R Systems International Limited Q2 FY22 Earnings Conference Call Insights

Key highlights from R Systems International Limited (RSYSTEMS) Q2 FY22 Earnings Concall

Management Update:

• RSYSTEMS said the company continues to witness strong pipeline for technology and digital services and is committed to further improve the EBITDA numbers during 2H ‘22.

• The company stated its performance towards revenue growth in 1H 2022 was encouraging; however margins were shy due to salary increases and attrition challenges.

Q&A Highlights:

• Vishal Khurana asked about the demand going forward, given the recessionary pressures seen in US and Europe. Nand Sardana CFO replied that as of now, the company is not seeing any impact of recession seen in US and Europe.

• Vishal Khurana also asked if RSYSTEMS is seeing attrition pressure easing off. Nand Sardana CFO replied that it feels so. On the ground the company is not seeing the less impact of attrition. Going forward, RSYSTEMS feels the attrition impact will reduce and that will help improve utilization.

• Vishal Khurana enquired about the attrition rate for 2Q22. Nand Sardana CFO answered that the attrition rate at the senior level is very low, less than 5-6%. But at the below project manager level, the attrition rate is close to 25% on an overall basis.

• Vishal Khurana asked if the company is still looking at the inorganic opportunities it was eyeing earlier. Nand Sardana CFO clarified that the company is always on the look for inorganic opportunities. RSYSTEMS looks at either good customer base or good talent base. Off late, the valuation has become very expensive which is hindering in doing meaningful acquisitions.

• Madhav Das asked about impact of Russia-Ukraine war on the company as it’s having operation in Eastern Europe. Nand Sardana CFO said that in Eastern Europe, its operations are in NATO countries and due to this, as of now RSYSTEMS is not seeing any impact of war.

• Abhay Jain asked if the company is planning for any expansion in other geographies. Nand Sardana CFO answered that the company is looking at near shore centers like Mexico and Latin America.

• Jagdishwar Toppo with Japa Investment asked about DSO going up and if it’s strategic or a market factor. Nand Sardana CFO said that when the company is growing at a faster pace of above 30%, small aberration in DSO happens. As of now, RSYSTEMS is not seeing any issue with DSOs and it’s not alarming. Going forward, RSYSTEMS expects 50-60 days standard DSO.

• Jagdishwar Toppo with Japa Investment enquired about the meaning of pyramid rationalization used by the company. Nand Sardana CFO said the company’s avg. salaries are increasing and by this rationalization it means that in big projects RSYSTEMS is trying to infuse less senior resources to rationalize avg. salaries.