R Systems International Limited (NSE: RSYSTEMS) Q2 2025 Earnings Call dated Nov. 08, 2024
Corporate Participants:
Kumar Gaurav — Vice President, Finance & Accounts
Nitesh Bansal — Managing Director & Chief Executive Officer
Nand Sardana — Chief Financial Officer
Analysts:
Nikhil — Analyst
Anmol Garg — Analyst
Vinay Menon — Analyst
Sandeep Shah — Analyst
Nihil — Analyst
Omkar Sawant — Analyst
Roland Nandu — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the R Systems Q3 FY 2024 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Kumar. Thank you, and over to you, sir.
Kumar Gaurav — Vice President, Finance & Accounts
Thank you, Sejal. I welcome all participants to R Systems quarter three 2024 earnings conference call.
Since R Systems follows the calendar year as its financial year, July to September quarter is Q3 for us. We have today with us Nitesh Bansal, Managing Director and CEO, R Systems; and Nand Sardana, CFO, R Systems.
We have shared the investor presentation earlier today, as well as uploaded on company and stock exchange websites. Hope all of you have received that.
We will start the call with opening remarks on the performance of the company by Nitesh, followed by financial overview by Nand. Thereafter, we will have a closure statement by Nitesh. Subsequently, we will open up for a Q&A session.
Before I hand over, let me read out the customary disclaimer statement on behalf of the company. Investors are cautioned that this presentation contains certain forward-looking statements that involve risks and uncertainties. The company undertakes no obligation publicly to update or revise any such statements. These statements may undertake revisions because of new information, future events, or otherwise. As a result, performance achievements could differ from those expressed or implied in such forward-looking statements.
Now, I am handing over to Nitesh ji for his opening comments. Thank you. Over to you, sir.
Nitesh Bansal — Managing Director & Chief Executive Officer
Thank you, Kumar, and good morning, and welcome to our earnings call for Q3. Thanks for joining in. This is Nitesh Bansal.
For those of you who received our slides, I will be mentioning the slide numbers just for you to refer to them. The broad topics on the agenda that I’m going to cover, cover the key highlights of the financial performance, the trends, our operating metrics, some of the comments on how we’re building for the future, referring to some key wins, and providing a little bit of a summary of what we are seeing ahead in the market.
So moving to Slide 4, if you’re referring to the presentation, the key highlights for Q3. We ended Q3 with a revenue of INR4,441 million, which is approximately $53 million. This is a revenue growth quarter-on-quarter in INR terms of 1.4% and year-on-year of 19.5%. The — sorry, my bad. I’ll just repeat. Quarter-on-quarter, 2.8% and year-on-year 1.4%. We closed at an EBITDA of 17.9%, which totals to INR796 million, or $9.5 million, which is a quarter-on-quarter growth of 11.5% in rupee terms and year-on-year of 19.5%. Net profit stood at INR398 million, which is approximately $4.8 million.
If you look at the EBITDA growth quarter-on-quarter, it has been a result of a few parameters, which is given as an EBITDA bridge. So we gained on higher number of billing days in Q3, about INR2.7 crores, or about 0.5%. Improved utilization, which has been a conscious effort that has been going on in the organization for the last three quarters, gave us an additional INR2.3 crores, or another 0.5%. Tightening our operating metrics and ways of working has resulted in another INR2.3 crores, or another 0.5%. We got a rupee depreciation benefit of about INR90 lakhs, or 0.1%, resulting in the overall EBITDA of INR796 million.
Moving to the performance for three quarters or year-to-date, Jan to September 2024, we finished at INR12,928 million, or $155 million, which is a year-on-year growth of about 1.9%, and year-on-year adjusted EBITDA growth of 5.4%, at 16.3% EBITDA, or INR2,110 million.
The equity attributable to shareholders remains at INR6,607 million, cash and bank balances of INR2,598 million, AR and unbilled at INR3,192 million, which results in the DSO of 59 days.
Just a quick note to observe for adjusted EBITDA comparative from Q3 or three quarters — same three quarters last year, we had a one-time transaction in Q3 last year, which resulted in an additional BOT transfer fee of $2.3 million, which is what has been adjusted. So, Jan to September 2023, stood at 14.5%, but added the $2.3 million, which is 15.8%, for the same three quarters last year.
Moving on to the next slide, which is Slide 6, financial trends. We have continued to grow quarter-on-quarter for the last three quarters, or last four quarters in a row, and ending at INR4,441 million, and at EBITDA of 17.9%. So, the company has crossed a quarterly run rate of INR440 crore in revenues and INR75 crore in EBITDA terms.
Our quality of revenue has also continued to improve consistently as we have continued to focus on higher-value business, winning deals, focused on cloud, data, and AI, which is giving us more sticky business, which is giving us better value clients.
On the operating metrics, which is Slide 7, our revenue mix by geography. While North America continues to be our largest geography, contributing 74.1%, it’s a 1% drop from the last quarter. Southeast Asia has done much better and gone from 12.9% to 14.2%, which is also largely reflective of how the economies in these regions have performed, where North America and Europe had been slow, but Southeast Asia had been doing well. So, it is sort of reflected in our business mix as well. Europe remains relatively around the same, 8.3% to 8.1%, and the rest of the world from 3.7% to 3.6%. But broadly speaking, no material change to the mix of revenue. North America continues to lead. Southeast Asia and Europe are still significant contributors.
From a client concentration perspective, our top client contribution came down from 5.2% to 5%, but this is largely because this is a telecom customer and large telco companies have been curtailing a lot of spend in the recent quarters. But we expect it to revive back as the telco spend comes back, and we are already seeing signs of that. Our top three clients contributed 10.3% compared to 10.5% last quarter, not a major change. Top five clients improved slightly from 14.1% to 14.8%, but signifying continued focus on both account management as well as improving the revenue mix, revenue from the top five clients. Top 10 clients also grew slightly from 21.9% to 22.5% of revenue.
Our utilization continued to improve, which has resulted in the EBITDA growth as we talked about, and the DSO has continued to be kept in check at 59 days as we ended quarter three.
Moving to Slide Number 8, building for the future, talking about some of the qualitative terms. Our go-to market, which has been our focus since the beginning of the year, we have been deepening our engagements with customers with more value-added initiatives. We’ve strengthened our partnerships with hyperscalers, Azure, AWS, as well as with all other partners that we work with, including Boomi and Salesforce and UiPath and others. This is giving us more long-term sustainable revenue through business solutions and solving clients’ critical business problems.
Our delivery footprint has also expanded. One of the major steps that we took in the quarter was to open a new delivery center in Mexico, for which we created an entity in Mexico, and we are starting our delivery operations from this quarter, which will serve the purpose of near-shore staffing, resourcing, and project delivery for mostly our North American customers, who require work to be done in the same time zone from a cost-effective location.
From an offerings and positioning perspective, we launched OptimaAI, which is a Gen AI suite for enterprises. This is a suite that we rolled out internally for all our developers, for all our engineers as well, which allows them to leverage the power of generative AI in the software development lifecycle, and also becomes a repository for all the AI use cases that we work on, and hence creating a lot of critical components that can be leveraged to deliver to our customers.
We also launched to the market a couple of offerings that are widely applicable and finding a lot of acceptance. One was around migration from any reporting tool to Power BI, and second was around Chaos Engineering with an integrated disaster recovery model to enhance our business continuity and resilience. And there are more such solutions in the works, so we’ll continue to release and launch more of these value-added offerings to the market, improving both our positioning as well as deepening our wallet share with the customers.
Talking about leadership, while people, of course, remain our most valuable assets, and as we have truly started operating like a global enterprise, we have been augmenting the management bandwidth in spaces where we felt that we had a white space or needed to bring in the leadership. We inducted Satyadeep Mishra as our Chief Human Resources Officer. He’s based out of India and is now globally responsible for HR. Srikara Rao joined us as a Chief Technology Officer for Cloud and Security Services based in the U.S., and Shardul Sangal has joined us as Senior VP of Global Delivery.
Talking about some key wins that we’ve had in the last quarter, we started working with a product company in Europe, which is engaged in developing financial software and providing services to mostly financial institutions. We are currently carrying out a total revamp and reengineering of their financial services platform from legacy technologies to more cloud-based and SaaS-based technologies with enhanced user experience.
With another U.S.-based cloud platform provider for utilities industry, we are streamlining their product development and sustenance services, offering full lifecycle of development and sustenance service offerings to implement transformative and cloud-based solutions.
For another company in the financial decision support systems provisioning, or who provide systems for financial decision support, we are currently managing and optimizing their IT support and sales force environment and enabling their cloud operations.
For a large independent digital wealth management platform, we are providing them quality assurance development services, critical fix-on-fail, and operational efficiency-related services that have come on board last quarter.
And for a Canada-based global leader in transportation and shipping of coal and oil and other energy materials, we are modernizing their operations by upgrading their reporting capabilities, giving them real-time capabilities to look at KPIs and reports to drive their efficiency and bring innovation in global logistics.
So these are just snapshots of a few notable wins of third quarter. There are, of course, many others, but these are just sort of examples of how leading through data, AI, and cloud, we are building deeper connect and winning better deals.
At this point, I will probably hand it over to Mr. Nand Sardana for a detailed overview of the financial metrics. Nand ji, over to you.
Nand Sardana — Chief Financial Officer
Thank you, Nitesh ji. Good morning to all. Thank you, everybody, for attending this call. The presentation gives detail of quarter three performance, which is our third quarter as we follow calendar year.
Revenue for the quarter was INR444 crores, or $53 million, as against INR432 crores, or $51.8 million in last quarter. It was INR457.3 crores, that is $55.3 million in same quarter last year. Q3 ’23 was benefited by one-time BOT fee of $2.3 million from a knowledge service customer. Excluding this one-time fee, year-on-year growth is 1.4%, and quarter-on-quarter growth is 2.8%. The growth was driven by higher traction to digital product engineering and digital operation services.
The gross margin was 36.3% compared to 35.5% last quarter, and 35.6% excluding that one-time BOT fee, same quarter last year. Gross margin is mainly resultant of improved utilization. SG&A expenses decreased by INR37 lakhs. This is mainly due to H1 visa filing, which falls in quarter two.
The adjusted EBITDA was 17.9% compared to 16.5% last quarter, and 15.2% excluding that one-time fee in the same quarter last year. The company has been able to expand sustainable operating margins through operational efficiencies. The RSU cost under management incentive plan for 2023 [Phonetic] is INR8.2 crores compared to INR8 crores last third quarter. EBITDA net of RSU expense is 16.1% as against 14.7% last quarter.
Year-to-date September ’24 for nine months, revenue was INR1,292.7 crores or $155 million as against INR1,268.2 crores or $154 million same period last year. Excluding one-time fee, the growth is 3.5%. Adjusted EBITDA was 15.3% as against 14.5% same period last year, excluding one-time fee. Our growth has been impacted by macroenvironment. However, we have been able to expand margins through operational efficiencies. We are committed for profitable growth and continued our investment in sales engine, new technologies, and innovation to deliver long-term sustainable growth.
Getting down to depreciation and amortization, the total expense was INR16.6 crores compared to INR16.7 crores last quarter. This includes INR6.3 crores for intangible capitalized on account of Velotio and Scaleworx acquisitions. Interest expense is INR1.6 crores compared to INR2 crores last quarter. Other income was negative INR72 lakhs compared to income of INR2.2 crores last quarter. This quarter, we had an exchange loss of INR2.2 crores compared to gain of INR1.1 crores last quarter, mainly on account of mark-to-market forward covers. Further, the other income comprises of interest income of INR1 crore this quarter compared to INR58 [Phonetic] lakhs last quarter.
During the quarter, the average rate for USD and euro was INR83.76 and INR92.05 respectively. These are the two main currencies for our systems. As at year-end, we had total forward cover of $37.5 million with average rate of INR84.75 and euro cover of EUR2.7 million with average rate of INR94.3 which have already been marked-to-market at closing date of September 30th.
Our tax expense was INR11.8 crores this quarter as against INR21.9 crores last quarter. Reduction of tax is due to reversal of tax provision of INR6.2 crores against dividend received from subsidiary companies as a result of declaration of dividend in this quarter.
Net profit after tax was INR39.8 crores or $4.8 million compared to INR24.8 crores or $3 million last quarter. Basic EPS for the quarter was INR3.37 compared to INR2.1 last quarter.
Getting down to asset size, the total receivables including unbilled at the end of quarter was INR319 crores compared to INR320 crores at the end of last quarter. DSO is 59 days as against 60 days last quarter.
Our cash and bank balances net of short-term borrowing as on September 30 was INR260 crores compared to INR179 crores at the end of last quarter.
With this, let me hand over to Nitesh ji for closing remarks.
Nitesh Bansal — Managing Director & Chief Executive Officer
Thank you, Nand ji.
So, basically summing up and looking ahead, clearly we’re seeing good signs of activity in the market. We’ve seen traction begin across all sectors now. As the year is coming to a close and also U.S. elections behind us, there are definite signs that customers are planning to spend more in the coming year. And this is the time when they’re doing a lot of those RFQs and RFPs. So, clearly very busy times from a sales perspective.
Our increase in partnership and collaboration with the ecosystem players, AWS, Microsoft, Salesforce, Boomi, UiPath, and something that we have done recently in the last few quarters is building up an active startup partner ecosystem as well. That traction is continuing to grow. We’ve seen benefits of that collaboration and significant activity in the market with that.
If you look at the trends, the trends have really not changed much. AI, of course, continues to be top of the town. Clearly, leveraging AI continues to require both expertise in technology as well as understanding the business domain. And those are the areas where professional service providers like us become really necessary because we bring the combination of understanding how to leverage AI to solve the business problems. And this is where we are beginning to see companies show a lot of interest and ask for services.
Process efficiency and automation, cost-saving, they all remain dominant themes. Additionally [Technical Issues] AI and automation are all very relevant. And we are seeing activities across all these areas. With the growth of activity in the sales process and the number of requests for quotations, proposals, etc., we remain fairly optimistic of the market sentiment improving with the beginning of 2025.
So with that, I would probably end the presentation now, and we are open to questions.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Nikhil from Kizuna [Phonetic] Wealth. Please go ahead.
Nikhil
Hello. Am I audible?
Operator
Yes, sir.
Nikhil
Yeah. Thank you for giving me the opportunity. Sir, I just wanted to ask you, now we are saying that the environment is pretty much optimistic now. So can you just highlight how the pipeline is making in process? How much growth is there in the pipeline, like in ACV and TCV numbers too? So that is my first question, sir.
Nitesh Bansal
Yeah, Nikhil, thanks for your question. We are seeing increased activity, which is reflected in growth in the pipeline. However, since we do not share the ACV, TCV numbers or guidance, I won’t be able to provide that. But like I said earlier, we have seen both the number of inquiries as well as the number of proposal asks go up. And we continue to work with them. We are hoping that, along with those asks, the decision-making cycle would also become faster where in the last few quarters, we have seen a lot of customers hold back on their decisions. Some of that will open up too.
So while the response to your question is not in quantitative terms in numbers of whether ACV or TCV of the pipeline, but definitely we are seeing the pipeline grow up and looking forward to good conversions.
Nikhil
Okay, sir. Thank you. That was satisfactory. And sir, now IT [Technical Issues]. So, sir, how are we looking at that? [Technical Issues] and sustainable models?
Operator
Mr. Nitesh [Phonetic], I would request you to please use your handset, sir.
Nikhil
Yeah, am I audible?
Operator
Mr. Nikhil, I would request you to please use your handset.
Nikhil
Yes, am I audible now?
Operator
Yes, sir.
Nitesh Bansal
Barely.
Nikhil
Yes.
Nitesh Bansal
Go ahead, Nikhil. I’ll try and follow. So my second question is our IT services business is now approximately 10%. So what is the additive margin and what is the sustainable margin? I’m sorry. I lost the first part of your question. Second part was what is a sustainable margin. That much I got. I didn’t get the first part when you said IT services, then I lost a bit.
Nikhil
[Technical Issues] IT services margin are [Technical Issues]. So are they sustainable or is there an improvement?
Operator
Mr. Nikhil, we can’t hear you.
Nitesh Bansal
Yeah, we couldn’t, but Nikhil, let me understand. What you’re saying is now that our services margin is around 18%, are we sustainable or what is our outlook? I’m guessing that’s your question. And I think in my previous earnings call also, we mentioned that we are consciously working on some of these margin improvement initiatives through utilization and pyramid improvement, etc., to, one, of course, provide a sustainable growth to the EBITDA margins, but also to create additional room for us to invest for the growth. As we are seeing the market move towards a growth sentiment, we will continue to invest both in our sales and marketing efforts by putting more feet on the ground, as well as start building additional capacity for delivery.
So while our margins will remain sustainable and when you look at our annualized margins, you will see sustainable growth in them. But we will also be making some amount of investments to fuel the growth on the top line basis.
Operator
Thank you. The next question is from the line of Anmol Garg from DAM Capital. Please go ahead.
Anmol Garg
Yeah, thanks for the opportunity. A couple of questions. Firstly, on the margin side, our utilization is now close to at all-time high. And we are also talking about making some investments on the sales side as well as on the delivery side. So what are some of the levers that will help us in increasing the margins from the current levels?
Nitesh Bansal
So, Anmol, thanks for the question and thanks for joining again. So we believe on a utilization front, we’ve done a fairly good job and we are at industry-leading utilizations. We will try and sustain the utilization while making conscious investments and improving our delivery bench strength and capacity to be able to capture growth as it comes in the market. And since we are looking at investments in line of growth, I do not believe that it should lead to a massive dilution of margin there. Sales and marketing investments are budgeted with certain amount of — tracked as a percentage of revenue.
So for us, we are quite confident that we should be able to — when you look at our annualized margin, this is just a quarter margin, so I wouldn’t base it on this. When you look at the full year margins, that’s where we will try to make sure that we are able to stay sustainable.
And from a lever’s perspective, we still have levers which will be related to, as we get into larger customer sizes, the whole management overload and effort becomes more streamlined. We are looking at pyramid rationalization and also as we change our service mix, our service mix itself also can lead to better margins. All of those are in the works and all of these levers will start playing out as we kind of work through in the quarters to come.
Anmol Garg
Right, right. Just continuing on the same, Nitesh, are we increasing our sales incentive structures and would this have an impact on our overall SG&A? So should we expect increase in SG&A levels from the current levels?
Nitesh Bansal
So on the sales side, we are not increasing the incentive structures because our sales incentives are benchmarked with the market and we are in quite a good spot. We are able to incentivize our salespeople for the efforts and the outcomes they produce. We are, however, continuing to improve our sales bandwidth, which basically means increasing the number of people in the market, both for hunting as well as farming. As we develop better logos of our customers, we are continuing to invest in farming efforts so that we can deepen our relationships with them and increase our wallet shares. So that will continue, but it is planned to be largely in the line of our expected growth.
So from a percentage change of SG&A, while there will be some investment, it’s not a massive investment, not a massive move to the percentage of SG&A. We will definitely see SG&A increase as a percentage over the next quarter and the next, but those investments are already made. The cost obviously gets reflected in the next quarter.
Anmol Garg
Understood, understood. And also, if you can talk about a bit on our journey towards signing on larger ISVs as our clients. Have we able to sign any larger ISVs this quarter or is there any new partnerships which is expected in coming quarters as well?
Nitesh Bansal
So from a partnerships perspective, I think we’ve been very conscious and partnering with the companies that we intend to. We will definitely also start working with ServiceNow in the quarters to come because that’s something which we’ve been working on and we will establish a partnership. But what we will be focusing more on is improving our partnership levels with the partners we work with and getting more traction with them and getting to a point where they start becoming the channels to bring us more deals. We have seen increase in the deal inflow through our partner channels in — like quarter-on-quarter for every quarter in the last three years and that’s something that we’ll continue to work on.
From signing larger ISVs perspective, our overall percentage of revenue or revenue mix from customers that are greater than $500 million or greater than $1 billion has continued to move up. And I think we will — like we had said earlier, we had set up a sales motion to open large accounts and larger deals that continues to do its work and it will continue to produce results. So the answer is yes and we are continuing to sign larger customer sizes and with better deal sizes as well.
Anmol Garg
One last thing is on the deliverance. So I know that you don’t give ACV or TCV numbers but from a qualitative aspect, if you can indicate whether we have seen increase in the deal sizes versus the last quarter and is this a trend which is happening or should we expect the deal sizes to remain where it is?
Nitesh Bansal
So we — Anmol, we are definitely seeing our average deal size go up quarter-on-quarter. We are also tracking it at pipeline level and we are seeing that in our pipe, also we are getting more number of larger deal sizes and, like I said earlier, it’s a conscious effort of gradually moving towards it. So for us, definitely it is a positive trend and we have every intention to continue in that way.
Anmol Garg
Understood, understood. Sure, sure. Thank you so much.
Operator
Thank you. The next question is from the line of Vinay Menon from Monarch Capital. Please go ahead.
Vinay Menon
Hi, congratulations on a good set of numbers, sir. So just a few questions [Technical Issues].
Nitesh Bansal
Hi there.
Vinay Menon
So utilization is, sir, 83.5%. Is there any room left for improvement or could we like top out somewhere close to this level?
Nitesh Bansal
Well, it is pretty much the best of the industry kind of a utilization level. So I wouldn’t say that we can or we will try and push for going beyond this level kind of a thing. So yeah, your question is valid. We are pretty much at the top from utilization perspective because from every calculation we look at beyond this, there isn’t too much room for utilization side. However, like Anmol that I think asked earlier on, are there other levers, there are other levers that we continue to work with.
Vinay Menon
Okay, okay. Thank you, sir. And on a simple basis, what kind of employee addition could we see, sir, over the next few quarters? Because you’ve had a few quarters without any kind of employee addition, so is there any plans for that?
Nitesh Bansal
There certainly are. And we are beginning to add bandwidth and employees in data, cloud, AI, and also a bunch of our specialized areas around security and similar services. And these are largely the service needs that we already have, but also we are beginning to add bandwidth over there in anticipation — to come.
Vinay Menon
Okay. And sir, margins have continued to be strong. So has there been any improvement in billing rates from the IT services side?
Nitesh Bansal
No. The market environment wasn’t going to support bill rate increase. In fact, in the last couple of earnings calls, there were questions around whether we have given discounts to our customers. Given the nature of our services in the product implementation and product engineering space, we haven’t offered discounts to our customers, but on the contrary, we have not increased or we’ve not been able to get the bill increase either. So the robustness of margin performance is largely due to better utilization and better operating efficiency, tighter control on project costs, better control over change requests and all of those aspects and not the direct billing rate increase [Speech Overlap] terms of our business, like digital operations, like some of the enterprise business that we carry out in Asia Pacific, our business mix has become richer and that has also had some positive impact on margin improvements.
Vinay Menon
Okay. Yes, sir. And sir, we’ve seen like two cuts already in the U.S., 150 bps and 125 bps last night. So has there been any impact on the [Indecipherable] spends? It’s been two months since we’ve seen the first cut? So have companies started to ramp up spending or something like that?
Nitesh Bansal
To increase spending directly, not yet, but intent to spend definitely, because I think the impact of the cuts — the last cut gave people the positivity and hope that they will be able to spend more, but then there was the election, which created uncertainty and people are obviously in the election side of things. With the second cut and now the election results being clearer, I think the intent to spend is becoming clearer. And also, given that U.S. budgeting cycles are typically — they get into budgeting cycle in October, November, so new spending don’t happen around this time, but they do prepare for spending next time. So the short answer is we haven’t seen increased spending happen already, but we are definitely seeing signs of increased spending intent for the future.
Vinay Menon
Okay, okay. Thank you, sir. I’ll get back in line for the further questions.
Operator
Thank you. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead.
Sandeep Shah
Yeah, thanks. Thanks for the opportunity and congratulations on very good execution, especially on the margins, despite the macro challenges being there. So the first question, Nitesh, is, in terms of growth momentum, we have done extremely well in past two quarters. Do you believe fourth quarter can also be maintained in terms of growth momentum because of the [Technical Issues]? I’m asking because it could have a significant impact.
Nitesh Bansal
Well, Sandeep, thanks again for joining in. And you are absolutely right. Q4 always has a seasonal impact because of furloughs, because of holidays, and also lower number of working days. So one, we believe that the growth momentum should continue. How it reflects is — so growth momentum in terms of volumes will definitely happen. That volume translating into revenue will be dampened by the lower number of working days and furloughs. So that will be reflected in the numbers accordingly. But that’s a seasonal variation that all of you are very well kind of aware of, that we lose a certain amount of revenue conversion of the volume growth each year in this quarter. So there is momentum, there is fundamental volume growth that we will aim for, but it may not translate into exactly one-on-one basis from volume growth to revenue growth.
Sandeep Shah
Okay. So you are still eyeing a positive growth in the revenue in dollar terms in fourth quarter?
Nitesh Bansal
I won’t be able to give you a forecast, but volume growth momentum is definitely there.
Sandeep Shah
Yeah. Why I’m asking it is this year’s exit rate would be better if we annualize the fourth quarter run rate and divide by the CY ’24 dollar number. We are — we may be entering CY ’25 with a better confidence, and that should lead to a possibility of a higher double-digit kind of a growth. Is it the right way of looking at it, looking at your pipeline, average deal size, yield ratio?
Nitesh Bansal
Sandeep, I couldn’t have said it better. Without commenting on exact numbers, I think the sentiment is absolutely right.
Sandeep Shah
Okay, okay. And any update in terms of Blackstone channel, how many customers you have closed with the signing and how many are in the pipeline? And can it be a big growth driver in CY ’25?
Nitesh Bansal
So Blackstone channel has been fairly effective and important channel for us. We have already got close to — well, exactly 15 customers from the Blackstone portfolio companies. It is beginning to contribute a reasonable percentage of revenue for us. We are constantly, just like all the other market activities, prospecting and reaching out to clients. We are constantly working with Blackstone portfolio companies as prospects. We currently have another close to a dozen prospects that we’re working with in the Blackstone portfolio. And just like market sentiment improves and people start spending, these companies would also — and I’m looking forward to some of them making those decisions and hence contributing to the growth in a similar manner.
Sandeep Shah
Okay. And Nitesh, is it possible to give some color in terms of average deal sizes in the pipeline now versus one year back in terms of win ratio now versus one year back and the pipeline growth, if you can quantify, versus one year back?
Nitesh Bansal
Sandeep, not in exact terms, but I’ll give you the sentiment. Number one, from a win ratio perspective, our win ratio for anyone actually across the industry you would see would have gone down because there are a lot more deals which are undecided, where customers have delayed decisions. So win ratios get impacted by that. But our average deal size has certainly gone up.
And from a color perspective, I would say that we’ve moved up a significant double-digit percentage sizes. I don’t know how else to provide a color without giving an exact number, right? But, Sandeep, the other thing is it’s not done yet, right? I mean, these are the beginnings of the outcomes of a conscious effort, right? And these things don’t change overnight.
So these are leading indicators that we’re doing the right things. We’re chasing better quality deals. We are going after higher-value deals and we are beginning to win them. But these will become mentionable or a large enough number only a few quarters down the line. Right? So definitely pipeline is bigger, made up of bigger deals. We are also winning them. And more number of decisions come in, then this will become a bigger, fatter kind of a number.
Sandeep Shah
Okay. Okay. Just last couple of questions, in terms of any large client-specific issue, which we are worried about entering CY ’25? Second, now the margin, including ESOP charges is higher than our margins when we did not have the RSU. So that’s a great execution on margin. So do you believe the current margin run rate can be maintainable going forward? Q-on-Q variation is okay, but Y-o-Y, it can be maintainable?
Nitesh Bansal
So is there a singular client-centric issue that we are worried about? The answer is no. Our top clients are largely sustainable — sustained. And in fact, some of whom we’ve seen either stagnate or not grow year-on-year, we do believe that growth with the spending will come back even in those clients. So clearly, no single client-centric issue that would worry us.
We do have, and we have said that in the past quarter also, that there is a certain amount of churn in the business, which comes because of the nature of our business, because we are on discretionary spend. We are doing project work, building products for people. So there is a certain amount of churn that continues, but it’s not like we are expecting any large client to suddenly drop off.
From a margin perspective, thanks for the compliment, we are very conscious of it, and we do believe that we will maintain a sustainable margin trajectory.
Sandeep Shah
Okay, thanks. I will come in the follow-up. All the best.
Operator
Thank you. The next question is from the line of Nihil [Phonetic] from Carnelian [Phonetic] Asset Advisors. Please go ahead.
Nihil
Yeah, hi. Thanks for giving the opportunity. And congratulations on the underlying operational improvement which is happening. I mean, that is clearly getting reflected in the margin side. My question, sir, was more on the comments that you made on the good signs of activity picking up for you, and your intent to spend going up. I mean, so is this getting reflected across sectors, or how is the situation on the telco side? If you can provide some color around there, because we are more exposed to telcos and ISVs. So I mean, this particular commentary of intent to spend going up, how is that panning out from the telco portfolio…
Nitesh Bansal
Thanks, Nihil, and thanks for the compliment. We have seen the activity pick up across sectors. That was the biggest impact or highest impacted, and we are seeing some of that expense come back. Telco is following behind. So the signs of — while the discussions have started, some of the real activity signs will probably start off and start showing up. But from a sentiment perspective, we have also seen some of the telco, ISVs, and OEMs begin to relook. And perhaps largely also because some of the larger OEM customers, etc., did a massive cost cutting and rationalization in the earlier part of this year. So perhaps they are kind of done with it and start off now. So I think that sentiment is reflected across sectors.
During the last few quarters also, for us, healthcare, which is the third-largest sector that we have exposure to, has continued to do well, and we expect that to continue. We are also seeing revivals in financial services and overall services, which is hospitality and education and travel transportation. So it is — currently at least, it is reflective across all.
Nihil
Sure, sure. My second question was on the deal flow side. And you had mentioned that deal flows are particularly [Technical Issues] sectors. Can you give us some clarity around here [Technical Issues]?
Nitesh Bansal
Nihil, I’m sorry. After DPO [Phonetic] sector, it became a bit garbled. Can you repeat?
Nihil
Yeah, sure. Is it audible now?
Nitesh Bansal
Yeah.
Nihil
Yeah, sure. So basically, you mentioned on the deal flow side, that deal flow has gone up. If you can [Indecipherable], what is the improvement, because that will be helpful. And second question was just on the headcount side. So where do we report our SG&A headcount? Does it sit in the support side — support part of the piece? Or does it sit in the technical piece? How would we see the SG&A headcount building up for us, let’s say, over the last 6 months, last 12 months? So your first question was on DPO. Deal flow, deal flow, sir.
Nitesh Bansal
Oh, deal flow, yeah. Nand ji, I really could not hear the question. Did you get that? Would you be able to answer?
Nand Sardana
So he’s asking, how is the deal flow going on? And second question is on the support. So where we do report marketing and sales people. That I’ll answer. But I think deal flow, you can answer. How is the deal flow in last one quarter?
Nitesh Bansal
Well, deal flow in last one quarter has been — well, it’s positive from a perspective that, yes, our total net new wins as well as revenue from net new has gone up quarter-on-quarter, which is also reflected partly in the growth that has been reported. And like I’d said, we are — when I’m talking about all the activity, it is really about how the deals have come in and we continue to respond and win some. So deal flow has gone up quarter-on-quarter and we continue to look at it that way.
Nihil
Sure.
Nitesh Bansal
Nand ji?
Nihil
Just on the SG&A side?
Nand Sardana
So let me answer this. On the SG&A side, in the press release, at the headcount, we reported the bottom support staff, which is 527 as on the end of September quarter. It includes sales and marketing guys as well.
Nihil
Okay. And how much would be that?
Nand Sardana
Okay. Our sales — hardcore sales team, including — excluding the ISR would be close to, I would say around 60 sources, Nitesh ji, excluding the ISR?
Nitesh Bansal
Yeah.
Nihil
Sorry, how much, 68 you mentioned?
Nand Sardana
60, 6-0, the hardcore sales guys who are at the on-site location and additional 55 to 60 guys, ISR support them in the sales after and they sit out of Noida during the night shift.
Nihil
Understood. Sure, sir. Sure. And just this number, what was this number on last quarter? Y-o-Y basis?
Nand Sardana
The sales guys number would be almost the same or maybe 2%, 3% increase. ISR number would have reduced maybe by around 8 or 10 resources in the last two quarters.
Nihil
Okay. Sure. That’s it from my side, yeah.
Operator
Thank you. The next question is from the line of Omkar Sawant from Marcellus Investment Manager. Please go ahead.
Omkar Sawant
Hi, Nitesh. Two questions, right? Firstly, on the delivery side, you have hired a global delivery head, right? So your presence has been more offshore-centric, right? Does that change over the next couple of years? Do you plan to go more onsite-centric? Does that mix change?
Nitesh Bansal
So Omkar, we’ve hired a Senior VP of Delivery for global delivery and the approach is still completely like it has been, offshore-centric. The person joined us in Noida, leading our delivery for a certain number of verticals and horizontals. When we talk about global delivery and working like a global delivery organization, this has been a conscious effort for the last three quarters where we operate as a single company and try to break the silos so that we are joined up and we are able to deliver to our customers from any of our delivery locations.
So now we have examples of customers, which is in contrast to the past, where we had customers, which are American customers being delivered with a combination of resources in India and Eastern Europe, or a European customer who’s being delivered from resources in combination of India and Asia Pacific, or any — that kind of combinations. And that’s why having more robust delivery mechanisms, better methodologies and tools, bringing everyone together as one team is really the global delivery that we have been building and leveraging.
Omkar Sawant
Okay. And secondly, on the sales organization, so even apart from the senior leadership, you have had a lot of senior level hires, right, from tier 1 organizations. So how does the sales organization overall change now? Does — do the focus areas for you change or the partnership-led deals that you’re chasing, does that change? Some color on that would be helpful.
Nitesh Bansal
So really, from a sales leadership perspective, we’ve really brought in only two senior-level hires. The Chief Customer Officer had come on board in Q1, with a clear focus that we have to focus on farming, on improving our partnership, channel-led kind of a sales motion, and obviously, improve the lead generation and deal pipeline through the channel partnerships. So that was one change. It was a clear white space that we recognized as part of our strategy exercise we did towards the end of last year, and we brought in and filled in that gap.
The second hire is our CTO that we have brought in recently, because as we develop deeper relationships and do more deeper technical work, typically the buying patterns in the market are the technologists, buy from technologists, and technically-minded people or CTO kind of people are effective consultants and sales people. So it is in line with our strategy, which has not changed, that we are going to build deeper relationships, that we are going to be partnering with our clients in their entire product and platform development and kind of improvement or expansion journey.
So those are the only senior-level hires we brought in on the sales side. Largely, strategy remaining the same, that we will deepen our relationship with those partners. So we continue to do that, that we will increase our deal flows through channels, we continue to do that. We are seeing more impactful deals, and for that, we need those kind of conversations to happen, and hence these people are there.
So those things are remaining. Internal minor changes or alignments of people’s focus areas by verticals, or some more people focusing on key accounts, and there being more support in the market in the form of specialist sales people who can sell cloud services, or who can sell data services, or who can sell AI services, those are constantly ongoing, but it’s not a shift in strategy. It’s just deepening of the strategy, putting it into execution, and enabling it through the right people and the right things in the market.
Omkar Sawant
Okay. And apart from ServiceNow, are there any other partnerships that you’re exploring?
Nitesh Bansal
Well, from a large notable tech enablers perspective, we’re not exploring because we do have a lot of those partnerships, but definitely Snowflake and Databricks are partners that we are going to go deeper with because as we increase our stance on data and AI, those are important players in the market. We already work with them. We need to raise our joint partnership motions with them. Recently, we got upgraded in our partnership with Salesforce. We’ve now become a Crest Partner, which is, again, a result of the conscious efforts that we’ve been making. We have been upgraded in our partnership with Microsoft in the Asia-Pacific region, and we will continue to work with those.
The only additional angle is that we’ve seen how, as people continue to deploy more AI into business use cases, there are a lot of new things that are happening and coming along with that, which is actually, in today’s time, not possible for any single organization to keep pace with and develop capabilities across everything. So actively working with a startup ecosystem and leveraging partnerships with our startup partners has also become a fairly important thing, and we’re continuing to get better at leveraging them and working jointly with them towards our customers.
Omkar Sawant
Okay, great, thanks. Thanks a lot.
Operator
Thank you. The next question is from the line of…
Kumar Gaurav
Sejal, It’s already 12 O’clock. How many questions?
Operator
Sir, there are two people.
Kumar Gaurav
Let’s do it quickly, please.
Operator
Sure. The next question is from the line of Roland Nandu [Phonetic] from Edelweiss Group. Please go ahead.
Roland Nandu
Hi, Nitesh. Thank you for taking my question. I just have one question, right? It’s been a year since you have joined R Systems, right, and you have taken helm and you know things internally now. So can you help us understand as to what is it that has surprised you in the last one year in terms of capabilities of R Systems, and what is it — which are the aspects which are taking more time in terms of the change that you want to bring about or the direction in which you want to take the company to?
Nitesh Bansal
Thanks for that question, and we can go into a fairly elaborate discussion about it, but I’ll try and answer in short. I think what has surprised me and quite positively is the number of hidden stories in the sense that I think we have been our worst enemies in terms of not telling the stories or the good work that we’ve done. Every time we have reached out deep within the organization to find, have we done work in this area, and the answer we found, surprisingly, is yes.
Just to give you an example, recently we were trying to find — we have actually carried out simulation of — doing simulation software for medical services. And to my surprise, we have actually done that a few years ago for a client. So that has been a surprise. And I think that’s also been the most difficult thing, how to get all of the hidden treasures of R Systems to life and put them out there. And then the answer is also being in our hands. We are deploying generative AI within our own organization. Every time we find new data sources where this information may be hidden, we are consuming it through generative AI and making it available through a very easy conversational interface to our people internally so that this discovery does not remain difficult for people.
So those are all the kind of things that are happening. So it’s a surprise, it’s a frustration, but it’s a great win as well.
Roland Nandu
Sure, Nitesh, thanks a lot and all the very best.
Operator
Thank you.
Nitesh Bansal
Thanks, Roland.
Operator
The next follow up question is from the line of Sandeep Shah from Equirus Securities. Please go ahead.
Sandeep Shah
Yeah, thanks. Thanks for the follow-up opportunity. Just last one question. Nitesh, you were also aspiring to get into product support and cost takeout deals from clients in N-1 product stages. Any early signs of success because this can lead to a higher annuity business, more predictable business for us.
Nitesh Bansal
Absolutely, absolutely, Sandeep. Though, not very big numbers but we have seen a couple of deals in the last quarter in the product sustenance space. We are currently in active conversations with at least another few customers who are talking basically product sustenance, the whole product portfolio management type of approach that we had talked about at some point with you as well. So definitely it’s resonating in the market. It is a need of the market. Just that, for anybody to hand over the product to us requires a lot of trust building and we have been successful in doing that with a few clients and we are getting better at it. And it’s also giving a story that is helping us now present them to others and with their process.
Sandeep Shah
And here the average size of deal could be bigger, right, versus what we used to do earlier?
Nitesh Bansal
The TCV will tend to be bigger because of — some of these will essentially get into a multiyear nature. ACV will depend on whether it is one product or a portfolio of products. So currently, we’ve seen a few one-product deals. Our aspiration is obviously to look at portfolio of products as a whole.
Sandeep Shah
Okay. Thanks and all the best.
Operator
Thank you.
Nitesh Bansal
Thank you.
Operator
As there are no further questions, I would now like to hand the conference over to Mr. Nitesh for closing comments.
Nitesh Bansal
Thank you so much and once again — for all of you for your continued confidence and questions. Like I’ve always said and felt, your questions are both enlightening as well as they give me things to look at and do better with. So looking forward to talking to all of you again for our next earnings call and/or sometime in between. But thank you so much. Really appreciate your attendance.
Operator
[Operator Closing Remarks]