NIIT Learning Systems Ltd. (NSE: NIITMTS) Q4 2025 Earnings Call dated May. 14, 2025
Corporate Participants:
Vijay Kumar Thadani — Vice Chairman and Managing Director
Sapnesh Lalla — Chief Executive Officer
Sanjay Mal — Chief Financial Officer
Analysts:
Unidentified Participant
Janish Shah — Analyst
Ganesh Shetty — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to NIIT Learning Systems Limited Q4 and FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.Should you need assistance during the conference call, please signal an operator by pressing star and zero on a touchstone form. Please note that this conference is being recorded. I now hand the conference over to Mr Vijay, Vice-Chairman and Managing Director. Thank you, and over to you, Mr Vijay.
Vijay Kumar Thadani — Vice Chairman and Managing Director
Thank you. Good afternoon. Welcome everyone on this call today, then we are going to discuss NIIT Learning Systems Limited quarter-four and FY ’25 results. First of all, thank you for your continuing interest in NIIT Learning Systems Limited and for joining the call today. I do know if you had other options, but we thank you for giving us your time and we will be sharing the details as I just talked about for quarter-four as well as for FY ’25 results of NIIT Learning Systems Limited of trading similar NIIT and TS.
We will be discussing not only the performance of the business, but also as the outlook for the business, a certain update on the inorganic activity as well as certain cost profit actions like dividend, etc. But I’ll come to that part towards the end. To start with, I am inviting our CEO, Mr Lalar, to make the opening comments and briefing based on which we’ll open it for Q&A.
I have in the room with us the rest of the top leadership team are including our Chairman, Mr; and the CFO, Mr Sanjay Mal; Kapil Saurab, Investor Relations and all our senior finance and business leaders. And we’ll be very happy to all join in answering your questions. Sapnesh will lead the call and he will start with over to you,.
Sapnesh Lalla — Chief Executive Officer
Thank you, Vijay, and thanks everyone for attending this call. Good afternoon to all of you. In our prepared comments, I will review the performance and also share expectations of the path ahead. First, let me set the context. In a challenging and volatile environment, our growth in Q4 was 3% quarter-on-quarter and 8% year-on-year.
In constant-currency terms, it was 0.7% quarter-on-quarter and 6.2% year-on-year. So when we announced our Q3 results in this past January, we had expected higher sequential growth in Q4, driven by continued ramp-up of new customers and a partial recovery in spending from existing clients. However, as we are all experiencing, there has been significant increase in the volatility and economic uncertainty the world over.
This led to significant impact on volumes in our North American real-estate training business for which Q4 is typically a very strong quarter. We Had slower-than-expected ramp-up from a large new customer, which has spilled over to-Q1 and is now on-track to be completed in Q1. And then in a handful of our customers, we’ve had deferrals or cancellations, cancellations more than deferrals cancellations of scheduled training activity in the second-half of the quarter, predominantly in February and March. The sudden nature of this revenue impact combined with an unfavorable shift in-product mix resulted in disproportionate impact on the margin, which came in at 20% for the quarter. I also wish to point out that despite the challenges we’ve had going to the current environment, our business has continued to outperform our competitors, demonstrating strong resilience with industry-leading growth and profitability. The business continues to see strong customer wins, three new MTS customer contracts comprising of two new logos and one expansion. In addition, we had one renewal. The visibility is now at $390 million. We maintain a 100% track-record across all customer segments with a track-record of renewals across all customer segments. We continue to expand our share of wallet with most existing customers. The revenue for the quarter was $4,297 million. It was up 8% year-on-year and 3% quarter-on-quarter, as I pointed out earlier. Constant-currency revenue was up 6.2% year-on-year and 0.7% quarter-on-quarter. EBITDA for the quarter was 807 million was down 14% year-on-year and down 9% quarter-on-quarter. EBITDA margin was at 20% for Q4. In addition to adding new customers, as I pointed out, we had one contract renewal and one scope expansion. The company continues to maintain a track-record of 100% contract renewal, reflecting continuous improvement in our long-term competitive position. The number of managed training services customers at the end-of-quarter four stood at 93. The visibility, as I pointed out is at $390 million versus $335 million when we closed Q4 last year. Coming back to our financials, the depreciation was 167 million INR. The net other income was 3 million. The treasury income, this includes the treasury income of 118 million INR, the strategic growth and acquisition-related expenses of $55 million, demerger related non-operating transitionary expenses of $5 million and other expenses of $56 million including ForEx loss of $36 million and net other miscellaneous expenses of $20 million. The tax was at $206 million, ETR stood at 29.7% and the tax was a tad bit higher in Q4 due to certain notional expenses on consolidation, which were not included in the tax computation. I’ll request Sanjay to spend a little bit on the ETR or the increase in ETR in Q4.
Sanjay Mal — Chief Financial Officer
So we have a tax charge of INR206 million, which is higher than the quarter three, which was about INR95 million. However, this is lower from the last year’s same quarter to INR94 million. So the overall impact has been typically for the expenses, which is the notional expenses on consolidation, which are not admissible for tax. And to that extent, there is a impact primarily relating to fair-value in future acquisition liabilities and the year-end, which we typically see in the quarter-four.
Sapnesh Lalla — Chief Executive Officer
Thanks, Sanjay. The profit-after-tax for Q4 was $487 million. The EPS was at INR3.58 per share versus 4.54 previous quarter from 4.02 last quarter — same quarter last year. For the year, revenue was INR16,533 million. This is up 6% year-on-year. The revenue is up 4.8% on a constant-currency basis.
The EBITDA was at 3,763 million versus 3,762 million in the previous year. The margin was 22.8% versus margin of 24.2% last year. The depreciation was million versus a depreciation of million last year and net other expenses were $80 million as compared to INR200 million last year, primarily due to higher treasury income this year. The treasury income was 411 million, INR as compared to INR279 million last year.
The strategic growth and acquisition-related expenses were at $267 million INR and demerger related non-operating on transitionary expenses were 29 million INR as compared to $115 million last year. Other expenses, which include foreign-exchange expenses and miscellaneous expenses were at 196 million INR as compared to 90 million INR last year.
The PAT for the year was 2,275 million INR. This was up 7% year-on-year. The EPS was 16.75 INR per share versus 15.82 per last year. The balance sheet and cash-flow metrics remained strong. DSO stood at 56 days as compared to 62 last quarter and 53 at the same time last year. Cash-and-cash equivalents are at INR7,742 million INR and these include the earn-out payment to St. Charles earlier this past quarter as well as a minority investment in a company called Striva that Vijay will talk about after I complete these comments.
The capex for the quarter was 145 million INR versus 118 million previous quarter, reflecting continuing and increasing investments in using generative AI to build transformative products. The net cash stands at INR7,036 million INR as compared to 6,099 million INR previous year, 5,659 million in our last year’s same quarter.
The return ratios continue to remain robust. We had — we ended the year with 2,410 410 employees at the end of Q4. It was up 54 quarter-on-quarter and up 14 year-on-year. So as we exit this year, our employee base is more or less what it was when we exited last year. As I mentioned when I started the call, the market uncertainty is driving significant focus on costs, resulting in conversations around large cost takeout and cost transformation opportunities.
We think we are very well-positioned to take advantage of such opportunities because organizations, when they look at-cost or cost takeout look for reliable partners who can both advise them as well as operate their business. And I think we have reached that position with most of our customers.
With our investments in AI, consulting and advisory services as well as disproportionate investments in sales and marketing, along with the reputation as a trusted and reliable market-leader, we believe we have an opportunity to gain a larger share of the upcoming opportunities and to accelerate growth.
Our deal pipeline continues to be strong, including large outsourcing opportunities across different market segments, including technology, professional services, automotive, life sciences, BFSI and others. And IoT Learning Systems Limited continues to make different disproportionate investments, as I mentioned, not just in sales and marketing, but also use of generative AI across the different parts of our business. Generative AI, as we found at our confluence event that we We conducted earlier this year in Orlando, our generative AI is part of almost every conversation. A number of our customers are evaluating the use of Gen AI in transforming L&D, though I would say there is still some hesitation in large-scale adoption of Gen AI solutions. I would however, report that in Q4, we did win our first significant customer — managed training our services customer, which is where the work that we would do for them will be purely driven by the use of Gen AI in every aspect of the work that we do for them. So we continue to make rapid progress in leveraging AI across multiple aspects of our work and we expect that over-time, we will have higher adoption across a larger percentage of our customers. I would like to reiterate that the rapid transformation in industries we serve owing to our digital transformation, use of AI, decarbonization, acceleration in biopharma present large and significant opportunities for NIIT learning systems. We see a number of organizations transforming and restructuring to improve their cost structure and achieve higher variability in cost structure. We’re starting to see acceleration in outsourcing opportunities. And owing to this trend, I feel unique — we are uniquely positioned to take advantage of these upcoming and emerging opportunities and continue to lead the industry in terms of growth and profitability. Specifically, some of our competitors are distracted and others are focused on other parts of their business. We also have an active pipeline of inorganic opportunities that we are pursuing. We will report more on this as we reach closure on any of them. Like I mentioned earlier, during this quarter, we announced a strategic minority investment in Strival Labs USA. I’ll spend a minute on the company and then let Vijay talk about as well as well as cover some of the other points that he mentioned. Was incubated at Stanford University’s Virtual Human Interaction lab. Was founded in 2015 by Derek Belch, then a graduate student and assistant football coach for the Stanford Cardinals along with Jeremy, a Stanford Professor and VHIL Founding Director. The company offers customizable content data analytics to track user performance and realistic simulations to develop practical skills by leveraging virtual reality technologies, driver enhances engagement, improves skills and reduces training cost-making with a leader in XR-based immersive learning space with clients ranging from top sports teams to professionals in banking, retail and healthcare industries and other Fortune 1000 companies. Reported a revenue of $18.2 million in the calendar year 2024 I wanted to spend a minute on our guidance. We see, as I mentioned earlier, a robust contract pipeline and ramp-up in a number of customers. Revenue growth during the year would, however be moderated by the completion of the North American real-estate contract, as I pointed out previous quarter in January. For the full-year, we expect a 10% plus growth income — constant-currency revenue with the goal of achieving 3% to 4% Q-o-Q of growth in the first-quarter. We expect the margins to be in the range of 20% to 21% for the full-year. I would now request Vijay to take you through some of the corporate actions that we take.
Vijay Kumar Thadani — Vice Chairman and Managing Director
So I — thanks,. I have just two points to talk about. One was the investment in Striver. So I just wanted to state that this is a strategic investment for. But the company believes that the investment in Striver is in-line with our stated strategy of investing or taking positions in strong innovative companies, which are going to contribute very significantly to the trading landscape.
Extended reality learning solutions is a very, very important component of that as we go-forward and we think that this will position us back very well. In fact, it is already beginning to position us very well as we speak, just in customer situations. This XR driven immersive learning combined with our Gen AI capability and AIability — Gen AI competence that we are building in-building very efficient and effective solutions, I think will position us very well competitively and help us lead the — or implement the L&D transformations the way our teams have — consulting teams have envision.
So this is one of the many that we would — or a few that we would talk about in times to come. As mentioned before, we have a strong inorganic funnel, but obviously the — there has to be an agreement or terms as well as and the value addition that each partner will bring on the table and as and when these will materialize, we’ll be sharing them this year.
The second part which I wanted to talk about was the dividend. The dividend is, as you know, NIIT Group’s dividend policy has been to be a consistent dividend-paying company and pay a consistently improving dividend as well as amounts in-line with the overall growth of the company and not get governed by a single — a single or a few events on the way.
And other than some very, very significant events, NIIT has always been consistent in paying dividends in its 30 plus years of being a public company and for NIT MTS for the last few years. So in-line with that, last year, the dividend that we had paid was INR275 per share.
This year-after deliberation, the Board has recommended a dividend of INR3 per share. And this obviously is subject to the approval of shareholders at the AGM and that will then get formalized and get distributed accordingly. So these were two statements I just thought I will share with you. I would now suggest you, that we open the forum for Q&A. Operator?
Questions and Answers:
Operator
Thank you. Thank you. Thank you. 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 remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question comes from the line of from. Please go-ahead.
Unidentified Participant
Hi. My fourth question is regarding the 500 bps margin fall this quarter. Any reason why outsourcing expenses have shot up? Or there were a couple of reasons and I mentioned these in my prepared comments. The first one is the significant reduction as compared to expectations that we experienced in the real-estate market.
Vijay Kumar Thadani
That was first. Second, the — now as I mentioned, the real-estate business is a high-margin business and B, it normally experiences very significant growth when we move from Q3 to Q4, our typically our Q4 is a shoulder quarter for us. We have a high quarter in Q3 and then we see typically a dip in Q4, we were, however, expecting to do significant growth Q-o-Q, predominantly on account of the ramp-up of a new customer that we acquired late last year.
Some of the outsourcing expenses or the increase in outsourcing expenses that you saw was in accordance with the ramp-up of a new customer. This customer was likely to get to steady-state in Q4. However, it’s taking a little bit longer to get to steady-state and we think that it will achieve steady-state in Q1.
So from a revenue perspective, we did a little bit less than what we expected, which also had a margin impact. And the last One really was that we had a number of program cancellations in the second-half of the quarter, which resulted into unexpected schedule changes where classes got canceled and we were unable to recover from the expenses that were already scheduled from — for these classes?
Unidentified Participant
Okay. And does the 20% 21% margin guidance include this slowdown or if there is a ramp-up of these customers, again, we can expect it to be on the higher-end like previous years.
Vijay Kumar Thadani
Now in this coming year, like I pointed out, we are expecting a 20% to 21% margin. We think that we have opportunity to do better than that and we will continue to strive to do better than that. But I think as we look-ahead, a fair part of this coming year, we will not have the advantage of the North American real-estate business. So that will to some extent bring down the margins. And then over the latter half of the year or towards the end-of-the year, we will have through internal efforts, we will have opportunities to improve margins.
Unidentified Participant
Okay. A follow-up would be, so if the Ontario contract is over, the North American real-estate one-and-one — should I assume the 100% renewal rate is gone? Because I’m unable to understand that metric to be.
Vijay Kumar Thadani
So our contract renewal rate continues to be 100% for all contracts that come up for renewal. Like I had pointed out earlier, there was a legislative mandate in the province of Ontario in Canada that expected the regulatory body to move the contract from an exclusive provider to a non-exclusive model.And so from a legislative perspective, this contract was not available for available.
Unidentified Participant
So in what situation does it become the 100% rate goes below, let’s say, 99 or 95
Vijay Kumar Thadani
No, like I pointed out, if I for contract is available for renewal, we have always been able to renew it. However, if a contract is not available for renewals, which means it’s out of neither we are going to get nor anyone else is going to get then we don’t count it in our competition.
Unidentified Participant
Okay, understood. And another question is we have asked this on this before. We understand the policy of the dividend payout of being consistent and increasing it every year, but the base itself seems very low. And considering the very low capital requirements and the excess cash we already have on the balance sheet from the demerger, would it not be better to have a higher dividend payout 50% of profit
Vijay Kumar Thadani
Yeah. So no, you are absolutely right on one observation that you made. The second is also the Board takes a call on what all is involved in the coming years. And I think the fact that we are looking at intense inorganic activity, we are also looking at volatility in the environment where there will be sudden need for cash inflows.
There are specific opportunities for investing very significantly in generative AI. I would say at this point of time, we are at the early-stage of that curve. Today, in the Board meeting, we were also discussing about how do we accelerate the investments in compute activity, for example, and not that we would like to get into setting up large data centers, but definitely there are opportunities of various kinds which are in the play.
And I think keeping all this in mind, we would — we would make sure that the overall yield that our shareholders get is balanced in terms of a dividend as well as an appreciation. And I think the combo is perhaps the way to look at it. And from a more selfish perspective,
Sanjay Mal
I would add that when our prospective customers evaluate NIIT to outsource our L&D, which is critical to their business, they look for companies who have strong balance sheets and have strong money in the bank, right, to handle the ups and down to handle ups and downs to handle ramp-ups and so on and so forth. So it’s a balanced call,. I would like to see it.
Unidentified Participant
Okay. Thank you.
Operator
Thank you. Next question comes from the line of Janish Shah with Investment Professional. Please go-ahead
Janish Shah
Yeah, yeah, yeah, yeah am I able to convey you like my voice is clear? Yeah, yeah, thank you. Sir, two, three questions. One, so first about the growth visibility, which you have been giving at 10%. However, if you look at the pipeline and also the visibility on the revenues which the numbers which you’re giving is at least like a 13% to 14% higher and assuming that the pipeline is remaining strong, what is holding you back from — for — I mean, what are the thought process for giving that 10% guidance?
Especially that last quarter you had — you were guiding for visibility more closer to like 20% on a very reasonable timeframe, that’s the kind of a sustainability — sustainable growth of this business. That’s one part. And second question is on the expenses, basically the outsourcing expenses, if you can just give us a little bit of an understanding how the execution generally works and how should we expect or how should — how the revenue recognition and how the expenses are being are being classified, especially in a sense that when we are also looking at the number of employees has also increased for the year end,
Which I mean generally has been flat for last couple of years, but we have started increasing. So that also is a little bit of a contradicting data point where there is a about how the expenses or basically the growth outlook looks like. And the third is probably on the outstanding on-sales. How much is the balance to be paid now for? Thank you. These are my questions. Thank you very much.
Sapnesh Lalla
The third-party — St Charles St. Charles, okay. STC. Okay. I can start with the first one. So I think your first question was on the quantum of growth, which is. If you — if you look at our guidance of 10 plus percent, what you will notice is that there is a netting that’s going on for this coming year.
And that is compounded by the uncertainty in the environment. So compression of spends with our existing customers. So while our pipeline of new customers and prospects continues to be strong. We are continuing to sign new orders, but the netting because of the sunset of the North American real-estate contract, which takes away from some of the growth is one factor.
The second factor really is uncertainty where in times of uncertainty, the consumption of training gets impacted. Now if things improve, that should go up though with a little bit of a lag. So that’s really why you are seeing a 10% plus guidance from a revenue growth perspective.
In terms of number of employees, like I pointed out, we are flat year-on-year. We have added about 14 additional employees on a base of approximately 2,400 employees. So it’s 14 employees up year-on-year. I would say that our ratio of offshore versus onshore has improved favorably.
So from an overall perspective, we are trying to control expenses or direct expenses.. In terms of your question of outsourcing, like I pointed out earlier to the previous caller’s question, we are in the ramp-up process of one of our large customers and we are increasing the variability in our cost basis. So you do see a little bit of a higher outsourced expense predominantly that’s our way of improving Variability in our cost basis so that we have a better response to uncertainty. So I think your last question was on St. Charles and I would request Vijay to respond to your question on same charts.
Vijay Kumar Thadani
Yeah. So I’ll simplify it for you. The maximum amount that they could have earned if all the projections had been met at the — at the highest-end would have been $65 million. And there are two tranches left still and in these two tranches, they have an opportunity to do that and that’s how we would like to state it and that’s how it has been stated in the contract.
So we have already processed two, three earn-outs in the past and now two more.
Janish Shah
Okay. Allow me one. If you allow me one more, can I go with one more question?
Sapnesh Lalla
Yeah.
Janish Shah
Yeah, yeah. Yeah. I mean, you clearly said that the generative AI is transforming this industry, right? I mean that also creates a demand also the growth you are going to deliver. So can you — can you give a little bit more understanding about the future and investments, how things are going to shape up for your industry in general? And would it also lead to a change in the margin structure since you already have one customer, significant customer who has already you’ve onboarded on a full AI delivery model.
If you can just give a little bit of an understanding about how the transition is going to happen in a little bit of a detail that will help in getting a sense of how the business is going to shape up in next two, three years, that will help. Thank you, sir.
Vijay Kumar Thadani
Thank you. I could go on for a few hours trying to answer that question and I might still not do great justice with the answer, but I’ll do my best. See, I think our generative AI is going to fundamentally change how training is practiced. The profession of training is going to go through a very profound and fundamental change over the next few years.
I think we are at the tip of that iceberg, and that iceberg will start revealing itself over the next few years. I think we are going to see substantial changes in both the efficiency of delivering education and training, but more importantly, we’ll see very significant changes in the effectiveness of training.
So you know, at the most advanced-stage, you could potentially foresee an AI tutor who is the personal tutor for each and every employee in an organization. Heck, you may even have more than one tutor, just like — I mean, imagine if you were an elite professional athlete. So let’s say you were an elite professional tennis player or a golf player or a cricket player. You would typically have about five or six coaches, you would have a coach for conditioning, you would have a coach — coach for stroke play, you’ll have a coach for mental wellness and so on and so forth.
You would have coaches for all of that. And we can do that because your earnings allow you to do that. And there are very few people who can afford it. With generative AI, I think the personal coaches of very-high quality and caliber are going to become more easily and more affordably available.
And that’s going to change very significantly how training is done. It will get done very much more in the flow of work. Imagine if you were going into a meeting where you had to give feedback — hard feedback to somebody and what-if you could practice with an impersonator who represents the person that you want to talk to, you could have a practice meeting ahead of that meeting.
So the point I’m trying to make is that our training is going to become significantly more personal, our training is going to become more coaching oriented and training — AI is going to be all pervasive. Now, will that happen tomorrow? Probably not, but will that happen over the next few years? I’m certain it will.
How are we looking at business going-forward? I think the significant changes that we are hoping to drive is to bring to our customers very different, very value-adding learning experiences which accelerate learning for our customers. What are used to take — so for example, if you are fresh out of college and you’re getting into pretty much any profession, today it takes three to six months-to get you onboarded into that profession.
We think that with AI, we have an opportunity to significantly shrink that onboarding time. Likewise, you know, we have — we think that we’ll have an opportunity to help reduce the mistakes people make when they do their jobs and make them more proficient in a shorter period of time. So I could go on this for a long period of time. I think it’s going to be profoundly different.
And I think companies who do not embrace it soon enough will not be relevant going-forward. And I think the reason why we are making such investments is because not only do we want to be relevant, but we want to meet so
Janish Shah
Thank you,. Thank you for elaborative answer.
Operator
Thank you. Next question comes from the line of Kanish Shetti, an Individual investor. Please go-ahead.
Ganesh Shetty
Good evening, sir. Sir, our previous acquisition like yeah. Sir, our previous acquisitions like Eagle Solutions and where we have bought controlling stake in a significant controlling stake. But now in recent investment like Strive AR and Energy, we are investing in a very small proportion.
Is it that we are using our capital very judiciously or we are just trying to understand the uncertainty around that? Or is there any change in our inorganic expansion strategy? Can you please throw some light on this?
Vijay Kumar Thadani
So I’ll give you one high-level answer. It’s a coincidence that the last two have been minority investments and the previous were controlling stake. When we make most of our inorganic activity is across actually across controlling stakes and that’s why we have the quantum that is allocated in our balance sheet or capital allocation that the Board has done.
In these two cases, coincidentally, these have been a minority investment. And the minority, we do make minority investment when the overall business of the target company is not core to us, but a specific capability or a specific part, which can make a big difference to us. And their overall business may or may not be in training alone, it may be beyond training.
So I think will explain to you Inno Energy, how Inno Energy we took a minority stake. And by the way, how it does — how it is helping us. And similarly how Striber Labs as a minority investments we have made, how it is not exactly a full core activity where we would like to bet our full bank on that, but take a positioning so that we have access to that technology in a in a competitive manner.
So I think you can explain that. Thanks, Vive and I would completely agree with what you said would echo it. See, Ganesh, our thesis for acquisitions is around three dimensions. The first dimension we consider is are we going to be able to get a new capability by acquiring a company. The second thesis is, are we going to be able to get access to a new segment of customer?
And the third is, are we going to be able to get access to a new geography? So what we try to do is in a full acquisition, ensure that at least two out of these three are checked. So if you look at, we were able to get new capability in our life sciences as a market segment as well as our new capability in doing application rollout.
If you look at St. Charles Consulting Group, we were able to get a new capability in consulting Advisory services as well as access to a new market segment where we were not present, it was the management consulting and services companies. There are however, a number of companies who may not check two or three out of our key criteria.However, still represent investing opportunities where we may have intersection with some of the customers that they might have or we may have intersection with some of the initiatives that they might have. However, it may not make sense for us to make a full acquisition. So for example, the minority investment that we made inergy. As you know, Innoenergy is really a large fund that invests in early and mid-stage startups that are around renewable energy. We have renewable — we have energy as a key segment and I think renewable energy is a key transformation that is going to drive a lot of what is going to happen connected to energy in the future. And we think that this transformation will succeed if and only if there are enough trained people to service that transformation or transition. For example, this will lead to manufacture of electric vehicles. It might result into setting up of hydrogen plants, it might result into setup of a large-scale setup of wind energy or solar energy. And all of this will require a lot of people who will need skills to be able to bring the dream of renewable energy to life and having invested in — taken a minority investment inergy will get us a seat at the table with companies who are driving this transformation. Likewise, as I mentioned, artificial intelligence, different ways of learning, virtual reality as it connects with artificial intelligence, create new modes of learning that will drive how students learn in future and by taking a minority stake in this organization will give us a seat at the table with organizations who are pushing the boundaries of how learning happens. So we make minority investments where the investment does not check all three boxes that we have for full acquisitions, but are still interesting because either we can learn or we can get access to customers or we can get a seat at the table that’s very desiring.
Ganesh Shetty
Thank you, sir. And my second question is, earlier we have guided for 20% growth at 30% EBITDA margin and in-spite of difficult macro, we have achieved 20% EBITDA, but the growth is not coming. So do you think that in near-term or in the medium-term, as many acquisitions are lined-up, we can achieve plus 20 trajectory in the near-future, sir.
Sapnesh Lalla
Thanks, Yanesh for asking that question. I think like I pointed out earlier, we are seeing a little bit of pullback in growth to some extent because of the uncertainty, but also because of the netting effect that I pointed out earlier, our medium-term, long-term point-of-view continues to be a 2020 point-of-view and we will do our best to get to the 20% growth mark as soon as we can.
Some of the inorganic activity will certainly help in.
Ganesh Shetty
Thank you very much, sir, and all the best for the entire.
Sapnesh Lalla
Thank you.
Operator
Thank you. Next question comes from the line of Shantur Narayan S from IThought PMS. Please go-ahead.
Unidentified Participant
Good evening, sir. My first question is regarding the healthcare and life change vertical and tech and Telecom vertical. So if you could see the recent job requirement report, specifically in the US, you could see the strong hiring momentum in healthcare and license vertical, but that’s not reflecting in our quarterly numbers this quarter.
So if you could throw some light of what happened in that vertical. And also regarding the technology vertical, tech and, we could see news regarding layouts in Microsoft, Google and and how can we expect these verticals to be a growth vertical in upcoming quarters.
Vijay Kumar Thadani
So I think your second question — I couldn’t quite understand your second question. Can you say one more time, please?
Unidentified Participant
We do the job before. So we are seeing news regarding the layoffs in-going down.
Vijay Kumar Thadani
Okay. I get it now. Okay. So let me answer the second question first and then I’ll come to the first question. Okay. And I think your second question was that a number of technology companies are laying off people and how do we expect to grow in an environment where a number of technology companies are laying off people.
I would say if you go to the core of it, if you go to the core of the issue on why technology companies are laying off people is to one extent uncertainty. And the second extent is the rapid change that’s going on with the technologies. And so as technologies change, there is obsolescence of skills.
And I think when there is obsolescence of skills, people who do not keep up with the skills end-up on the short-end of the state. I think this is this rapid change in technology will create actually more opportunity for us because while organizations will end-up with fewer employees, the employees who are left will need to be continuously trained and we will see an opportunity of increased training consumption for the employees who are left at the organization.
So I think also as cost becomes important, large technology companies will resort to outsourcing, which will be beneficial for us. And I think while we have seen significant growth this past couple of quarters in our Technology segment, we should see continuous growth as we start doing more with technology customers.
That continues to be a focus segment for us. Your second question was that there is a increase in hiring in healthcare and life sciences, I guess you’re saying you are seeing that happen because the world is getting older and requires more help from a healthcare perspective.
We’ve seen year-on-year growth in healthcare over the last few years. The top, I think eight or nine out-of-the top 15 pharma companies are our customers. And over the last two years, we ramped-up in a significant way. Even as I look at the year that went by, we saw a 4% growth in our business in-life sciences.
We are some of the largest pharma companies as our customers and I think our business will grow in pharma. In fact, one of the two contracts that we signed this quarter was with the large pharma company.
Unidentified Participant
Okay, sir. That’s answer my question. And my second question is regarding your own service content creation. So with regards to generative AI, it could be able to generate the content without or with lesser human assistance. So how could we see the content creation vertical? I know that generative AI can leverage this segment, but how you could see — because eventually you are needing less assistance so that when customers ask for a price discount or you will see a pricing pressure in this segment because that’s not many industry analysts like even George he was saying regarding this content creation.
So just your thoughts on this.
Vijay Kumar Thadani
So I think it’s a very good question and a very appropriate question. See, like I pointed out, if we kept doing the same things that we’ve been doing, AI will be able to do it for almost for free. However, I think the opportunity we have is to create more effective training that results into better outcomes. And I think this is really what we are hearing from our customers. Our customers who don’t want to dramatically reduce Their spend on training. They want — I mean, there are times when it’s tough for them and the budgets go down marginally. There are times when the budgets go up marginally. If you look at our data for the last 20 years and L&D has gone through many transformations over the last 20, 30 years, the average spent on training per employee has hovered around about $1,100 over the last 30, 40 years. So organizations do believe in the value that training generates and they don’t want to very significantly lower the training. However, the expectation on outcomes from training are going up and should be going up because we should be able to leverage generative AI to improve the outcome. So my belief is that — and we are — we classify content in level of complexity or level of interactivity or outcomes it can generate at level one, level two and level three. I believe that going-forward, our opportunity in level one content creation will diminish significantly because you really don’t need to create that training content. If training was just informational, you could just as well go to Gen AI, not have to go to a training class at all. But our training will specifically focus on higher-level outcomes and I think that’s where our opportunity will shift.
Unidentified Participant
Thank you, sir. That’s answer my question. And my last question is regarding your long-term guidance of achieving INR400 million to 500 million.
Vijay Kumar Thadani
There are a large number of participants. I’m going to request you to rejoin the queue and I’ll request everybody else to limit their questions to one and then come back-in the queue if they have more.
Unidentified Participant
Sure, sir. Thank you.
Vijay Kumar Thadani
Thank you
Operator
Thank you. Thank you. Thank you. Once again, I request that given the large number of participants, please restrict yourself to one question, then fall-back in the queue in case of additional questions. Next question comes from the line of with. Please go-ahead.
Unidentified Participant
Yeah, hi. Sir, just on the guidance for FY ’26, we saw that in FY ’25 because of macro through the quarters, we had to cut-down the guidance. So what is the confidence level in terms of FY ’26 guidance? What have we built-in terms of macros? Is the guidance baking in any detailization in macros and any cancellations that might come up to given what is happening at the markets and how our existing clients are talking of in terms of their spending spending patterns
Vijay Kumar Thadani
So pulling together this guidance was really hard this quarter. It’s been harder than it’s been for the last several quarters. We’ve tried to do as good as a job as we can, but our ability to on the crystal ball is only so good and things seem to be changing on a daily basis. So we will continue to reevaluate our guidance on a quarterly basis.
We have baked-in what we know. We know that our contract with the North American real-estate business will end in mid. So we that in. We baked-in the pipeline and our expected probability of winning from that pipeline. We’ve been some conservative estimates of what our existing customers will spend with us.
So we tried to be as data-intensive as we can be and we’ve tried to be as transparent as we can be and what the guidance reflects is our view today. Will the world change as rapidly as it has changed over the last three months, time will tell. But we’ve tried to do as fair and as objective a job in coming up with the guidance as we could provide.
Unidentified Participant
So the guidance that’s building assumption that whatever we have in pipeline from these closures would happen and ramp-up of that will take care of the guidance of 10%. That is correct. Right. And on the margin guidance, on the 20% 21% margin guidance that we have, should this be treated as a new normal for margins or this is just a ’26 guidance on margins and going-forward, we should look at some improvement and coming back to the 20% 25% average level 24%
Vijay Kumar Thadani
See, like I pointed out earlier, both for revenue and margin this year will be a little bit of a transitioning year. I think things will settle down by the time we get to the 4th-quarter of the year. And I think then on, we will get to a steady-state. So the first few quarters of this year will be transitionary in nature.
Like I pointed out, long-term, this business is a 2020 business. We hope that we’ll be able to get to 20% growth as certainty comes back. And from a margin perspective, we think that it should be in the 20% to 22% range this year, this coming year, given the netting effect, we think it will be 20% to 21%, but over-time, we may have an opportunity to go beyond 20%.
Unidentified Participant
Okay, sure. Thanks. That’s it from my side. Thank you.
Vijay Kumar Thadani
Thank you.
Operator
Thank you. Next question comes from the line of Ankur Shah with Casa Capital. Please go-ahead.
Unidentified Participant
Hi, sir. Thanks for the opportunity. Sir, just one question on the business. Sir, when we mention about cancellation of contracts or sorry, cancellation of training, like what do you — what do we mean that it is a scheduled training which has been canceled and you know, the related outsourcing cost which we had committed, we have to pay them or our costs are also variable subject to the cancellation or the scheduling of the training.
But that is somewhere I’m a little unsure.
Vijay Kumar Thadani
So the part that you mentioned about cancellation of training is accurate. So in times of uncertainty, a number of organizations have to give up their budgets and in-turn, that results into cancellation of classes that are scheduled or that are on the calendar. Now in terms of expenses, all training that we deliver is not outsourced expense.
It is not variable expense. A fair part of our expense is variable. However, a large part of our expense is also fixed. The part that we cannot recover is the fixed expense. The fixed expense, results cancellation of classes that have fixed expense allocated result into lower utilization of headcount as compared to what was planned and therefore results into margin depletion of what was to be outsourced often does not need to be outsourced and therefore there isn’t margin depletion.
And that’s the reason why I made the comment that as we look-ahead, we will have higher variability in our business given the uncertainty.
Unidentified Participant
And sir, is that variability component driving a slightly lower guidance in margins.
Vijay Kumar Thadani
Well, fixed costs when utilized to the maximum result into lowest expense. Variable costs come at a premium. So variable headcount, variable staff come at a premium. And if 100% of our cost basis was variable, then our unit cost would be higher because you would have to pay premium for that.
Unidentified Participant
Got it, sir. Got it. All the best. Thanks.
Vijay Kumar Thadani
Thank you. Thank you. Next question, we will have time only for maybe one or four people. One question. Go-ahead,
Operator
Right. Next question comes from the line of Venkat with Mirabilis Investment Trust. Please go-ahead.
Unidentified Participant
And thanks for taking my question. My question is regarding on the RE deal, a real-estate deal again. You mentioned that the deal is converting into non-exclusive basis. Are we planning to bid for the deal in this non-exclusive basis or will the deal ramp-down to zero come next quarter?
Vijay Kumar Thadani
So we have assumed that in the guidance that we have provided, we’ve assumed that it will ramp-down to zero. We are in conversations with a number of players who are likely to participate in the deal. Just so you know Know, and this was true when we won the contract seven years ago as well to be able to be a partner, you have to be an accredited college. We partnered in our first go-around, we partnered with one of the accredited colleges and that’s how we were able to the deal. As I mentioned earlier, it’s going to move from exclusive to non-exclusive. So a number of colleges are going to be in the fray. We have discussions on with some of those colleges. And if we get selected, we may have some participation, but we have assumed that it will come now to season when we provided the guidance.
Unidentified Participant
Okay. And on your long-term guidance of 400 million to 500 million by ’27. Do you think that goal is far fast or do you believe we have enough acquisitions in the pipeline to reach anywhere close to that?
Vijay Kumar Thadani
So our goal is to get to 400 million to 500 million by ’28 and it is as we have given that we have not grown at 20% 25% year-on-year over the last three years, the climb has become harder. But I think with the strong balance sheet we have, the opportunities we have, I think we still have a chance.
Unidentified Participant
Thanks,.
Operator
Thank you. Next question comes from the line of Pranai Jain with Panind Tree Advisors Private Limited. Please go-ahead.
Unidentified Participant
Hello, am I audible? Hello. Yeah. So when is the Ontario contract getting over June of ’25? Okay. Okay. And secondly, so you, you used to like give out top-five, top-10, top-20 customers revenue mix so can you please share that with us?
Sapnesh Lalla
Yeah, we’ll be happy to. Yeah. Yeah.
Unidentified Participant
And thirdly appeal will be currently. Okay. Okay, sure. And thirdly, so for like are the margins for the AI-related contract at same levels as that of — as that of company-level margins?
Sapnesh Lalla
So we don’t comment on margins for specific customers, but we believe that the AI contracts will generate same or better margins for us.
Unidentified Participant
Got it. Got it. Sure, that was it from my end. Thank you.
Sapnesh Lalla
It in our results data sheet, those numbers are provided already. If you could have a look at that.
Operator
Thank you. Next question comes from the line of Janesh Shah with Investment Professional. Please go-ahead.
Janish Shah
Yeah, thank you for giving the opportunity again. Just to get some understanding on this AI, I mean, you clearly mentioned that a lot of part of commodity or it’s refrigerative raining is going to get with the machine in this how do we see? So generally today of talking about the cost advantages you have been mentioning is around like a 40% which is which is making the outsourcing more sensible with decline.
So in an environment where the AI transition is going to happen, what choice the customer will have? Do they have this I mean because the cost advantage is going to evaporate or reduce significantly and as you mentioned that there is going to be a level up, which is going to happen on your side. But does it mean that the opportunity client budget basically will get shrink because of the AI and-or the cost of paying per employee, as you mentioned about $1,100 has remained for decades.
That’s only changed. And you see — I mean, profitability you mentioned, but I’m just trying to understand outsourcing — I mean, do you tend the clients to go for an outsourcing, especially when the industry and total outsourcing is fairly minimum right now? And do you see that the transformation for the client from being an in-house to an outsourcing, it still makes sense in a changing environment.
So that will help in understanding the.
Sapnesh Lalla
Thanks. I think you had two or three questions mixed up in one, but what I will — what I would say is, one, people don’t outsource because they are looking at somebody else to do the same thing that they were able to do internally, people outsource because organizations want to achieve better outcomes as compared to what they are able to create internally.
And that’s the reason why many organizations choose to outsource what is not core to them. And when I say what’s not core to them, our customers in oil and gas, what’s core to them is exploration, what’s core to them is drilling, what’s core to them is defining what’s core to them is distribution. Training is not core to them.
And therefore, to be able to become the best-in the world at training is not very advantageous for them from an investment perspective. So what do they do? They look at organizations who can reliably support them for training and be able to bring the best-in the world to their employees so that their employees can get the skills that are so important for them.
While they are doing that, they also are able to get benefit from the scale that their partners have and therefore save money. Money but it’s not the part before the horse. The reason why organizations outsource is because they don’t want to invest in areas that are not core to their business.
Now AI will fundamentally transform training just as 30, 40 years ago advent of electronic training or e-learning or digital training transform the training industry. So industries go through multiple transit transformations over their lives. But that doesn’t affect them. Like I pointed out, organizations have been spending about $1,100 per employee for many, many years.
Sometimes it goes down to $10.50, sometimes it becomes 1,150, but it doesn’t change to 300. I think we should now focus on the last question.
Unidentified Participant
Thank you, sir.
Operator
MR. Shah, are you done with the question?
Janish Shah
Yeah, I’m done. Thanks.
Operator
We’ll take the next. That is Deepak from Sundra Mutual Funds. Please go-ahead.
Unidentified Participant
Am I audible?
Operator
Yes.
Unidentified Participant
Thanks for the opportunity. Sir, I had just one question regarding your sector performance. So if I look at this quarter, the management consulting and professional services vertical has shown a good comeback, right? On Q-o-Q basis, we have almost did a 25% plus revenue growth. So just wanted to understand has the volume in management consulting has come back, which was kind of subdued due to business environment and push for cost-reduction or is it that the volumes in management consulting still remains subdued, but because there could be a one-off which we booked in this quarter because of our advisory and strategy consulting revenue?
Vijay Kumar Thadani
So there are two-parts to this to my answer. See if there is a seasonal impact to our consulting and advisory practice. It typically does better in Q1 as compared to Q4, predominantly because a number of the customers that we work with take vacation time in our Q3. Now this is contra to several other customers who are try to consume their budgets.
As you might know, for a number of Big Four and management consulting firms, they don’t follow a calendar year as a fiscal year. They have mid-year fiscal years, whereas a large majority of our customers have calendar year as fiscal Years. So consequent to that, we have a seasonality in the consulting and advisory business and we see a quarter-on-quarter increase when we go from Q3 to Q4. So that is one reason. But I would also say that while last year, we saw budget cuts across most of our customers, this coming year, it looks like we are turning the bend and we are likely to see growth.
Unidentified Participant
Okay. So there is an element of season and there is also — you are seeing some green shoot in terms of L&D spendings by the big fours. Okay. If you allow — one more question. Okay. Okay, sir, just to double-click on one of the earlier participant question as well. This cancellation part, you explained that there is a fixed component to it and there is a variable component to it, right? And wherever there is fixed component, obviously, if the new customer doesn’t ramp-up his contract and you have fixed expenses for that contract, obviously, your margin gets pulled down, correct.
But if I look at your P&L, most of your expenses — spike in expenses will come from this professional technical outsourcing expense, right, which is mostly variable in nature, if I’m not wrong. So I’m not able to understand where-is a fixed part coming from this professional and technical outsourcing expenses, which is impacting your margin because of slower ramp-up of new customer and cancellation of existing training students.
Sapnesh Lalla
So it will be hard for you to discern it from our P&L because there is netting. On one-side, we are seeing ramp-up of a customer and as we ramp-up the customer, we have higher outsourced expenses to ramp-up this particular customer. And like I pointed out, as we ramp-up the customer until we get to a steady-state, we like to keep our costs variable so that we get to fixed costs once we have realized the consumption patterns.
So that’s one part of the answer and that’s why you see a spike or an increase in variable costs. On the other hand, we had allocated fixed costs to a number of classes, which got canceled. And those fixed costs could not be utilized given the cancellation. So we had utilization problems or we had idle time issues because of cancellation on one-side and we had ramp-up costs, which were variable in nature on the other side.
Now the reason why we can’t net off each of these because I mean, an easy question could be that if you have people who have utilization issues on one-side, why the heck would you spend money on outsourcing, that is because there are different skills that are needed to address different customer needs.
One customer might need Red Hat skills, another customer might need AWS, somebody else might need some other skills. So it is not like-to-like. So we couldn’t exchange our folks who had utilization issues with folks who we were outsourcing. Did that make sure
Unidentified Participant
Just to clarify on that. So for example, let’s say, the new customer who was supposed to ramp-up as expected in Q4 didn’t ramp-up, right? Is it that the trainer of whom you have recruited as an outsource agent to teach your customer, you paid that trainer in advance and that is where one of the — so we did not lose on outsourced expenses.
Sanjay Mal
So our margin is not local because we had unutilized outsourced expense. And the reason why we have variable-cost is if we don’t have utilization, we don’t have to incur the expenses. The — like I pointed out, we had one customer who was ramping-up. They did ramp-up quarter-on-quarter in a significant way, but did not reach the peak that we were expecting them to reach.
However, from a cost perspective, that is not what hurt us. It’s not like we were paying contractors for not doing work. We were — we paid them and they did the work. However, the outsourcing expense was higher compared to previous quarter because we saw that customer ramp-up.
Unidentified Participant
Okay. Got it.
Vijay Kumar Thadani
And I think we are on each time and if you need more clarification, do get-in touch with Kapil and he’ll be happy to have another discussion with you. And thanks for taking the time, everyone. I know it’s a busy schedule for you.
Operator
Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Sapnesh Lalla
Thank you. Thank you. Thank you. Thanks a lot for joining the call. Even though it went on for a little bit longer than we had planned, we learn a lot from your questions and we get a lot of insights and we would love to continue this dialogue as we look-ahead.
Operator
Thank you. Thank you. On behalf of NIIT Learning Systems Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you