Sonata Software Ltd (SONATSOFTW) Q2 FY22 Earnings Concall Transcript

Sonata Software Ltd (NSE: SONATSOFTW) Q2 FY22 Earnings Concall dated Oct. 18, 2022

Corporate Participants:

P. Srikar Reddy — Managing Director

Samir Dhir — Chief Financial Officer

Sujit Mohanty — Head, Sonata Information Technology

Jagannathan Chakravarthi — Chief Financial Officer

Analysts:

Baidik Sarkar — Unifi Capital — Analyst

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

Aejas Lakhani — Unifi Capital — Analyst

Sameer Dosani — ICICI Prudential AMC — Analyst

Romil Jain — Electrum PMS — Analyst

Mohit Jain — Anand Rathi — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Sonata Software Limited Q2 FY ’23 Results Update Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Srikar Reddy, Managing Director of Sonata Software Limited. Thank you. And over to you, sir.

P. Srikar Reddy — Managing Director

Thank you, and good evening everybody, and welcome to the analyst call post the announcement of our results for FY ’23 Q2. The results are updated on our website. Today I have with me Mr. Samir Dhir, the CEO of the company; Mr. Sujit Mohanty, CEO and MD of our subsidiary, Sonata Information Technology Limited; Mr. Jagannathan, CFO; Mr. Roshan Shetty, Chief Revenue Officer of the company; and Mr. Sathyanarayana, Head of Finance.

What we will do today is that we’ll have Mr. Samir taking you through the International Services operations, Mr. Sujit then taking you through the highlights of the India business and Jagan will take you through the financial highlights and then we’ll open up the forum for Q&A. So over to Samir.

Samir Dhir — Chief Financial Officer

Thank you, Srikar. My name is Samir. Good evening to all of you. And a very warm welcome to all of you for this conference call to discuss our strategy and goals, broad industry updates and the financial results for Q2 quarter ended September 30. Thank you for joining us today. We all appreciate your valuable time and support.

First of all, I’m very excited with the opportunity to lead Sonata Software Limited’s next phase of growth. I’ve taken the baton pass being passed to me and to work hard, to make Sonata IT powerhouse in time to come. The team at Sonata is really excited and working judiciously to accelerate our growth curve and really build for scale; and scale in terms of large deals, large clients, markets, partnerships and talent. That’s what really we are focused on as we move forward.

Let me cover with you some broad strategic goals that we’re working on and then go around them. So given the market potential, we really aim to double our International business in the next four years or so. And we’ve known in the industry as a specialized firm in modernization and digital engineering. We are committed to focus on our strategy and making investments; and investments in sales, investments in large deals, capability build, partner ecosystems, all that to really become one of the fastest growing company in years to come.

We are in interesting times right now as a industry. We really see three secular trends in the market. Number one, we continue to see enterprise modernization and enterprise is really focusing on growth platforms, which will drive the revenue up. That growth or that trend is really intercepted by clients modernizing their digital platforms, improving their customer experience on their platforms and unlocking the power of data through analytics and AI/ML. We believe that’s a significant trend in front of us as a company to harvest and continue to build on that.

The second trend we continue to see is leveraging technology to strengthen compliance and security, and we’re really bullish about that with the capabilities that Sonata has built over the years. We think we are rightly positioned to capitalize on that trend as well.

And third, quite very importantly right now, to continue to build deep engineering talent with the specialized and not generic. We really have prided ourselves over the years to build deep engineering talent in the company, and that’s something that we want to continue to harvest upon and continue to intercept the market on that trend.

Now if you have a question for me, and say, Samir, so how you want to build for this growth? And I think the answer to that is really focusing on the verticals that Sonata has been traditionally strong in. We have been traditionally strong in high-tech industries, manufacturing, retail and travel verticals. As we go forward, we’re doubling down to scale our BFSI and healthcare life sciences verticals. We’re really spending investment dollars — continue to invest dollars in BFSI and healthcare verticals to strengthen those verticals from the vertical point of view.

The second investment we’re making is in our sales and marketing across the globe in USA, Europe, ANZ and APAC. We really continue to strengthen our sales organization, account mining, hunting organization to really build out a world class sales organization and really empower the teams with the cutting-edge, leading-edge digital tools to be most efficient and really continue to add value to our customers.

The third side of building scale from a growth perspective is really to continue to focus on modernization and solutions. We have been very strong in our platformation framework. We’re very strong in the data and cloud side, automation side. And that’s really where a bulk of our focus from a modernization transformation will come from, really harvest the strength of Sonata in the past and really continue to build on that and gain market share rapidly in the verticals that we’re focused on. So that’s really our high level blueprint to build scale to be ready for the growth that is in front of us.

If you have a question for me which says, how do you build engineering talent go forward? What are we doing different to really build out the capabilities that are needed to gain more and more market share? My response so that will be, we’re really building talent ahead of time and not be surprised with the growth. We really continue to with our plans to hire lateral talent. We are continuing with our plans to hire fresher programs. We are building out development centers in European geographies and other geographies where we’re servicing our clients.

We’re continuing to also invest deeply in personalized training for our engineering teams, depending whatever track they are on. We continue to invest dollars to make sure that we continue to harvest and nurture talent which is best-in-breed from an engineering perspective. All this keeping in mind that we’re also expanding into Tier 2 and Tier 3 cities and keeping diversity and inclusion as the main focus from a talent build-out perspective. So we really continue to make sure that we have a very diverse workforce and a global workforce as we move forward.

As we have embarked on this strategy, which is really a continuation of the past and build-out the future, we’re beginning to see some early success in this front. I’m proud to share with you that we’ve closed out a very large deals in the current quarter. This is with the Sweden-based manufacturing conglomerate who are a leader in access products. This is a company which is in $95 billion and over in revenues. So we think as we close this large deal out, we’ll continue to farm and revere [Phonetic] this customer. And really the nature of the work is at the heart of what Sonata has stood for over the years. This is a customer we are going to modernize their systems, accelerate their business transformation, bring in sales efficiencies and channel efficiency, real-time customer engagement, not only with customers, with suppliers, distributor engagement and all within an agile transparent manner. And this is really what we are very proud — very happy about with this win because it sets up the foundation for us for a very large European customer, but beyond that, really it’s harvesting our investments in the modernization space.

The second win — marquee win that we had this past quarter was for a SaaS-based talent management and development client, which has over 6,000 customers spread across 180 countries. And for this customer, we’re really implementing a solution to modernize the current suite of products on AWS platform and doing their modernization work, doing the cloud modernization, product lifecycle management and really getting them ready to adopt the infinite power of the cloud platform from a cloud-native development perspective. So we’re beginning to see early offshoots and success of the investment strategy that we’ve put out, which is all towards the scaling the platform from a growth agenda perspective.

Now let me cover very briefly the market and industry update. Despite some macro concerns that have been talked about in the industry, so far from a service demand indicator perspective, our outlook is very strong. We are seeing some decisioning delays, but overall, the demand environment seem robust. Our pipeline continues to grow. And we continue to drive growth from a pipeline perspective with our clients’ platform, which are very growth-oriented. These are customer-facing platforms, revenue-facing platforms with customer, and they are all underpinned by work in the cloud, data and automation space. And this is again a cornerstone strategy of Sonata so we can harvest the momentum as we move forward.

With that, let me move quickly to the Q2 update. We have good strong performance in the most recent quarter. Our International Service revenue will grow 1.7% sequentially and 16.9% Y-on-Y. In rupee terms, 5.4% sequentially and 27.6% Y-on-Y. In constant currency terms, we witnessed 3.9% sequential growth and 22.8% Y-on-Y. Our operating margins are at 25.7%.

Beyond numbers, this quarter we also added over 850 employees, out of which we have also kept our promise for inducting freshers. Out of 850, 300 are freshers. And we’re also beginning to see tapering down of the attrition. This is the quarter we saw attrition come down by more than two percentage points within the quarter compared to prior quarters.

With that, in summary, we are very excited about our long-term prospects of our growth. We have started taking steps to invest in the business and strengthen our sales and solutions to gain the market share by building scale ahead of time. We aim to be in the top 25% quartile of revenue performance in the industry in time to come. We expect the momentum to take off in about three to four quarters. And all our investment initiatives are really built around that to continue to build a very strong and robust order book and pipeline.

Thank you. With that, let me turn it over to Sujit for his comments. Sujit?

Sujit Mohanty — Head, Sonata Information Technology

Thanks, Samir. Good evening to everybody, and welcome to the call.

As you have seen from the revenue [Phonetic] Sonata have had the good quarter. On the EBITDA side, we had 40% year-on-year growth. From the Indian market perspective with most of our customers continue to see their investment for digital platformation. And most of our customers’ process continued even during this quarter as well as we believe that going forward this initiative from each of these customers will continue for some time.

This gives us an opportunity to have more business on the hybrid infra and on the cloud infra. And that is what the focus we have as a group with most of the customers we were working with them in their digital platformation process and helping them to build-up their hybrid and cloud infra, which is required to deliver a good digital experience to their customers as well as to their process.

From a segment perspective, in the Indian market, I think [Indecipherable] [24:28] BFSI, pharma, these are the industries which are — where we can see really good cloud consumption growth. And whatever our interaction and experience we have with these customers and as well as with most of the cloud providers, we believe that this trend is also going to continue. In Indian market, various of our customers at various stages of this cloud digital process, as you must be knowing, that this process consist of various stages. In the initial stage, most of the customer go for [Indecipherable] [25:07] that means on-premise to cloud and after some time they go for multi-cloud and then they go for modernization. And towards the end, to get the best results and output, they go for data modernization. So as a partner, we would like to be a strategic partner to each of our customers in each of these stages. And that is what is our business goal and we continue to work on that.

We continue to focus on large annuity and platform contracts. Almost — a major part of our business comes from our existing customer in form of annuity contracts. Almost 85% — our annuity renewal rate is almost 85% and that gives lot of comfort for the future business. Currently, various hyperscale cloud providers in India they are having lot more go-to-market initiatives with partners as well as directly with customers to propogate their cloud platforms and to make sure that there is a larger consumption for each of their cloud offering. And we’re taking advantage of that, we’re trying to work with each of them, we’re trying to have more and better GTMs with each of them so that we’ll get the larger share of the business.

That’s from me. Thank you so much. I’ll hand it over to Jagan.

Jagannathan Chakravarthi — Chief Financial Officer

Hi. Thank you, Sujit. Good evening, all. Thanks for joining for this call.

Now I’ll take you through the financial performance of the company. I’ll start with the consolidated performance, because this includes the India and the International revenue. I’ll cover the revenue of International business seperately and Domestic business separately. With regards to the important pointers, for the last 12 quarters, the CQGR of EBITDA growth as well as the PAT growth have been consistently high. We are at 3.4% and 3.8%, which reflects the very strong profitability, continued to have a very, very strong industry-leading profitability in our business. That’s highlighted here.

The next step for International business, now we have to talk about the revenue growth this quarter. As Samir mentioned, we had a U.S. dollar revenue growth of 1.7%, but the constant currency was 3.9%, which is in the top line of the revenue growth for this quarter in the IT services field. Our profitability continued to be very strong. Our PAT growth have been consistently high. The CQGR of our PAT growth have been 2.8% and we reflected strong profitability of 25.7% of — EBITDA of around 25.7%, which was the industry-leading EBITDA for the business.

Coming to the Domestic business, Domestic business continued to do well, as mentioned by us. [Indecipherable] [28:00] the Domestic business has the growth of absolute gross contribution rather than as a percentage of profitability and revenue growth because that’s the turnover for the business. We wanted to make sure the business on the absolute amount of gross contribution and this growth on that. We continue to grow the business very well. And this business gross contribution again had grown quarter-on-quarter very well.

Coming to the financial summary of this, this is the break-up of the financial performance of the various — both the International business and the Domestic business separately. This has been shared with you. We can take questions later whenever the question comes in. Our key operational parameters, there is no major changes in the operational parameters. Few of the geographies like Europe had an impact because of the cross-currency impact was reflecting on the — our percentage of contribution. This is with an abberation because of the strong movement in the currency during the end of the quarter. The same was had been reflected in couple of verticals also like retail. Otherwise, there is no major movement between the same. The onsite/offshore mix, again, there is a small change in that of onsite/offshore mix. Again, there is cross-currency impact on onsite revenue has been there to some extent. Otherwise, we don’t expect — like an abberation, we don’t expect this to paying much in the coming year.

Coming to the other verticals, we have continued to have a strong client addition. We have added 12 customers this quarter and we continue to focus on further growth. We expect this strong performance to continue for the remaining part of the year. And with this client additions, we expect this growth to be propelled in the coming quarters also.

With this, I complete my financial update. Hand it over — hand it back to for the questions.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Baidik Sarkar from Unifi Capital. Please go ahead.

Baidik Sarkar — Unifi Capital — Analyst

Samir, gentlemen, good evening, and thanks for the numbers given the cost environment. Could I invite your comment on how much of growth was perhaps less than the [Indecipherable] [17:53] unfulfilled due to ensuing supply side issues? A. And B, are we on track for all of that in Q3? I ask this question because I understand also been decent [Indecipherable] with this quarter’s constant-currency number. But in Q4 of last year and Q1 of this year or anything that left a lot of revenues on the table upwards of 50% from what I recollect. So apart from organic demand visibility, how is the recovery of what we’ve [Indecipherable]?

Jagannathan Chakravarthi — Chief Financial Officer

Your voice was little [Indecipherable] repeat the question, please.

Baidik Sarkar — Unifi Capital — Analyst

Sure. [Indecipherable]

Operator

Sorry to interrupt, sir. Sir, are you using any earphones? I would request you to please speak from the handset.

Baidik Sarkar — Unifi Capital — Analyst

I think this must be better.

Operator

Yes, it is better.

Baidik Sarkar — Unifi Capital — Analyst

I’ll just repeat my question again. Apologies for that. I just wanted Samir and the team’s comment on how much growth was left on the table unfulfilled due to supply-side issue? And are we on track for recouping that starting Q3? I ask this question because in Q4 of last year and Q1 of this year, there was upwards of 2%, 3% growth that was not build and not executed because of supply-side issues. So your comments on that? And if we can see a strong recovery from that perspective starting in H2? Thank you.

Samir Dhir — Chief Financial Officer

Yeah. I think I got most part of the question. Thanks,Baidik, for asking the question. The broad answer is, it’s in the mid-teens number somewhere around 15% or so approximately. I may not have the exact number, but it’s in somewhere in that zone. That probably is still not fulfilled because of the talent supply constraints that we continue to see. Of course, it varies a little bit by technical skill set. On the more modern technology, it’s probably slightly higher. And perhaps the more traditional technology, it’s slightly lower. But on the average, if you want to get a ballpark number, Baidik, I would say probably around 15%, 16%.

Baidik Sarkar — Unifi Capital — Analyst

Sure, sure. So given the intake this year and then given how our intake [Indecipherable] by when do you think, Samir, we can bridge that gap or do you reckon you hit a couple of more quarters to see if you guys can catch up? How is the bridge looking like?

Samir Dhir — Chief Financial Officer

Yeah. No, I think we are sort of making good progress, Baidik, like we said, we have continued with our investments in the fresher program. Despite all the macro economic concerns, we have not slowed down our investments from a campus hiring perspective. We’re continuing to do that because the demand environment is robust. We believe — I think in the last call we had said it will take us about three to four quarters. I think at this point in time given the easing of arbitration, we think it’s about couple of quarters away before we can completely tied over it. So we’re getting better and faster now.

Baidik Sarkar — Unifi Capital — Analyst

Great. And I’m sorry if I missed this on your opening comments, but on the large deal size, I mean, congrats on that. Could you perhaps quantify the range of these two large deals that we won? And what’s your spectrum of large deals in terms of value?

Samir Dhir — Chief Financial Officer

Yeah. So we don’t share the numbers of the deals itself, Baidik. But I think in general, our yardstick is, these are three to four years annuity contracts, which are multi-year in nature and transformation in nature. So that’s really how I would qualify it. These are fairly large contracts in the industry. And I think more focus essentially is — sorry, the more focus is to get the annuity contracts increasingly as we move forward. And hence, this deal is a marquee deal for us because we are really ticking off that box to continue to build the platform from a scale perspective on annuity side, Baidik.

Baidik Sarkar — Unifi Capital — Analyst

Would it be fair to assume that these deals have been won in the same margin band that Sonata’s IT Services has been delivering or how should we view this from a margin perspective?

Samir Dhir — Chief Financial Officer

Yeah. They will be — they are in the same margin profile. In fact, the deal we just closed is probably higher than the average margin profile. So they’re pretty good margin profile deals for us.

Baidik Sarkar — Unifi Capital — Analyst

No, that’s great to know. Nice to say hello, Samir. My best wishes, and I’ll be in touch. Thank you.

Samir Dhir — Chief Financial Officer

Thank you, Baidik.

Operator

Thank you. [Operator Instructions] The next question is from the line of Chirag Kachhadiya from Ashika Institutional Equities. Please go ahead.

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

Sir, I have a question like we are migrating from Salesforce to Microsoft platform, so there are many peers who are also offering Salesforce platform. So how this Microsoft offering will give us aid in the client ecosystem and the acceptance from client side for the same? If you could throw some qualitative insight on same?

Samir Dhir — Chief Financial Officer

Sorry, your voice was not very clear. Your question is, if a migrating customer from legacy platform to a Microsoft track, what is Sonata’s differentiation. Is that the question?

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

Yes, yes, that is the question.

Samir Dhir — Chief Financial Officer

Okay. So I think going back to the comments I made earlier, see, we have been very strong in our platformation techniques. That’s been the cornerstone of Sonata for last several years. We have built out and invested in that framework and capability over the last six, seven years. And that’s really at the heart of this whole success that we’re beginning to see now in the market.

Why that is important, because it’s not just about migrating customers from legacy to on cloud, lift and shift, but it is also transforming their estate to really drive meaningful insights from our customer data analytics perspective. It is also about modernizing and unleashing the power of cloud so that development cycles can be faster. It’s also about driving the automation along the way. It’s also about shedding the legacy code. It’s also about moving to a more modernized CITT DevOps pipeline. Just the whole start that we offer as a platformation technique which is really inbuilt into engineering DNA of the company which continues to differentiate us against the competition.

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

And does Microsoft provide us any exclusivity?

Samir Dhir — Chief Financial Officer

Well, I think we have built ourselves our own differentiating tools framework and IPs over the years, and that’s what really differences us. Of course, Microsoft endorses that in many of these engagements, but there’s no exclusivity, if that’s the direct question. We have differentiating rights because of the investment we’ve made over the years in these areas.

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

Okay. And sir, can you throw some light on macro economic environment challenges which we are facing in execution? And also client side spend commentary in such an uncertain time?

Samir Dhir — Chief Financial Officer

Yeah. So like I said, I think overall the demand environment is still pretty robust. Our pipeline continues to grow. We continue to see our pipeline grow in line with our results that we just announced. So I think we are very happy with the progress we’re making. In addition, we are very happy with the progress we’re making on the order book side. Our order book continues to be very strong. In general, the momentum is very strong. Of course, there are some decisioning delays given the macro economic conditions, but those are sporadic at this point in time. They’re not concerning us as we move forward. And that’s true for all clients across the globe at this point in time. Just a general market observation at this point.

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

So you are since quite long in the industry, so if we compare current slowdown with what we have seen during the GST and post that, is it similar launches or a bit different this time?

Samir Dhir — Chief Financial Officer

I think that’s a million dollar question. I wish I had an answer for you. I think things are developing at this point in time. Like I said, we are not seeing that slowdown at this point in time, but we’ll keep the audience informed as we move forward. At this point in time, we are hunkering down and continuing to maximize opportunities in front of us. Our investments are in that direction, our market momentum in that direction and we continue to build-out the company as we move forward in the direction.

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

Okay, sir. Thank you so much. All the very best.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead.

Aejas Lakhani — Unifi Capital — Analyst

Yeah, hi. Are you able to hear me?

Samir Dhir — Chief Financial Officer

Yes.

Aejas Lakhani — Unifi Capital — Analyst

Okay. Sir, my question is to Mr. Mohanty. I’d like to understand how we should model the scale-up of your products reselling business, because we haven’t honestly seen this scale of sequential profitability growth? So I’m really sort of looking to understand how deep and long is this runway. And H2 is usually significantly — there is a significant scale up that takes place in H2. So should we expect the same?

Sujit Mohanty — Head, Sonata Information Technology

Yeah. Hi, Aejas. I mean, the market, as I explained during my initial comments, the market looks attractive in the sense that most of the Indian customer they have a plan and they are spending on the cloud. And if you look at the software retailing now, like measures, it’s on the cloud spend. And that’s what I said that the way we are looking at the market and we are observing the market, I think the cloud expenditure of the customer will continue to grow for the next couple of quarters for sure. That mainly because, most of the customers’ digital transformation program is still on. And as I explained to you that when some — when the customers are migrating to cloud, there are various stages and it does not mean that from on-premise to they move to cloud and the program gets over.

After that there are various stages in terms of from a single cloud to multi-cloud, we’ve actually trying to select the right cloud for the right application and what — they have multi-cloud then the complexities regarding security, multi-cloud management, which comes in. And after sometimes the customers also start realizing that the applications since they have moved to the cloud have not giving the optimum version, because they’re not architect but the cloud is. So there are lot of app modernization opportunities which come to us, and after a customer goes through a major app modernization and certainly. And then also realize that just not app coordination is going to do everything for them. It’s also required some data modernization. So that is the — it also comes in. So it’s a long process, it’s not just moving to the cloud. So because of this we believe that there are many stages in which a partner — the opportunity to work with customers and I mean, good wins, and that’s the reason we believe that market is there and we will have opportunities going forward.

Aejas Lakhani — Unifi Capital — Analyst

Got it. And sir, usually the second-half of the year has more sales and significant scale-ups there so is that — what do you see as the revenue visibility there?

Sujit Mohanty — Head, Sonata Information Technology

Yeah. [Technical Issues]

Aejas Lakhani — Unifi Capital — Analyst

Sorry could you repeat that.

Sujit Mohanty — Head, Sonata Information Technology

Yeah, we believe that we’ll have a good second half.

Aejas Lakhani — Unifi Capital — Analyst

Okay. Got it thanks.

Operator

Thank you. Thank you. [Operator Instructions] Next question is from the line of Sameer Dosani from ICICI Prudential AMC. Please go ahead.

Sameer Dosani — ICICI Prudential AMC — Analyst

Hi thanks for the opportunity. Just to this understand, right. What we hear from industry experts is that retail and manufacturing as a sector has been helping struggling, economically. So IT spend in these sectors here is more vulnerable we have a decent exposure, right, so retail is like 15% in our IT services and 20% is distribution and manufacturing. So how do you see the trend in this business specifically and if you can highlight to quantify, what is various [indecipherable] is it more on the project implementation, more on annuity, if you can just throw some light on this? Thanks.

Sujit Mohanty — Head, Sonata Information Technology

Sure. Thanks for the questions, Sameer. I think the two-parts of this, the bulk of the work we do for our clients is really transforming their core systems. And we are in many ways defining their future modernization agenda. So those programs that are in-flight are continuing at this point in time. There is no let-up, of course, there may be some sporadic cases, one or two clients here and there. But in general, the business momentum that we have seen in the first half of the year is continuing into the second half of the year. We’re not seeing any slowdown and that includes retail and manufacturing distribution included.

Now from a net new pipeline perspective, there had been some decision delays, but I would say there are just delayed by a month or so. They are not like the projects have been canceled or stalled. And we are continue to watch that space very keenly, pipeline build-out, as I said earlier, is continues to be strong and order book continues strong. And at this point in time, we are not concerned about there’s nothing outlier about the behavior that we’re seeing in the marketplace it’s very consistent what we would have normally expected in an environment like this. So it’s not concerning us at least at this point in time.

Sameer Dosani — ICICI Prudential AMC — Analyst

I understood, understood. Thanks for the answer. And when I look at your — I’m not sure whether we disclose it. I don’t think we disclose it. What is the utilization trend because you have hired a substantial number of headcount now? It did in this quarter and I think I look at your utilization of billability, I’m not that is that we [indecipherable] that you dismiss. We don’t see any impact on that. Could you explain how is that utilization changing and if you can also highlight what is the kind of number of patients that we would higher till now and what is — how much are deployed from that. Thanks.

Sujit Mohanty — Head, Sonata Information Technology

Yes. I will answer the last question, first, Sameer. We have added about 290 campus minds in this quarter. And we have a — in that 200 people have joined in September and 90 have joined in the month of July. So this 90 people will be deployed in the project probably by next month. They have three months training period. The other 200 people are under the training now. Coming to this most of the additions during the quarter has been lateral replacement addition, and our utilization remain sustain, because we have putting the process of effectively the — as Samir was mentioning the demand and the pipeline is good, new project additions have been good. New customer addition has been good. So we are continuing to have good utilization now, what we call it as billability. So that has continued to be good at remaining at 82% for the company.

Sameer Dosani — ICICI Prudential AMC — Analyst

So sorry. I couldn’t get the number so out of that 290 freshers, how many freshers have been added in the September month?

Sujit Mohanty — Head, Sonata Information Technology

September is 200.

Sameer Dosani — ICICI Prudential AMC — Analyst

200, Okay. So the full quarter impact of this will come in next quarter, right?

Sujit Mohanty — Head, Sonata Information Technology

Next quarter, correct.

Sameer Dosani — ICICI Prudential AMC — Analyst

Okay. Okay. And out of 200 how much — I mean, out of the 280, how many are deployed?

Sujit Mohanty — Head, Sonata Information Technology

So our — 90 are completing their training in the month of October that is the quarter in this month they are being deployed into the project. 200 will complete it by year November-December, so they will be deployed at they end up of Q3 or at beginning of Q4.

Sameer Dosani — ICICI Prudential AMC — Analyst

Understood. And just to, get a sense, how many freshers have we hired in as a total, if you can get that — give that number?

Sujit Mohanty — Head, Sonata Information Technology

Total number of freshers we are hiring as about 550 for the year.

Sameer Dosani — ICICI Prudential AMC — Analyst

Okay. Okay, this is the target [Technical Issues], right?

Sujit Mohanty — Head, Sonata Information Technology

Yeah, this is the target, correct.

Sameer Dosani — ICICI Prudential AMC — Analyst

And how many already hired from this 550. Half of them, right, 290 are already hired.

Sujit Mohanty — Head, Sonata Information Technology

Okay. Okay. Sorry sir, 290 was the H1 number?

Sameer Dosani — ICICI Prudential AMC — Analyst

Okay. Okay. Thanks for that. And last question sir, if you look at the IT services as the business, right? Q3 is that we look at where we are — is a weaker quarter in this [Technical Issues] also overall how do we expect Q3 of our business to turn out to be if you can throw some light on that? Thanks.

Sujit Mohanty — Head, Sonata Information Technology

You are talking about international business, right.

Sameer Dosani — ICICI Prudential AMC — Analyst

Yeah. Yeah, international business?

Sujit Mohanty — Head, Sonata Information Technology

Demand continued to be good for — continue to be there. There are — but Q3, we have holidays some lowest impact can be there, a little bit number of working days we’ll will be two days lesser in this quarter, but traditionally the last two years have been good for us, Q3, we hope to continue with the overall performance in the same direction.

Sameer Dosani — ICICI Prudential AMC — Analyst

Okay. Okay. Okay. So no unexpected —

Sujit Mohanty — Head, Sonata Information Technology

No unexpected.

Sameer Dosani — ICICI Prudential AMC — Analyst

Okay. Thanks for the opportunity.

Operator

Thank you. The next question is from the line of Romil Jain from Electrum PMS. Please go ahead.

Romil Jain — Electrum PMS — Analyst

What do you mean — am I audible?

Samir Dhir — Chief Financial Officer

Yeah.

Operator

Yes, sir.

Romil Jain — Electrum PMS — Analyst

Yeah, sure. Sir, one question is, we have talked about PLATFORMATION being a very important part of the overall strategy and obviously that will lead to further scale and benefits under business side. So what kind of margins we expect when we go full throttle maybe two-three quarters down the line. So I just want to understand the margin picture on the international business.

Samir Dhir — Chief Financial Officer

Yes. I think the gross margin profile of the business is very consistent on all the PLATFORMATION programs, Romil. I think we don’t see any impact of that. I think the partnership programs are accretive and in-line with the overall gross margin profile of the company. The investment that we’re making are generally going to sit to below the gross margin line, but we will continue to make those investments and those are not new, they’ve been continuing for the last five years. So we’ll make investments in — pretty much in-line to what we have been making in the past five years timeframe.

Romil Jain — Electrum PMS — Analyst

Okay. So should we see some margin benefit or broadly we will be in this range?

Sujit Mohanty — Head, Sonata Information Technology

It will continue the same ballpark.

Romil Jain — Electrum PMS — Analyst

Okay. Secondly, on the competition just to understand the deals that we have won, broadly there would be against larger peers. So if you can give some flavor of the competitive scenario there what we are seeing in the big pipeline right now. As well as, again on the competition the PLATFORMATION that we do, can others also try and do that or obviously, we have some differentiation but what stops others also following similar pattern?

Sujit Mohanty — Head, Sonata Information Technology

Yes. So it’s a good question. I think for most of the work that we do, Romil, I think we compete with the large tier-one companies. These are global players. Both India-based as well as U.S., and whichever geography you’re competing in, if it’s a European client, it will be European-based competitors as well. So these are the different line competition that we typically see and that’s what we the large deal that we just won was against that — against that fairly stiff competition.

Now on the PLATFORMATION side, I think this is — this hasn’t happened by accident or overnight, right? As this success is created over the years, so the last five-six years of sustained investment that Sonata has made to really differentiate into the transformation techniques and tools and framework is really a culmination point and it’s not just about the framework it’s about training your staff, it’s really about providing that whole DNA in the company to live that mission and vision every day. It’s a fairly long process. Can everything be copied, the Toyota thing, everything get recovered at some point but it takes time and we’re continuing invest. So we know by the time competition catches up in maybe three, four, five years, time we would have deep focus on next level of evolution ourselves. So we’re not concerned about that we believe we have a unique source to continue to differentiate in the market in that sense.

Romil Jain — Electrum PMS — Analyst

Okay. That’s good to hear. Sir, one question on the acquisition, so just want to understand. As we mentioned, we are going to double the revenue in broadly four years on the international side. Does this include any inorganic acquisitions also or it is purely organic?

Samir Dhir — Chief Financial Officer

Yeah. I think the strategy is to grow the company. We are not averse to taking acquisitions along the way, Romal if that — if we find a suitable property which is in-line with our overall broad strategy that we laid out to you. I think if we find a property, we will take it, but it is not picked-up on as a constraint to do that. It has to be thought-out M&As, if we have to do we’ll do it but it has to make and meet our strategic goals. It won’t be for skills.

Romil Jain — Electrum PMS — Analyst

Okay. Okay so that means this would be broadly organic is what we can assume?

Samir Dhir — Chief Financial Officer

I wouldn’t qualify either way. It really is how the market develops. I think we’ll have to — we’ll have to see how the market develops and how the opportunities present. But our aspiration is to double the company for over four years and that’s what we really head down focus on and along the way if an acquisition makes sense we’ll do it, if it doesn’t make sense, we’ll do it organically.

Romil Jain — Electrum PMS — Analyst

Got it. Got it. Sir, can I just ask one more question?

Samir Dhir — Chief Financial Officer

Yes, please go ahead.

Romil Jain — Electrum PMS — Analyst

Yeah. So in terms of the overheads, okay, obviously in COVID, lot of travel and everything had gone down, so in current quarters and going ahead are we broadly at a normalized level in terms of all the other overhead expenses?

Samir Dhir — Chief Financial Officer

Not exactly, till the people have not fully come to — come back to the office, but the travel increasing, we do not be like last year it will be overhead cost will go up this year, but not to the pre-COVID levels still. We are — we expect like, it will take another three, four quarters, at least get there. But working from — people coming back to office and working from home serve larger industry problem. So that require some time to solve.

Romil Jain — Electrum PMS — Analyst

Okay. Okay. Thanks a lot. All the best.

Operator

Thank you. The next question is from the line of Krishna Thakker from Anand Rathi. Please go ahead.

Mohit Jain — Anand Rathi — Analyst

Yeah. Hello, sir, Mohit, here. Just wanted to check if there reclassification as far as your disclosures are considered vertical wise in Q2 versus last quarter?

Samir Dhir — Chief Financial Officer

Q2 versus last quarter, which verticals specifically.

Mohit Jain — Anand Rathi — Analyst

For example, I see this drop also in travel vertical in term there is some number change in OPD or ISV. So therefore is there some part of revenue which would have gone from travel to ISP or something like that?

Samir Dhir — Chief Financial Officer

No. No. No, travel has come down because of the cross-currency, because our travel is majorly Europe.

Mohit Jain — Anand Rathi — Analyst

Okay. And in the last quarter PBT, the percentage is a little different for Q1 versus this time. But as for you, there is no reclassification that must have been?

Samir Dhir — Chief Financial Officer

No. No. No, reclassification, it is only because of the cross-currency impact of various currencies that has impacted in few of the verticals.

Mohit Jain — Anand Rathi — Analyst

Okay. And sir just one thing on the higher PBT, seen this sharp pickup. So I may have missed it a little earlier but what drove this and what is the outlook there in ISP particularly?

Samir Dhir — Chief Financial Officer

Yes. So why that is built on — the first question first and I’ll answer the second question. So in terms of volumes in travel and other verticals it’s grown in-line with our overall numbers, but because of the cross-currency impact, you’re seeing the numbers go down in travel specifically. On the ISP side, I think the — our product engineering heritage continues to be strong. So the ISPs that we continue to build-out the core platform, which are their revenue generating platform, there is no latter and we continue to build that momentum out and hence we continue to see the market momentum in that direction, Mohit.

Mohit Jain — Anand Rathi — Analyst

So there is something which you think is not projected essentially and we should see the momentum building up ahead.

Samir Dhir — Chief Financial Officer

Yeah. I mean. Yes, absolutely, that’s our expectation as we move forward the market momentum holds up and that’s what we’re seeing at this point in time and the product engineering work that we do for various ISPs and transformation work we do for them is absolutely the pipeline is there to continue to build that out.

Mohit Jain — Anand Rathi — Analyst

Perfect sir, thank you.

Operator

Thank you. The next question is from the line of Sameer Dosani from ICICI Prudential AMC. Please go ahead.

Sameer Dosani — ICICI Prudential AMC — Analyst

My questions have been answered. Sorry, thank you.

Operator

Thank you. [Operator Instructions] We have a follow-up question from Chirag Kachhadiya from Ashika Institutional Equities. Please go ahead.

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

Sir, other than Microsoft tie-up, what other platform we also plan to launch in future and are there any discussion on negotiations ongoing on that front?

P. Srikar Reddy — Managing Director

So we are asking from that [indecipherable] that’s currently. Currently, we have partnership with Microsoft, Google, AWS.

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

Okay. Well. I’m asking from a point of mitigating the revenue concentration. Is that right?

P. Srikar Reddy — Managing Director

Okay. So it’s from that point, Chirag. Chirag, I can take that. So I think as we scale the platform forward and I talked about it earlier. We’re really continuing to invest on logos that can scale for us and that’s the whole sales investment thesis that I covered earlier, Chirag, in the commentary. So we have logos in the travel space. We have logos in the healthcare space and that’s what we’re focusing on to scale those logos up as we move forward and work on the diversification topic that you’re on. And that’s definitely judicious working on we believe it’s a two-year journey, it will take us to diversify the business, but that’s what we’re focused on and even the new logos that we are doing, they must have account that we have is really all about Fortune 2000 to 5000 companies. So that these logos has the potential to grow-out for us as we move forward. It’s a very significant focus we are driving as part of our go-forward strategy from a radiation point-of-view and new logo acquisition point-of-view to work on that aspect.

Chirag Kachhadiya — Ashika Institutional Equities — Analyst

Okay, thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Srikar Reddy for closing comments.

P. Srikar Reddy — Managing Director

Well, thank you all very much for joining the call today and thanks for your continued support and. I look forward to hearing from you in future conference calls. Thank you again for joining today.

Operator

[Operator Closing Remarks]