth. I think we need a little bit more consistency in the — in that number from a quarter-on-quarter perspective, which is what we are all focused on. From what has changed, I think some of the uncertainties that at a macro-level started getting addressed, whether it was speaking of the interest-rate cycle. Middle of 2024, it was clear that cycle has peaked, but it took another three months till September for the cuts to start. Between September and December, we had 100 basis-point cut that definitely had some uptake to not only volumes, but more importantly, confidence in the cycle and the soft landing. Secondly, if you look at the outcome of the elections, there is some degree of certainty on the fact that the tax cuts will get definitely extended, which means that enterprises can now plan budgets with that assumption in mind versus an uncertainty around how that goes and where that goes. That definitely leads to higher enterprise confidence when it comes to competing to larger programs. The issue earlier was they would commit to a program, but it was one-step forward, one-step backward because the data points were so co-mingled and confusing that it was hard for them to take a two-year, three-year view as to whether they can commit that kind of budget in that duration. So there was a very-high scrutiny on projects and spends. It’s It’s still high scrutiny. It’s not that there’s free money available, but at the same time, there is more confidence and the ability to commit to some of these larger programs is definitely uptick in the last, I would say, three months or so. So that’s kind of where we are — where we are seeing the business and the approach and the confidence arriving from. And that also — if you can see, we’ve closed $450 million in the last three months, including the January deal, that’s a six-quarter high, it’s probably more than the last two months, two quarters put together. Pipeline is up in addition to these big closures, pipeline is actually not just insta, but it’s actually jumped up to a number where we are 50% high. It’s a record number. 23% sequential growth in pipeline is not something that I’ve seen often in the business. Obviously, we’ve been investing in the large deal framework. We’ve talked about adding a new leader and very much and as I said, forward-leaning on it purely based on the qualification of the deals in the fight as well as the ability to continue to originate deals as well. So I think it’s all put together, environment looks to be, you know, improving further from where we were definitely this time last year. There was a little bit of a tentativeness in the recovery and obviously for the first two quarters of calendar ’24, there was a fair amount skepticism around whether the recovery will take shape. We’ve seen that across the industry now in the last two quarters, 3/4. So I think it’s just a contination of that trend.
Abhishek Kumar
Okay. Great. Just a follow-up on what you said towards the end. You’ve hired a new leader, you’re looking at some of the large deals and we just discussed some of the rebadging, etc. So is that a conscious strategy to go after these consolidation deals, those sort of $100 million-plus kind of consolidation deals, which we were probably not participating as much given higher exposure to apps, etc. Is that a conscious strategy that has changed recently and therefore, we should expect a slightly more larger deals going-forward
Nitin Rakesh
So I think the answer is this is very much a deliberate effort to balance risk-reward as we look for opportunities and deals. And the reason I say that is that just because we are doing these consolidation deals, which require some element of structuring or investment doesn’t mean that we are throwing caution to the wind and doing deals that shouldn’t be done, right? So I just want to make sure that I articulate that very openly. Of course, focused on large deals. We’ve been reporting the number of large deals, I don’t know, for the last five years now, we used to do one to two a quarter, we are now between three and five a quarter. Average deal size has gone up slowly, but surely. We had a mega-deal quarter, mega large deal quarter about six quarters ago. So this is very much a deliberate attempt at building muscle that we think is required. And by the way, not only is it required to get scale, but there’s an opportunity to use the capabilities that we’ve been invested in and I talked a fair bit about that in the script as well. So I think this is very much a deliberate conscious attempt. Unfortunately, in business, you can’t really have a subconscious competence-driven winning strategy. So we are focused very much on consciously driving growth through this.
Abhishek Kumar
Great. That’s helpful. Thank you and good luck.
Operator
Thank you. The next question is from the line of Vibhor Singhal from Nuvama Equities. Please go-ahead.
Vibhor Singhal
Yeah, hi. Thanks for taking my question. Nitin, just want to a bit more on the logistics vertical. I know we’ve done a bit a lot on it already. I mean, it stands out as a — as a sharp contrast to all the other verticals, which actually reported quite handsome growth in this quarter. So what is this vertical particularly? If you can develop a bit more on this? Is it that the vertical itself is facing tech spends which are coming lower? Is it some clients who are actually ramping down or is it a loss of wallet share also something like that? And can you provide some trajectory as to when do you think this vertical could bottom out for us in the coming quarters?
Nitin Rakesh
So let me first break-down the vertical for you. It’s called logistics and transportation because it has a combination of logistics, airlines, railroads in there. Logistics isn’t just, you know what you think it is. There is a supply-chain element to it. There are shipping companies in there. Airlines is well-understood. It’s a new vertical we created over the last two, three, two-and-half years. We’ve announced multiple wins in that area, including the recently won AWS Partner of the Year award for Airlines in 2024 that was handed to us at the. And then, of course, there’s the railroad element. So if you look at the — all of these three have a different dynamic and a growth trajectory. The airline business has grown well for us. Obviously, it’s a very small base. We expect that to become a much more meaningful portion of this business over the next 18 to 24 months. A large number of deals and the activities that we are talking about actually do sit there. Same with some of the other elements — segments of this vertical. The decline, as I mentioned, is not related only to one large customer or any one single customer. It’s a combination of things that happened. And again, as I mentioned, there are seasonality factors at play, not just you know the cyclicality of the business. This is this — the non-airline business is also that is something that is exposed highly to global macro and supply-chain headwinds, there is definitely work to be done there. And again, not every customer in every segment will grow at the same pace either on a sequential basis or on an annual basis. So this is kind of the puts and takes that we are dealing with, fairly focused on driving growth through deal wins and of course, making sure that we continue to protect what we can with existing customers as well as acquiring customers.
Vibhor Singhal
And any timeline that you could provide that when do you think with the effort that we are making in terms of airlines and other sub-segments, when this vertical could bottom out for us, we could start seeing positive sequential growth in this quarter? Any kind of a subjective direction itself also would be helpful.
Nitin Rakesh
Thank you. So Vimor, I can give you answer, but the answer can change within like one deal being signed-up, right, because that’s the — that’s the nature of the — I mean this is a — this is not — this is not the vertical the size of banking for us. So the shape of the vertical can change very, very quickly. So I think what I will tell you is the portfolio visibility that we’ve given you for Q4 assumes a certain set of actions that could change as we announced or as we try to close deals and we announced activities there. So instead of giving you a timeline by which this will bottom out. I would just tell you that we’ll continue to update you as we progress our actions because there are some really interesting actions that we’re trying to execute.
Vibhor Singhal
Got it, got it. That was helpful. Also just to quickly pick your brain on the insurance vertical. How do you see the outlook for that vertical going-forward? I think DFS, I think we’ve spoken a bit about that. I think that’s quite clear. On the insurance, any key puts and takes that you would probably want to share? The growth has been quite good through this year, in fact, through the last six quarters. Do you expect the momentum to continue?
Nitin Rakesh
I think, again, it’s — we started talking about stabilization in that about a year-ago and we’ve seen a pretty decent growth in that business sequentially this quarter. Some of it is linked to new cloud acquisition and expansion of our wallet share in that business. That business obviously is across both sides of the Atlantic. So there is a UK and European element and then there’s obviously a US element. I think at this point, it looks like that it will continue to give us a sequential improvement. We have visibility into existing clients that where we want wallet share and deals that will continue to convert. So I mean, from the point-of-view of leading the growth, I think it will still probably be led by banking and PMP, but insurance definitely is a contributor to growth from an overall company standpoint as we go over the next few quarters. Got it, got it. And again, caveat that with — caveat that with the fact that deal activity can change all of that pretty quickly, right? So that’s the — that’s the focus on from a pipeline conversion standpoint.
Vibhor Singhal
No, got it. That’s really helpful. I think I think the deal conversions have been quite good and fingers that continues to change the moment — the momentum for us. Great. Thanks for taking my question and wish you all the best.
Nitin Rakesh
Thank you.
Operator
Thank you. Thank you. Thank you. Thank you. We have the next question from the line of Sandeep Shah from Equirus Securities. Please go-ahead.
Sandeep Shah
Yeah. Thanks for the opportunity. Nitin, just wanted to understand any client conversation in the insurance segment because of the California fire, do you believe the growth momentum can picked-up going-forward?
Nitin Rakesh
I think it’s still a little bit early days. We have not at this point seen that conversation reach our offices or desks or interactions. I think it’s a very complicated state as well as a federal subject maybe some clarity will emerge now that the administration is in-place. I mean, there’s definitely going to be some impact on some large carriers, especially that cover home and auto because both of those will take an impact. But I think there is probably a realization that there is a dollar limit to that given the backstop of the — that was given by the government in California. So at this point, nothing to call-out. We’ll keep watching it. I don’t think the incidents are behind us yet because there seems to be some more activity this week.. So I think nothing to call-out on that front. We probably will know more about it as they report their current quarter earnings and make some disclosures. On the flip side though, I think it gives us an opportunity to sharpen our pencils and go to them with some propositions. So that’s something that we’ve already started to think about.
Sandeep Shah
Okay. And in terms of large deals with a conscious effort to increase, is it fair to assume that these large deals will also be at a company average or there could be some investment which may lead to some compromise on the margins going-forward,
Nitin Rakesh
Very, very good question. I think the stance that we’ve taken is and we’ve talked about it for the last, I would say, few quarters, maybe even few years, is we’ll continue to prioritize growth and hold the margin steady, which means if we have the ability to drive operational efficiencies, we’d love to invest that back into growth. Growth can come from, I mean, investment requirement is in three or four different buckets. First one is definitely capability. We’ve been investing — we’ve actually upped our investment in capability competency as we build these AI platforms over the last few years, especially over the last 18 months. Second investment required is in GTM, which for example, setting up the loyalties team, expanding our coverage on accounts, going from just the top-10 to the next 20 accounts, expanding into newer verticals and new geographies, all of that requires investment in GTM. And the third investment is at a deal level within a large deal construct, what investment is required and how much of that can be absorbed. And that’s why I think Arvind was explaining earlier, as we’ve looked at some of these large deals, we felt we could absorb that level of investment without disrupting our overall margin profile. So we do expect these deals to obviously be either at or above the overall company average if we have to hold our margins steady. So I think that’s the approach and the philosophy with which we are approaching the market. Again, the ability to use discontiguous opportunities using some of these platforms gives us confidence that we have line-of-sight to what card are the possible, what the size of the price is. Of course, competitive intensity in the business is always high. There are peers who are — we’re punting the savings percentages in the outer years to get into the deal in the earlier years. We have to just be very careful that we have the level of confidence that we can actually execute to those programs. And I think given that we’ve been executing these large deals over the last few years already, I think we do have a pretty good idea of what the should look like.
Sandeep Shah
Okay. Okay. And just a last bookkeeping question. The 9th January deal which we have signed with TSQS Inc. Is it the deal construct like M&A or the deal construct is similar to what we have signed in ADZ and that may keep the amortization cost higher for a foreseeable future?
Aravind Viswanathan
It will be identical, Sandeep, to the — it is another vendor consolidation deal, right, with people take-over. So it will be identical to that. And again at a deal level, these are, I would say, accretive to the company margins even post the amortization. So that’s the way you should look at that.
Sandeep Shah
Okay. Okay. So amortization line as per new Arvind may not materially decline in the 4th-quarter, but may come down starting next financial year.
Aravind Viswanathan
Yes, yes, unless we win more deals, which necessitates such line items to come through.
Sandeep Shah
Okay, okay. Thanks. And I will come back-in the queue.
Operator
Thank you. The next question. Yeah, sorry. The next question is from the line of Rishi Junjanwala from IIFL Institutional Equities. Please go-ahead.
Rishi Jhunjhunwala
Yeah. Thanks for the opportunity. Nitin, if you look at, say, our revenues over the past three years, including the down-cycle of FY ’24, we are up 5%. If you look at headcount during the same-period, it’s down 15%. And even in the last one year now, as of 3Q Y-o-Y basis, our revenues are growing 5%, our headcount is down. So just wanted to understand, I mean, and you’ve talked a lot about the contribution of AI into some of the deals that we are winning. So just wanted to understand how much is the non-linearity getting played out in the new business that we are doing and whether is it fair to assume that even going-forward for the revenue growth that we might achieve, the non-linearity is potentially going to expand and as a result could be a margin lever?
Nitin Rakesh
Yeah. So Rishi, great question. I was waiting for someone to ask the question because I knew this was going to be an item for discussion. And if I look at the metrics you shared, especially over the last 12 months, I think there are three components to it that you should think about when it comes to revenue direction correlation. The very first component is very evidently reported is utilization. We were running at a lower than industry utilization because of the infusion of pyramid. We’ve talked about construction of the pyramid in ’22, ’23. That doesn’t happen in one or two quarters, it actually takes multiple quarters to do. So the shape of the pyramid definitely changed and that meant that we had to actually lower our utilization. And now we’ve been eating into that utilization over the last four quarters. Still work to do. We’ll probably see some infusion again at the bottom of the pyramid. We’ll continue to work on those actions based on the rolling 90-day headcount requirement plan that we run. Second element of the headcount revenue correlation is onsite versus offshore. If you see in the same-period, onshore headcount has actually gone up at a billable level and that’s because we are stuck — as we do some of these deals that have been talked about, they start onshore and then we transition them over a period of one or two or 3/4. And that I think has distorted a little bit of the revenue to headcount correlation purely for the last four quarters. Nothing alarming because in the end, the thesis will always be 30, 70, 2080. That’s the reason why clients look for savings. Our ability to infuse you know, right shoring with, with tech is important. We’ve already talked about centers outside of the — outside of India that don’t count in the offshore locations. So that’s all sitting in there. The third element of that is the AI or nonlinearity that we talked about. We are definitely seeing some of that, especially in areas that require AI-led offs, for example, production support, enhancements, QA. The ability to drive 30% 40% of the manual effort is definitely driving conversations. Now again, I mentioned the fact that not all of that has to be in a T&M construct. So when we do some of these in a managed outcome basis, when we do — even in the mortgage business, we have the ability to drive efficiency using some of the same constructs. That is starting to play-out. It’s a little bit early days for that, but it’s definitely very much in that equation in the last four quarters and will probably be more in the equation over the next four quarters because some of the deals we sold very recently will require us to strengthen that muscle. In the longer run, the correlation between revenue growth and headcount growth will not go away, but it won’t be as high as it used to be on the last 10 years.
Rishi Jhunjhunwala
Okay. Understood. And just one confirmation. You made a comment earlier in the call that 4Q could potentially be the strongest 4Q you have seen from a Q-o-Q growth perspective in the last three years. I’m just confirming the last three years you mean 4Q FY ‘234 and 5% because 4Q FY ’22 was 4.3%.
Nitin Rakesh
Yes, you’re right.
Rishi Jhunjhunwala
Okay. Thank you so much.
Nitin Rakesh
Okay. That was the previous peak. Since then is what I meant when I said last three years.
Rishi Jhunjhunwala
Yeah. Just wanted to confirm. Thank you.
Nitin Rakesh
Yeah, yeah.
Operator
Thank you. The next question is from the line of Dipesh Mehta from Emkay Global. Please go-ahead.
Dipesh Mehta
Yeah. Couple of questions. First, about the 100 million deal, which we subsequently announced in the current quarter. If you can provide some more detail about the control of the deal in terms of whether it is existing client, new client vertical, if you can share whatever additional detail you can say? Second question is about the top-20 client considering because now budget cycle is getting finalized and if one want to get confidence about growth considering the concentration which we have, are we seeing any, let’s say, signs of concern area in any of the top-20 clients, which can lead to, let’s say, issues and derailed growth momentum, which we likely to see in Q4 entering into FY ’26 and last question is about — if I look — look — we give new general TCV number, surprisingly, it fall below 50 this quarter, which we have not seen in at least recent past. So if you can provide because the way we are suggesting deal construct kind of thing, then these components would be higher. Surprisingly, in Q3, that number is the lowest which we have seen — ever seen kind of thing. Thank you.
Nitin Rakesh
Sure. So I think the first one is around the new deal in Q4. It is in the banking domain and it is a new customer. And the nature of work is application and infrastructure transformation using public and private cloud. So and that’s the need that our execution timelines are pretty clear, well-defined and it’s definitely a 2025 calendar year execution initiation as well. It’s a — it’s a multi-year deal. Second question was, do we see any clients in the top-20 that can contribute to growth, if I’m understanding correctly right?
Dipesh Mehta
Yeah. It is reversed, whether it can create headwinds or headwinds. Again, it’s very difficult to call a client in the top-20. Again, you can ask that question with a different context of top-10 or in verticals. So I think puts and takes will always be there. They will always — there are always clients that are declining sequentially or Y-o-Y. Our effort is to make sure that the net positives are higher than the net negative. So from that perspective, the top-five, top-10, top-20 anyways is a dynamic list. It’s not the same static list. There are clients in the top-10 today that were not in the top-10 a year or two ago, and that’s very much the focus for from a pyramid growth standpoint. So nothing to really call-out at this point. We will continue to monitor the portfolio both at a geovertical and a client segment level and report it. And the third question was around. It’s a good question. We’ve been a little bit conservative in taking some of these vendor consolidation opportunities and not reporting them as newGen and that’s what’s driving the lower percentage because the large deal that Arvind talked about that we’ve done with an existing customer with a consolidation play, we so-far have not applied any new general AI muscle to it. So that’s something that we will do during execution. But from a reporting standpoint, that’s probably what’s distorting the newGen percentage. But there’s definitely going to be inclusion of tech-led capability besides just rightshoring to make sure that the deal is executed for what we committed to the customer. Okay. Just harping more on the top-20, which I said, it is more from the growth perspective. Let’s say, we will see good momentum picking-up for us in Q4. If any of those issues again cropped up, we will see considering we have fairly high concentration in top-five, top-10, top-20. And that’s why I try to get sense. Do you see, let’s say, considering puts and takes, which we know in the portfolio of 20 clients can provide any big headwind to our growth momentum, which we have started to see.
Nitin Rakesh
So Dipesh again difficult to give you. I mean I really don’t have a way to calibrate as to what the exact you know response should be, able to except tell you that there will be hotspot accounts. There are hotspot accounts in the top-10, top-20 because as I mentioned, not every account, not every vertical will grow at the same pace consistently. We will take a portfolio approach and continue to report it. We definitely have work to do where we think we can plug some of these — these headwinds. There are two-ways to grow. One is everything grows, other is we grow around all the issues that we have. So we try to do both of that and wherever possible, look for opportunities to grow around issues as well. And we’ve done that in the past. We’ve looked at our concentration to one large customer five years ago used to be almost 26%, 28%. We are down to 2%. We’ve also looked at concentration or risk coming out-of-the mortgage business. So we’ve done around that as well. So I think we’ll continue to just supply the same playbooks that we know-how to. And in a way, the lead indicators will always be pipeline, pipeline of results.
Dipesh Mehta
Understood. Thank you.
Operator
Thank you. The next question is from the line of from. Please go-ahead.
Shradha Agrawal
Yeah. Hi, Nitin. Two questions from my 74 utilization since last 3/4. So how do we see the trajectory of utilization?
Nitin Rakesh
Is it better now? Can you please repeat the question? Yes, can you repeat the question?
Shradha Agrawal
Yeah. So we’ve been operating at 74% 75% utilization since last two, 3/4. So how do we read the trajectory of utilization from here onwards.
Aravind Viswanathan
So I think we’ve had a sharp improvement in utilization over the last four quarters, right? I think it is safe to say that we would be around similar levels. But I think one of the points that we’ve at least been very focused on, right, we’re pivoting towards growth. And I think a lot of our supply-chain is determined by how the growth materializes. Now if you really look at even the data that we share, we’ve seen a sharper increase in onsite over the last three, four years, right? And naturally that lends itself to a better blended utilization because on-site always operates at higher utilizations. So I would say that directionally, I don’t see a major shift in utilization from where we are, but utilization, supply-chain are frankly input parameters to manage demand, right? And if there is a change in the nature of demand, which we don’t see currently, but if there is, things will change, but otherwise, it should be along similar lines.
Shradha Agrawal
Right. And just the second question on the weather consolidation,
Operator
But your line seems to be breaking in-between once again.
Shradha Agrawal
I’m speaking from line. Is it that alone?
Operator
Please go-ahead.
Shradha Agrawal
For the consolidation deals that we aggressively pursuing now.
Aravind Viswanathan
So do these involve a larger component of the weighted we can’t hear you
Operator
Clearly,., may we request you to have an area with a network or reception.
Shradha Agrawal
Okay. Thank you.
Nitin Rakesh
Or if you don’t mind, just send that question send that question on the I’m sure there is one-way to do that.
Operator
Thank you. The next question is from the line of Manik Taneja from Axis Capital. Please go-ahead.
Manik Taneja
Hi, thank you for the opportunity and congratulations for the steady performance. Nitin, I wanted to — while you mentioned about the fact that we should probably see the correlation between revenue growth and headcount reduce going-forward. It will be great to understand your thoughts as to do you think some of these — some of the transition towards almost like a platform business can drive margin gains for us given in the past, we’ve seen the industry compete away the margin gains back to customers. That’s question number-one. The second question with the way that you see demand playing out across different industry segments, do you think our — our concentration or proportion of business coming in from banking once again grows in the foreseeable future given — given the way one is seeing industry demand progress.
Nitin Rakesh
So I think the first question is, let me take that one. I’m not sure second one I understand, but let’s take the first one around transition to the platform model. So I think that is in a way the North Star question is as you rightly said, that industry has competed away the gains from this model into — back to the customer. That really is — there are two issues that we are very, very watchful of change management at the client level will the client buying behavior change from buying predominantly capacity-driven contracts. Second change management behavior will always be around competitiveness intensity, the ability to construct deals that actually give you some lift and some benefit. Early days, I think we are in the first innings of a baseball game, so to speak. How this will play-out over the next few years definitely. There are — all I can tell you is there are existing instances of at least a handful of companies that have managed to transition from a pure services or a solutions business to a platform-based services business. We are very focused on learning the best practices and making sure that as we invest in some of the platforms, we will definitely take a commercial approach that is value-accretive to the customer to begin with, but most importantly also highly gives us a degree of differentiation and stickiness that helps us beyond just looking at short-term margin lifts. So I think, again, early days, this is a topic that will continue to be discussed over the next few quarters. We are again very deliberately and consciously driving a whole set of actions around it and we’ll continue to keep you operated. If you don’t mind, can you repeat the second question, please?
Manik Taneja
Sure. So my second question was, I understood, but sure. So my second question was that in the post-pandemic demand upswing, we saw the proportion of revenues that we get from banking go up the strong spending in that segment. Do you see that once again inch up for the over the foreseeable future, given, given the way you are seeing the bag patterns play?
Nitin Rakesh
Manik short answer is we will take the growth where we can find it in the short-run and because there is only one color of currency. If you look at our longer-term trajectory, let’s take a five-year, seven-year view as well. Banking used to be 50% of revenue and we’re still very much 50% of revenue at an overall company-level, give or take a percent year or there. So I think the portfolio diversification approach of building the other enterprise verticals definitely has given us good rewards in the last three or four years, a lot — I mean, TMP is a great example. The approach to very short-term will always be a over-index on opportunity and deal-making. And the approach to long-term is to continue to look at portfolio across verticals, geographies and services. So I wouldn’t worry too much about getting overexposed. I think there is tremendous opportunity. And by the way, this is without the upside risk to business growth if the interest-rate cycle truly plays out in some shape or form. And this is the first time we’ve seen in, I think the history of financial markets that at least I’ve been following where after 100 bps cuts 10 years gone the other way. So I think we have suffered a little bit in the last couple of years. We’ll take the benefit in the very short-term and we’ll continue to focus on driving in our core vertical the right to win and expand as much as we can at with existing clients, new clients, new verticals, new geographies in the BFS segment.
Manik Taneja
Thank you. Sure. Thank you and all the best for the future.
Operator
Thank you. Thank you. The next question is from the line of Abhishek Shindatkar from InCred Capital. Please go-ahead.
Abhishek Shindadkar
Hi, thanks for the opportunity and me. Nitin, just one question on the headcount. Now how should we read the decline in the headcount and corresponding change in the next-gen services TCV. So it seems like a strategy to focus on a managed services deal. Now are we kind of planning headcount for the potential rebacking of employees that can happen or associated with this kind of deals or is it a change of a pyramid where we are moving from the middle layer to more fresheners and that’s what is the reflection of it.
Nitin Rakesh
Thank you. Yeah, I think I addressed the headcount issue that Rishi had asked. I don’t have anything new to add, except tell you that you can’t plan for a rebatch deal until the deal happens. If it happens, you work — you plan around it and you see how to optimize your current pyramid and your current deliverable to the customer. So I think the short answer is that we will continue to do headcount forecasting on a rolling 90-day basis, look at how the demand environment looks like across locations and skill-sets and then try to meet that with either internal utilization or external fulfillment and that’s very much an operational rigor that is well-built into the company and will continue to get optimized as we grow the business.
Abhishek Shindadkar
Yeah. Thanks. And just a follow-up to it, as we move more towards managed services deal, has anything changed in terms of the revenue recognition for the managed services deals? Last year, we had heard of you know, taking transition timelines up to six months, anything changed on that count would be helpful. Thank you.
Nitin Rakesh
Thank you. Yeah, I think the revenue acceleration from PCV definitely has improved, which means the transition timelines are not as long right now. When it comes to managed services, it’s a combination of rightshoring and effort elimination, as I mentioned earlier. So that will definitely play-out into the aspect of the non-linearity in headcount to revenue correlation. Beyond that, I think we will report and explain away these numbers as we go-forward. But we are looking actively for opportunities where effort elimination is very much part of the thesis of constructing a solution and largely around it. Thank you.
Abhishek Shindadkar
Great. That is very helpful. Thank you for taking my question and best wishes for the next year as well.
Operator
Thank you. Thank you. Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to Mr Nitin Rakesh for any closing comments. Over to you, sir.
Nitin Rakesh
Thank you. Thank you very much. And on behalf of Emphasis, that concludes this conference call. If you have any further questions, please reach-out to our Investor Relations team and we thank you for your interest and look-forward to speaking to you again in the demand.
Operator
Thank you and thank you. Ladies and gentlemen, on behalf of Emphasis Limited, that concludes this conference. If you have any further questions, please reach-out to the Emphasis Investor Relations team at investor.relations@emphasis.com. That is Investor Relations — sorry, that’s investor.relations at emphasis.com. Thank you all for joining us. You may now disconnect your lines