R Systems International Limited (NSE: RSYSTEMS) Q4 2025 Earnings Call dated May. 09, 2025
Corporate Participants:
Kumar Gaurav — Assistant VP of Finance & Accounts
Nitesh Bansal — CEO, MD & Director
Nand Sardana — CFO
Analysts:
Nikhil — Analyst
Sandeep Shah — Analyst
Nitesh — Analyst
Mihir Manohar — Analyst
Vinay Menon — Analyst
Anmol Garg — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to our systems Q1 FY 2025 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 for pressing the star then zero on your touchtone phone. I now hand the conference over to Mr Kumar. Thank you, and over to you, sir.
Kumar Gaurav — Assistant VP of Finance & Accounts
Thank you. Thank you, Steve. I welcome all participants to quarter one 2025 earnings conference call. Since our system follows the ending this financial year January to March quarter is quarter one for us. We are today with, our Managing Director and CEO of
Operator
Sorry to interrupt. You are not audible. Could you please repeat a favorite statement please?
Kumar Gaurav — Assistant VP of Finance & Accounts
Yeah in it, we have shared the investor presentation relatively yesterday as well as notable company and stock exchange section. I hope all of you have been seeing that. We will start the call before we do not on the performance of the followed by Mr and thereafter we have a the valuation. That we will open up for a Q&A session. Before I hand over, let me now. Investors are cautioned that investments are certain forward-looking statements that involve risks and uncertainties. The company undertakes no obligation or meeting to update or revise any such any information future actual results
Operator
Can you please come closer to the mic and speak?
Kumar Gaurav — Assistant VP of Finance & Accounts
Yeah. Now I’ll hand it over to for his opening comments. Thank you. Over to you, Mr
Nitesh Bansal — CEO, MD & Director
All right. Thank you, Kumar. Good morning to everyone and thanks for joining in we know you know this is. This is a you know a difficult time in the continued escalations at the border. So our you know our wishes go out to all these families wishing for everyone to stay safe and also the best wishes to our armed forces for what they’re doing. So to begin with, I would like to cover today, as always some of the highlights of our financial performance, looking at the financial trends, some operating metrics, touching upon some key wins and reflecting on what we are seeing develop in the market and how we’re looking ahead. So without much ado, I will move forward. And for those of you who are referring to the slide deck, I will be referring to the slide number four in the slide. Now before I start talking about the financial performance or go to the numbers, just wanted to kind of reflect on the — on the overall how the quarter one has been. And to be very honest, quarter one has been a little bit of a bittersweet quarter and where on one-hand, we witnessed delay in decision-making coming as a result of global uncertainties with the tariff induce challenges, etc., which led to some discretionary spend being canceled resulting in some immediate impact on revenues. But on the other hand, if you remember last quarter earnings call when we talked about how we are entering the next fiscal with a strong robust our pipeline of large deals, which we continue to work on and have won, which is then reflected in our actual headcount increase during the quarter. So it’s been a bit a sweet quarter in that way. Looking at the numbers, we closed quarter one at INR442.5 crore rupees or $51.1 million versus, you know in INR terms it’s a degrowth of about 1.5% quarter-on-quarter but it is I’m sorry, my growth is a little, okay. So we reported an adjusted EBITDA of INR76.8 crores, which is a growth of about 6.2% revenue growth and I’m sorry, the slide is not reading right definitely reported adjusted EBITDAR76.8 crores, which is a 28.1% growth on EBITDA in INR terms and 22.8% growth in USD terms. A net profit of INR38.6 crore or 4.5 million with cash and guided bank balances of INR243.4 crores in rupees at $88.1 million and total equity attributable to shareholders of about INR7671.5 crores or $77.6 million. On a quarter-on-quarter basis, last quarter, we had reported an adjusted EBITDA of 17.8%. This quarter it was 17.4%. This is after taking into effect the salary hike, the rate hikes that have been rolled-out for the entire organization during the first-quarter. So looking at the EBITDA bridge from about INR80 crores in Q4, we got some rupee depreciation benefits of about INR4.7 crores. We had increment wage impact of about INR3.4 crores and due to reduction in revenues and other operating standard operations, another INR4.6 crores, hence resulting in a INR26.8 crore of reported adjusted EBITDA. So if we move to the financial trend, the next slide the eight-quarter trend, we have continued to — for the last eight quarters, we had continued to be a quarter-on-quarter growth. This is a quarter we’ve seen a day. However, you know, we have — we have based on the deal wins and activities, we do not see it as a secular trend. It is a one-off and get better as we — as we go-forward. And then our comes of 17.4% EBITDA are fairly stable and we are confident of continuing to grow the company with good profit margin and hence being able to deliver good shareholder value over-time. Thank you the essentially excluding the charges on RSU, which we have anywhere reported in our press release, the impact of it close to 6 62 crore rupees as it comes. Summarizing the financial highlights, again, in terms of revenue, EBITDA and profit-after-tax, we had a consolidated revenue of INR442.5 crore, which is a year-on-year increase of 6.2% and adjusted EBITDA of INR36.8 crore, which is a year-on-year increase of 28.1% that a percentage 84% compared to 14.4% in the same quarter last year and hence 296 basis-points improvement. On a PAT basis, INR43.4 crores of PAT versus 31.9% same quarter last year, that’s a 36.2% increase in PAT. Adjusted PAT percentage of 9.8% versus 7.6% of the same quarter last year, so 216 basis-points improvement and adjusted basis EPS has gone up from 2.7 per share to 3.7 per share on a year-on-year basis, which is a 36.1% improvement on the EPS. Moving to the operating metrics, our revenue by geography broadly remains the same. There is a — there is actually a 0.8% improvement in North-America. So revenue has shifted slightly more towards North-America, but it’s not a very huge percentage of the quarterly movement as it depending on how the quarterly revenue look like. Europe still contributes about 8.9%, Southeast Asia contributes 12.7% and and others are a small percentage points. From a client concentration perspective, again, nothing major that has shifted. Our top client continues to contribute in that 6% range has gone slightly up to 6.2%. Our top three client contribution has actually gone up slightly more meaningfully from 11.9% to 13% and the top-five clients contribution from 17.1% to 17.7%, while the overall top-10 client contribution remains just under 25% to 24.8% as compared to 24.5% earlier. So while we do not have a single client concentration risk, our top-10 clients continue to give us 25% or so and we are continuing to improve slightly our wallet share across our top-10 clients. So our utilization has continued to stay consistent. Like we had said last quarter, we have — we have probably squeeze the utilization lever to the max. We do not — we do not anticipate or wish to increase it any further, running at about 83% to 84% utilization is one of the industry’s best and we believe that we would have we would want to carry a certain amount of as we are carrying today, which allows us to fuel the growth and new project claims that we get from time-to-time. Our days of sales outstanding has continued to stay-in between that 60 days to 64 days. So we continue to see that it’s range-bound within the same range and we do not see any challenges to that either. Moving towards some of the qualitative commentary on building for the future. So our go-to-market has continued to be strengthened. We talked about launching the GCC offering and the playbook for midsize enterprises. We had done that in basically one and a half quarter ago. We’ve seen that as being a being a very attractive offering where we’ve seen significant traction and we are continuing to build and scale that offering especially with our focus towards midsize enterprises. Our go-to-market with AWS, with Amazon or IoT connectors got announced during the Mobile World Congress in Barcelona in January this year. That’s a significant partnership and then together with Amazon, where we are building those connectors, which will be then are sold through and by Amazon on their marketplace. And we have also created other go-to-market partnerships in niche areas, both in the cloud as well as security side of offerings. So from a positioning perspective, our offerings both met at in VCC and they have been well-received and earlier we had offerings around setup. Now we have also created offerings on GCC scale-ups and this is targeting those GCCs in India that have already been established, have achieved a certain maturity level where they are now beginning to develop a brand partner ecosystem to work with and look for more value-added innovation-led R&D-led services being offered through the VCC to their parent companies. Our data readiness offerings, analytics and AI-related offerings have also continued to create a good positioning and good traction for us in the market. And like I said earlier, significantly, we have significantly enhanced our partnership status with both Azure and US where now we are launched as a partner for certified and achieving competency such as globally across several of their competency levels. From a delivery priority perspective, we continue to focus, as you know, we have — we had launched Optima AI in September last year, which is our generative AI workbench for adopting our Gen AI practices and delivering engineering work that we deliver to our customers. And that’s continuing to scale and we’ve seen good traction with that amongst our customers. We also started our Mexico operations earlier last year because of the beginning, but during the quarter, we started operating with two customers productively being delivered from Mexico and we are actively enhancing that nearshore positioning towards our North American customers or US clients, to be precise. From a leadership development perspective, we continue to hire more sales leadership across key verticals in North-America. We are working — we have actually added a specialized data and AI sales capability in North-America. So we continue to enhance our positioning as well as getting feet on-the-ground both in the cloud, security, AI, data and all these spaces, which are core to our strategy. And we also onboarded a leader in quality engineering for leading our quality engineering services. So from a key wins perspective, bunch of key wins during the quarter, a leading provider of data-driven distribution solutions, which is also a private equity-backed company and basically chose our systems to deliver robust infrastructure capability and scalability through on-premise solutions. This is leveraging leading hybrid cloud platforms where we are focusing on building, modernizing and deploying scalable high-performance applications with comprehensive ongoing management of those applications for the client. So it’s a new engagement, which is obviously in a fairly leading technology kind of a space, which we are working closely with the customer on. Another one with a US-based global payments platform who has partnered with us to create an accelerated product engineering team. We are managing the gateway integrations, rearchitecting the reporting systems and creating improved data insight and operational ability for them. These are new-age payments platform type of a company and working with significant number of e-commerce and other kind of kind of commerce operations across the world actually global organization are providing solutions to them. For our Canadian B2B marketplace solution, we are currently engaged in accelerating their platform development, enhancing quality assurance services to create seamless digital experiences for each independent business that of kind of comes on the platform and hence creating buying suppliers and all of those kind of things. So for a fiber-optic Internet card and triple player service provider in the US, they have partnered with us to create a quality assurance lab for their IPTV, for OTT kind of kind of apps and devices that they offer and we have we have created that test lab for them in India with an expanded test coverage with metric-driven validation and improving their overall belief efficiency and user experience. And in Asia-Pacific, Singapore-based precision engineering company has engaged us to implement Microsoft Dynamic Business Central and CRM, our solutions, which will help them optimize and digitize their end-to-end business processes with an outcome of increase in financial visibility and operational excellence across their enterprise. And these are just some of the leading examples of kind of wins we’ve seen in the first-quarter. And like I mentioned earlier, including some of the pursuits in the large deal space and some win where we are in transition thus increasing our — increasing our headcount without really having an impact on revenue during the quarter, which we will continue to — once the transition is over, then we’ll get into steady-state delivery in Q2 and so on. So I will pause over there and maybe hand this over to Nanji for — for a detailed overview of the financial numbers as we normally does and then maybe I’ll come back to provide a war-up.
Nand Sardana — CFO
Thank you, ji. Good morning to all. Thank you everybody for attending this call. For those referring to investor presentation, it is the last page, which I will be deliberating. Revenue for the quarter was INR442.5 crores or INR51.1 million as against INR449 crore or 53.2 million last quarter and INR416.6 crores that is $50.2 million in the same quarter last year. This is year-on-year growth of 6.2% and quarter-on-quarter reduction of 1.5%. This quarter was impacted by reduction in onset consulting revenue and lesser revenue from our business and certain one-time revenue in last quarter. We have started witnessing the results from our investment in cloud, data, AI and automation in terms of large deal conversions, which will support to report sustainable revenue growth this year. The gross margin was 36.7% compared to 37.9% last quarter and 33.7% same quarter last year. Our quarterly margin are primarily impacted by offshore increments. SG&A expenses decreased by INR4.7 crores from INR90.3 crore in last quarter to INR85.6 crores this quarter. This is mainly due to lesser year provision travel expenses along with two-op of year-end provision created during last quarter. The adjusted EBITDA was 17.4% compared to 17.8% last quarter and 14.4% in the same quarter last year. The company has been able to report robust margins percentage through operational efficiencies. The RSU cost under management incentive plan 2023 is INR6.2 crores compared to INR7.3 crores last quarter. EBITDA net of RSU expenses is 15.9% as against 16.2% last quarter. Despite the external challenges, we maintained EBITDA stability through prudent cost management and operational efficiencies. Getting on to depreciation, the total expense was INR14.6 crores compared to INR15.5 crore last quarter. This includes INR6.3 crores for intangible capitalized on account of and Scale acquisition. Interest expense is INR1.5 crore compared to INR1.9 crore last quarter. Other income was INR2.3 crores compared to income of INR2.5 crore last quarter. This quarter we had an exchange gain of INR71 lakhs compared to exchange loss of INR99 lakh last quarter, mainly on M2M of forward. Further, the other income comprised of interest income of INR1.1 crore this quarter compared to INR1.2 crore last quarter. And during the quarter, the average rate for USG and euro was 86.58 and 91.06 respectively, as against last quarter average rate of USD84.46 and euro of 90.08 respectively. These are the two main currencies for our system. At the year-end, we have a total forward cover of $36.4 million with average rate of INR86.03 and Euro cover of 1.9 million with average rate of INR94.76, which have already been marked-to-market at closing rate of March 31st. You would notice that our forwards over at higher-rate compared to the present rate. Our tax expense was INR18.1 crores this quarter as against INR70.6 crores last quarter. Our tax-rate comes to around 32% due to non-deductibility amortization for intangible acquired through acquisition. This is slightly higher this quarter due to some timing reasons. Our net profit-after-tax was INR41.1 crore or $4.8 million compared to INR38.9 crore or $4.6 million last quarter. Basic EPS for the quarter was INR3.2 crores compared to INR3.3 last quarter. The Board at its meeting held yesterday has declared in dividend for the year ’25 of INR6 per share. Some balance sheet item total receivable including unbilled at the end-of-the quarter was INR361 crores compared to INR340 crore at the end of last quarter. DSO is 64 days as against 61 days last quarter, but quite comfortable. So our cash and bank balances net of short-term borrowing as at end-of-quarter was INR243 crores compared to INR196 crores at the end of last quarter. We have been constantly generating cash from the business. With that, let me hand over to Nidheji for closing remarks. Thank you.
Nitesh Bansal — CEO, MD & Director
Thank you, Nanji. So basically coming up and looking ahead, as we Call-IT, in Q1 led by a large deal win and the remaining pipeline of large deals that we continue to work with our pipeline still remains robust and we continue to believe that even though there were some delays in decision-making temporarily probably caused due to uncertainties, but as things pan-out during the during the year, the decisions will start happening and our pipeline will obviously convert into projects into revenue. So we remain a positive towards the overall outlook of 2025. We’ve seen increased traction in AI use cases as well as the use of generative AI in SDLC and our Optima AI work branch has continued to give us an edge over the competition. From the trends perspective, clearly, tech companies are seeing increasing adoption of AI in every aspect of software development. And hence, we believe it is an advantage for partners like us, our systems who are proactively invested in-building these capabilities. And the GCC for mid-market companies have been driving some of the large hiring numbers in India and both for GCC setup and GCC scaled-up and we believe these will continue to remain important drivers for seasonally priced price deals. Capturing that mine space through our launch of our point-of-view as well as our offering in the space and trying to go after the mid-market segment, which is our sweet-spot has become quite attractive and have kept us quite active in the routine space. And despite all the uncertainment faced by the US businesses, we continue to remain optimistic for building growth momentum in 2025. So that’s really it from me. I would I would stop the presentation and hand it back to the operator for opening it up for Q&A.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking your question. Ladies and gentlemen, we will wait for a moment for the question queue assembles the first question is from the line of Nikhil from Kir. Please go-ahead.
Nikhil
Yeah, hi, sir. Am I audible?
Operator
Yes.
Nikhil
Yeah, hi, sir. Good morning. And sir, I wanted to ask one question. Can you comment on what is the discussion spend going on in the high-tech vertical? And what is our GCC strategy going ahead? And we said that we won wins for the GCC offerings. So what was the size of those deals and like when — when do we expect a significant ramp-up
Nitesh Bansal
The discretionary spend in high-tech space you know continues to continues to be I would say, separate for a simple reason that on one-hand, there is a significant amount of spend happening in-building the infrastructure and data pipelines, et-cetera for their AI related initiatives. On the other hand, there is a continuous stream of layoffs that is taking place. So there are — if you look at the enterprise high-tech space, the net headcount has been reducing, while they have been spending on specific initiatives, both in capex and opex terms on the AI front. From where we look at-the-market from a midsize companies and platform space, we are seeing the opportunity to help those platforms reduce their overall engineering spend for developing those platforms. And this is where they are coming to us and working with us also to help them ramp-up the AI component or the overall AI content in their platforms, which is where they otherwise would struggle to have the right kind of talent and capability to build that up and that’s where they’re partnering with us. So we have seen that kind of traction in the market. We are attracting those customers and also in the wins that we talked about, whether it’s the payments platform, whether it’s an e-commerce platform, whether it is the logistics platform that we talked about, each of those are wins which are in the same kind of space. So yeah, it is depending on which part you look at, the overall discretionary spend may look like coming down or staying constant, but it’s a question of where we are seeing a market and we are continuing to build traction over there. From a GCC offering perspective, I think question was, was you know what is the typical win size or what are we seeing and when will it create traction for us? Well, you know, these deals vary in sizes, of course, so there is no-no one single answer to that. When we are talking about large deals, we are obviously talking deals which are in not in hundreds of thousands, but in millions of dollars, which with — typically they come with multiyear commitments and since we are in the middle of those deals, we are we are continuing to work with the customers to convince them to work against the competition to win them. And these deals typically come to the transition. So that’s a win that I talked about, which we have won. It will have a couple of months of transition, which is the time during which we ramp-up the team, where we transition the work, where we establish the ways of working and then start delivering back to them. And it’s after that couple of months of transition that it starts resulting into showing up as revenues in our books. So as we continue to win these deals, we will see that adding up to the revenues and will get reported accordingly.
Nikhil
So that’s great to hear. So my second question is on like we have just now signed a UK FTA and there is a European FTA also in the talks, which might be our guidance is hello, am I audible?
Nitesh Bansal
No, I lost after you said in after your first sentence.
Nikhil
Yes, sir, my second question is on certain is it clear now?
Nitesh Bansal
A better. Yeah, go-ahead.
Nikhil
Yes, sir. So I we have signed a UK FDA is UK FTA and a European FDA might be under process and might materialize by the end of this year. So how are we thinking of our European expansion? Because one of our large is our new.
Nitesh Bansal
But you know, with the FTAs, wherever possible we get led up, we try to, but our business has actually been, you know, working basically because we don’t get direct advantages, except that of course, you might open up the corridor, there’s more dialogue and other things. I think other industries which directly get benefited, we’ll probably look at these FTAs in a different light. For us, Europe has been a strategic market. Like we have said in the in the past also, we have invested in strengthening our sales team in Europe. We’ve seen a couple of wins in Europe in Q1. We are building upon that pipeline and we will continue to perhaps see that our overall revenue from Europe will continue to go up, whether we will see that as a percentage make a significant difference on the overall mix, it may not be — it may not be so in the short-run because ultimately as a — as a an engineering services or technology services provider, the US-India corridor always remains the primary channel on which the business happens because of the — I mean, the vastness of the US market and the openness and how mature they are in terms of outsourcing or using offshore services. So we believe that our European business will continue to grow at the same pace as our American business and hence, we’ll continue to maintain the — maintain the revenue mix as we have across geographies, but we continue to invest in the market and we are seeing good traction and wins in that market as well.
Nikhil
So it’s a bit too. Sir, my question is on, how is the growth in after the large deals in Q1? Like last-time also you provided a certain great amount. So if you could just highlight that figure. And sir, when do we begin a significant ramp-up in — do we expect it from Q2 or Q3? When do we expect a significant ramp-up.
Nitesh Bansal
Nikhil, both your questions are related to again large deal wins and you know we — as we — as we win more of those deals automatically, it will impact our ACV win — average ACV win number. Like I’ve said in the past, we have gradually and consistently seen our average ACV win number go up. The hope and this is what we have been actively working towards that with more largely win than this year as the year progresses, that number can move-up meaningfully because one large deal in 1/4 here or there will not make a needle move-in change, right, because it will move-up on quarter and then come down again. But consistently winning three, four or five large deals, which we hope to do during the year, we’ll definitely move that needle and we will certainly be happy kind of seeing that. From a ramp-up perspective, you know our net headcount is already going up and like you may have seen in the press release, our headcount has gone up in Q1. Hopefully, you know, as a result of some more wins, we will see it move-up in Q2, Q3, et-cetera. And the quantum of which I’m not able to talk about right now because again, we are in the middle of doing many of those deals, but we’re keeping our fingers crossed and hopefully, you will see that ramp-up happening as we go along.
Nikhil
That’s good to — I will join that back to queue. Thank you. Thanks.
Operator
The next question is from the line of Sandeep Shah from Equirus Securities. Please go-ahead.
Sandeep Shah
Yeah, thanks. Thanks for the opportunity. Sir, I wanted to understand the ramp-downs which you have witnessed in the first-quarter of calendar year 2025 is it at the later part of the quarter the why I’m asking this is, it may not have a full-quarter impact in the first-quarter of ’25. If it has been ramped down starting March, it may have a full-quarter impact in April, May-June. So are you worried about 2Q growth as well because of what has happened in the first-quarter of calendar year 2025.
Nitesh Bansal
Hey, thanks for joining in. And you know, a simple answer to that question is no, we’re not worried about the impact having a knock-on impact on-Q2 kind of a thing because here, A, unfortunately for us, some of this impact to the beginning of the quarter. So we have a full-quarter impact kind of factored in win B it was you know it was not even like a like a cancellation or a ramp-down or a churn, it was just a logical end-of-the SOW which we would have expected to continue. But then given the this given the challenges in the economic situation, the customer decided to delay, it does not renew at that point in time, right? So that’s something — and that’s why it came as a little bit of anticipated thing. Some of the churn is quite natural, which happens every quarter, every year, so which also took place. But short answer is no, we’re not worried about a knock-on impact in Q2 because of this.
Sandeep Shah
Okay. Okay. So is it fair to say the seasonal strength for the industry in the first-half of the financial year, which I’m talking about as of March as a year, which would be 2Q and 2Q of the calendar year for you. There could be a material or considerable ramp-up because of the order book, which we have as well as well as the order pipeline? And second, the nature of the deals which we are winning because is it possible that the nature of the deal, which is discretionary and the macro outlook still remains uncertain, especially in the US, the deal wins may not convert on-time in terms of revenue.
Nitesh Bansal
Now Sandeep, we’ve asked both sides of the question, so I do not know which one to answer first. But from our own vantage point, the way we look at our pipeline and order book, know, it’s encouraging for us to continue to work on that. We obviously need to convert more of those deals. The decision-making we are keeping our fingers crossed does not get delayed too much. I mean, we’ve seen in Q1 some delays to decision-making. If decision-making gets delayed, it will delay the realization of revenues for us and hence it can create a delay in finally that ramp-up that earlier Nikhil was asking, right? But assuming that the uncertainties have now been kind of internalized by the organization, they understand what impact they are having, how they need to move forward. So finally, they will then start moving forward with the decisions. Then whatever we have in the pipe or whatever we are converting should ideally result in being able to continue to build towards the growth as we have you started the year with. From a larger commentary perspective and whatever commentary I mean I’ve seen, I’m sure you’ve got better sources and you’ve seen that all. At least Q4 commentary, which is Q4 for most companies is March, that hasn’t been — hasn’t been very encouraging. But I think like everybody else, we are also hoping that this will — this will — with the start of April and going-forward, some amount of tailwind will come in and will help us, right. The specific segments that we have been working with targeting the platform companies, the data platforms, the whole AI induced acceleration and those kind of things, we are well-positioned and we are seeing that we are winning against some of the larger competition that is the added source of confidence for us, which we are building on.
Sandeep Shah
Okay. Last couple of questions, sir. Looking at the 4Q run-rate and the first-quarter run-rate, do you believe based on the ramp-up schedule and the pipeline and the deal order book, we can be above the average growth rate and if that and when I say industry, I think it could be between 4% to 5% kind of a growth because to even achieve a more than industry growth rate, the lift with the growth rate for the next 3/4 would be considerable for our systems looking at the run-rate in the 4th-quarter last calendar year and first-quarter of this calendar year.,
Nitesh Bansal
Honestly, too early to say because like you only said in the last question, right, it all depends on if the decision-making is not delayed and those wins happen on-time. So we believe we can do that. We should certainly be able to come up of the industry growth rate. But while all our efforts are in the right direction and the indications from the wins, et-cetera in the right direction, a little bit of — little bit of timing and luck would also might be bad at this point.
Sandeep Shah
Okay. Okay. And the last question on the adjusted EBITDA margin outlook. Anything to share both in the near-term as well as for the calendar year 2025.
Nitesh Bansal
So I think last quarter also, we had said this from whatever adjusted EBITDA we’ve reported, you know, A, it is built-out of actual productivity and utilization improvement, which are quite sustainable and secular. So we don’t believe that we will have any, any short-term challenges due to that. So we — we would be able to maintain — robustly maintain the adjusted EBITDA margin levels. However, we are obviously investing in go-to-market. We are investing in sales team. We are also investing in-building capacity and capability, deeper capability around AI and cloud. So some amount of that investment will go in. But you know, like we had said, last year’s annual EBITDA rate is something we are quite confident of managing and maintaining and being able to deliver to that. So last year we reported 16.7% EBITDA, right? So we believe that at that rate, we will certainly be able to manage and deliver.
Sandeep Shah
Okay. Thanks. I will come in the follow-up. All the rest.
Nitesh Bansal
Sure. Thank you. You. Thank you. Thank you.
Operator
The next question is from the line of Nitesh from Capital. Please go-ahead.
Nitesh
Hi, thank you for the opportunity. So in the press release — release you’ve mentioned continued traction towards deals and that there are some large deals in the pipeline. Could you provide some more clarity on this such as the size of the deals, type of work involved and when do we expect them to come through first.
Nitesh Bansal
So size of the deal, like I had mentioned in the earlier question, these are — these are obviously, you know, several millions of dollars type of deals with multiyear commitments. Our nature of work remains core to our, which is product engineering work where we are either taking over multiple — multiple products, including engineering build and activities or building several boards for a rapidly-growing platform or product engineering play where we are we are adding to their design, build and test capabilities for certain clients for a range or family of their products. So it’s core to our in-product engineering space. And in terms of timing, I think — like I said, we are currently in the process of those deals and we expect some decisions to take place in Q2, maybe a worst-case some decision might go into Q3 and then we have some deals which we are winning now, which will naturally go into Q3. So this is an ongoing thing and we are just keeping our fingers crossed that we will continue to receive those decisions on-time and can then accordingly, you know, reflect those in our results, both in terms of ramp-up of headcount and revenues as they come along.
Nitesh
Thank you. And just following-up on the question from the previous participant. So just any number you could give, do you expect revenue growth to be in the high-single-digits for 2025?
Nitesh Bansal
So, we do not provide guidance, but then to Sandeep’s question like I had responded, you know, we are we are quite what should I say, we are quite encouraged by the by the activities that we are participating in and if the decisions, etc happen on-time and some amount of timing and luck goes along, then maintaining and delivering industry average — above industry average growth should be quite possible.
Nitesh
Thank you. Okay. Thank you. That’s all from my side. I’ll fall-back in the queue I more questions. Thanks. Thank you.
Operator
The next question is from the line of Niel from Carnadian Asset Management. Please go-ahead.
Mihir Manohar
Yeah, hi, thanks for giving the opportunity. Sir, wanted to understand on GCC side, I mean also when we see GCC, this is also part of the book of some of the last tier and tier IT companies. So I wanted to understand given our size which is there, we have in 4,500, 5,000 people and typically GCC is kind of recruiting a large number over there. So how do we compete or how do we compare ourselves versus these mid-tiers and large tiers? Is it the service line is different or is that very specific some color around that will be helpful.
Nitesh Bansal
Right. So you know, I’ll answer the second part first because that color context is important as compared to some of the large tier players who are possibly mostly involved with large enterprises who are looking at several very, very large GCC, 1,000 people, 2,000 people, set, et-cetera. Our focus area is defined by a mid-market segments we are looking at. We are looking at companies who are not global 2000 enterprises. We are looking at mid-market enterprises, typically $500 million to $5 billion companies in the mid-market who typically are looking at GCC set which might — which might be a few 100 people, not thousands of people type of things. That’s number-one. Second, we stay very true to our swim lane. So we are only going after companies in the tech space. So these are tech, ISP platforms, health tech companies, fintech companies and telco tech companies, right? So very, very focused in our swim lane because that’s where we bring maximum value to them. So it is not just a pure you know people game, it’s actually a capability game. And we are also focused on where GCC objectives are not about back-office and doing cost takeout operations. These are GCCs which are focused on innovation, R&D, product acceleration and those kind of things. So we’ve carved-out our space in a manner that we can play a certain amount of niche to it and that’s where we have seen the positivity and traction come through. And the second part is that we are not looking at it as a — you know as a massive recruitment game because recruitment, I believe anybody can do, right? It’s about making it operational and operating it successfully to deliver final KPIs back to the parent company. And that is where you need an operator mindset, somebody who’s who operated and delivered those kind of operated, constructed, build those kind of teams and deliver outcomes to company and that’s what our customers like about us when we help them through this journey. So I hope that kind of provides you a sense of what we are talking about from a GCC perspective?
Mihir Manohar
Sure, yeah. So what other players, let’s say, when you go for this particular on the side, what are the competitors or peers that companies which you see?
Nitesh Bansal
Well, these days we see a wide variety, right? I mean, there are consulting companies or pure-play big-file consulting who are basically advising them on GCTs and sometimes customers have a choice that they can work with them to basically say, okay, fine, we’ll do it ourselves, but you help us guide us through. We have also seen the likes of what we call GCC facilitators. I mean, we have all seen press releases from NSR and and others, right, who can — who can handle and carry them through the process and we’ve seen some of those in the competition. We’ve also seen larger midsized players, some of the very well-known midsized product engineering or as project engineering companies from India who also participate in those titles. But as far as, like I said earlier, our target selection and our capability towards those domains and being and the ability to deliver an outcome through that GCC to the parent companies, what has — what has differentiated us?
Mihir Manohar
Understood. Sure. What’s the current business price for revenue for us for GCC? And what’s the EBITDA market that we are making? Is it higher than our company average?
Nitesh Bansal
Now that you from a business perspective, the price point or EBITDA, et-cetera that we are seeing. Today, it is not such a big percentage because we just launched it like in November, right? So we started building the book of business and winning some business in that regard. So it’s not such a huge percentage or a meaningful percentage that will have an impact on the overall organization today as such. But we definitely consider that this percentage will grow. Where we have, you know, being very, very prudent is, as I said, since we are doing innovation-led or R&D-led type of a business, we do not see this as being significantly either price or margin-dilutive to us.
Mihir Manohar
Understood, sure. And the second question was on from a business perspective, we have $200 million of annualized business. Just wanted to get an understanding to how much is the annuity business for us because what I understand is our product engineering business is largely a product business. So maybe you can provide some color as to what is the annuity percentage business for this $100 million and where this — where does this annuity come from? What kind of audits give us annuity?
Nitesh Bansal
I think, good question and I probably talked about it once in the past as well. You’re absolutely right, most of the product engineering business is discretionary spend. It is a project-based project-to-budget type of business. And hence to say that there is a significant portion of annuity in there is not going to be right because it is not, right? And — but the relationships are sticky. So while the business itself is not annuity, it is discretionary and project-based, but it continues year-after year simply because once we become part of somebody’s product engineering team, we know their products, we know their architecture, we know their product roadmap. It is in their favor and it’s actually very difficult for them to then replace us or have somebody else get onboarded and do all that running and carry that out, right? So that’s why we see that we have a lot of long-standing clients and the longevity client longevity is very-high.. Now having said that, as a conscious strategy, we are trying to get at least some amount of annuity business through adding more of product sustainment services or doing these some of the deals which could be in a multiyear fashion, especially in the digital transformation space where we are now beginning to look at whether we could take on — as we’ve launched our security service offerings, for example, those are typical sustainable in nature or we have launched some of our ops offerings with CloudOps and MLOps and other things, which can have some sustenance in nature. We hope that our traction with some of those offerings will grow. And especially with all the clients where we are already working on AI, we are already working on data with them, adding a data ops in a, AI ops kind of offering will give us certain portion of annuity business or annuity revenue with them. So today, the assumption is right that most of the business is discretionary and project spend in nature. I don’t have a clear percentage to say how much is annuity, but it is not very large. But we are consciously working towards adding offerings to our existing clients, which can develop an annuity on the side so that we can increase our annuity percentage.
Mihir Manohar
Understood. That’s it from my side. Thank you very much. So it’s only at 10.55, we’ll take last two, three questions, sir. Got it. Okay, sir.
Operator
The next question is from the line of Vinay Manon from Monaj Capital. Please go-ahead.
Vinay Menon
Yeah. Thank you for the opportunity. So a few questions from my side. One, can you throw some light on this AWS partnership for IoT connectors. So what kind of opportunity do we see there and you know exactly is on clarity on it?
Nitesh Bansal
So AWS is has one of its three strategic initiatives in the telco space is trying to build a marketplace where our telco operators can leverage AWS marketplace to provide value-added services for essentially everybody like homeowners like us where today people are using Alexa or Google or whatever else or CV to control, let’s say, the lights or air-conditioning or whatever in their house and it is all distributed different OEMs and different technologies and different connectivity mechanisms and all. By developing standard connectors that will allow a telecom company to build a connected ecosystem for homeowners, et-cetera, they are going to create a new revenue stream for telco operators, which will then translate to the revenue stream for AWS and which will then translate into the money that anybody who is developing those connectors will be able to. We have been selected as one of the key strategic partners to develop those connectors. We will be developing a certain number of connectors over the course of the year for which we will get paid both directly by — through our contracted data, but also by the telco operators who will end-up essentially using the connectors to build those ecosystems and monetize them. So long answer in short, but as you know, it’s a — it’s — it’s a very strategic push by AWS for creating a different kind of a marketplace along with telco operators and we are a core part of it.
Vinay Menon
Okay. Okay, okay. And we’ve added about like 50 employees this quarter. So what could be the trend going ahead? Is this the quarterly trend that we can expect over the year or could we will be different
Nitesh Bansal
Well, this is 50 net addition despite the reduction in some of the revenues as you’ve seen. So if you are if you look at it that way, our gross addition has actually been quite healthy, inside one of the highest in any of — in receiving last seven or eight quarters. And we believe that the coming few quarters, we will see good gross additions and very healthy net additions of headcount as well, given some of the large deal discussion that we had been having throughout the call. Yeah. So the number should be actually the numbers should be larger only, right, because hopefully the ramp-downs have already impacted in, in which case the gross addition and net addition difference would not be that large anymore.
Vinay Menon
Okay. Thank you. And sir, like in Q1, like obviously the tariff-related issues were there and uncertainty. How is April and maybe until now? Are we seeing — we’ve seen lot of trade deals which this time sign in the country. So are we seeing that going away and like talks in a decent manner for us?
Nitesh Bansal
I do not know whether it’s impact of trade deals or anything else. The way I am seeing it is initially there was a shock as companies did not know what will happen next or how to react to it and what that typically does is put breaks to everything. But once you realize that, okay, this is how it is happening and this is going to impact on me and this is how I’m going to deal with it, once all that happens, then you start releasing the brakes and start doing what is necessary for your business, right? So I do not know the cause and effect relationship, but what I’m seeing is that people are coming back to that point where they’re saying, okay, fine, we understood. And now we need to do what’s necessary for our business.
Vinay Menon
Okay. Okay. Okay. Thank you. Thank you so much for the opportunity. Thanks. Thank you.
Operator
The next question is from the line of Anmul Garg from Capital. Please go-ahead.
Kumar Gaurav
So that is the last one.
Operator
Yes, sir.
Anmol Garg
Yeah, hi. Thanks for the opportunity. Just had a couple of questions. Firstly, wanted to understand that our — despite the wage hike, our SG&A have reduced during the quarter. So is there any voluntary deduction that we have done in our sales team and accordingly, are we planning to change any structures over there?
Nitesh Bansal
So in SG&A side, there have been a couple of couple of reductions because we take we do take a half yearly view on salespeople performance, etc. So some of that kind of comes in and has an impact of course. So, but there is, you know, there is no structural change or anything as we continue to — we actually continue to hire more salespeople and add more feet on-the-ground. It’s just a question of maybe a reduction happened first and addition is happening later. So you will see it kind of level out. So there isn’t really anything much to read in there.
Nand Sardana
Yeah. And let’s not the short at all. Yeah, let me just add. In addition, the reason is that there is lesser AR provision compared to last quarter. The true-up of travel expenses and you see year-end we make year-end provisions, so some true-up of that. So these are temporary, otherwise we are investing in sales and marketing as planned.
Nitesh Bansal
Yeah.
Anmol Garg
Sure, sir. And sir, secondly, wanted to understand that when we talk about operationalizing the GCC, does that mean that the deal sizes here would be relatively shorter durations and it would include pass-through hardware and software components in
Nitesh Bansal
It no, not really, because a and you know it is not necessary that operationalizing GCC or scaling up GCCs as shorter range generation because, you know our point-of-view has always been that to stabilize a GCC operation, operationalize it and mature it, it takes a certain amount of time and that time is not like you know short, it takes at least 36 months or more to kind of do that. And hence you know, and that’s a choice we’re making, right? We’re not looking at being that operator who just kind of sets up a — sets up a team for someone and say, okay, here it is run with it. For that, they don’t need us, right? We are working with clients who really are interested in making sure that they get it right the first time. They set it up right that the GCC scales, the operations mature, that they’re able to deliver with great amounts of maturity back to the parent entity. And we have that option not to do the deals where they are shorter in duration. So we basically laid that point to view very clearly, right, that it is not short-duration. And neither are we doing these deals with the — with lot of software or hardware pass-through because please remember, these are not infrastructure deals. These are not — these are not back-office deals. We are talking about engineering. We are talking about product development. We’re talking about platform development. We’re talking about new AI models and those kind of things. So what they have is essentially what a normal development team looks like. These are high-quality resources built-in a certain manner so that they are delivering to a product roadmap or a platform roadmap and what they require is the best computing infrastructure. Typically on cloud with a lot of AI and other tools supporting in terms of licenses, which are all part of the operational setup of such a team, right? So clearly, no, we are — we are not looking at this as neither short-term nor a lot of hardware or other things passed-through over there.
Anmol Garg
Understood. Understood. And sir, one last question is that earlier we have talked about two tailwinds in our revenues. One is from the Blackstone channel and the second is to penetrate the larger IFCs and do some digital engineering work-in them. So just maybe an update on both of them and how both of these are panning out?
Nitesh Bansal
So the last one channel continues to be one of the channels through which we are driving new deal wins and growth. They — like I’ve said in the past also, every quarter, we see one or two additions from that channel to our client count and accordingly to the revenue. The good thing is that not just Blackstone, but we are also you know, over the course of last year or so, we have developed significant traction with other private equities as well using similar playbooks and delivering similar kind of solutions to them. So today, we actually work with over 10 different private equities focused in the mid-market segment and we are continuing to develop our book of business with private IPs. On the larger ISPs or enterprise ISV front, we’ve seen some success. This is something which is still in the making, but we are working with a couple of very large well-known names in the in the tech space. I don’t think we have permissions from the client to name them right now, but we’ve seen a couple of wins and we are building on the back of that to go after more larger enterprise IFC type of space to be able to build that book of business. And we are confident that is — that’s only a question of timing rather than anything else because once you have a couple of case studies, a couple of wins, it’s something that you can continue to continue to leverage and multiply.
Anmol Garg
And sir, do you believe that some of these IFCs that we are working with would eventually become or will come in our top-five or top-10 clients?
Nitesh Bansal
They would. Yeah, certainly. As we as we continue to build more book of business with them they were. But I mean, right now, we have just started working with them as of last couple of quarters as we started focusing on those larger IRCs. So it would not be something that you would certainly see over the course of next few quarters. But yes, I mean, the whole idea is these are larger ISVs where total spend is much higher and hence our ability to expand the wallet share is much higher. So we — so the room for growth available is much higher and that’s why we would want to work with them. That’s why we would want to focus on them and expand those relationships and then eventually get them into our top-five, top-10 customers.
Anmol Garg
Understood, understood. Thank you so much. Thank you.
Operator
The next question is from the line of Sandeep. Please go-ahead.
Kumar Gaurav
That will be the last question..
Sandeep Shah
Yeah. Thank you very much for the second opportunity. Nitesh, sir, just any learning in terms of how to become slightly more defensive in terms of ramp-downs, which may come in the product engineering services, which we largely do the bulk of the client because these kind of a business is more sensitive to macro-related issues. So any learning and any measures taken to protect ourselves to have slightly curtailment on the ramp-downs because world is slightly more volatile and uncertain and maybe coming at a regular interval.
Nitesh Bansal
Oh, absolutely. And I think you’ve been very polite when you say, while it’s slightly more volatile, I think the volatility has — has been crazy over the last 18 to 24 months. But Suneet, you know, we obviously — this is the job we do as management leadership and the Board and talking in the Board meetings, etc., we are constantly looking at what is it that we do towards building our resilience and robustness? How can we get more of foresight or looking around the corners kind of a thing? And ultimately, it boils down to getting closer to the customers being more constantly in connect to know what’s happening with them or in their — in their particular enterprise because a lot of times this is not an industry-related phenomenon. Some of them are industry-related and you know them because of the trends. But then a particular organization, what they are going through, what their situation is, whether it’s related to their funding, whether it is the borrowing, whether it related to the product, how it is going-in the market. And all of that basically requires just staying closer to the customer, which is the most effective direct information. And that’s where we’ve continued to build our team, the funding engine, the whole account management layer and also encouraging our delivery folks, our delivery leadership to have more regular connects with a lot of our delivery leaders actually traveling more frequently to visit our clients and meet with them. So the frequency at which we have been talking to our clients, connecting with the senior leadership and in cases where they are you know private-equity portfolio companies, we are even connecting to their private-equity partners, right, reaching out at a regular interval to get a 360 degree view of that has been the most kind of effective and the strategy that we’ve been following. And I think that’s the best that we can do to get any kind of foresight or advanced warning when things are not right.
Sandeep Shah
Okay. Okay. And just a last follow-up, do you believe we have to also focus and create a dedicated team in terms of more pursuing deals tilted towards support and maintenance, which are more sticky, predictable year-after year. Any investment on those side of the as well?
Nitesh Bansal
So that investment, you know, the short answer is yes. And what we are doing is we have — we have increased our capability in this space because first and foremost was about having the offerings in that space. So we’ve increased the capability in this space, some of the delivery leaders that we brought on-board come from that background and have managed to build some of those kind of offerings and which we are now actively taking to the market. Our target space is existing clients because we want to build that stickiness with existing clients. So what is happening is with our top customers, we are proactively approaching them. It’s also an excuse to obviously stay-in touch with them, which I was talking about earlier and introducing those offerings to them and being able to figure out the value propositions with which we can work with them. We’ve seen a few successes. You know, some of the customers have agreed and accepted that they would like us to actually not just do product build, but also take-over the sustenance of their products or product portfolios and we are beginning to kind of, you know, step into that work and transition that work-over. So it is a developing space and you’re absolutely right. So we’ve got a dedicated small team in India, which is working on it, building those propositions and pushing to our existing banks.
Sandeep Shah
Okay. Thanks and all the best. Thank you. Thank you. Thank you. Thank you.
Operator
Ladies and gentlemen, that was the last question for today’s conference call. I now hand the conference over to Mr Nitesh for closing comments.
Nitesh Bansal
Thank you. Thank you so much for conducting the call and thank you so much for every — everybody asking the questions. Like I always say, your questions are very insightful and help us also assess how we are performing, plus also focus on the right areas based on the questions that you asked. So that’s been very helpful. Thank you for joining as always and encouraging us and we hope to continue to work together with you. Anybody who is looking for any detailed financial modeling, information, et-cetera, like we’ve always said, Nanji is more than happy to help. Please reach-out. And — and yeah, I look-forward to interacting with you during the course of the quarter as well as with our next quarterly release next — with the next quarter. Thank you so much. All the best.
Kumar Gaurav
Thank you. Thank you. Thank you everybody.
Operator
Thank you. Thank you. On behalf of our systems, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.