Zensar Technologies : Earnings Call Transcript Q1 FY24

Zensar Technologies Limited

July 20, 2023

Moderator:

Ladies and gentlemen, good day, and welcome to the Zensar Technologies Limited Q1 FY '24

Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will

be an opportunity for you to ask questions after the presentation concludes. Should you need

assistance during this conference call, please signal an operator by pressing star and then zero

on your touchtone phone. Please note that this conference is being recorded. I now hand the

conference over to Mr. Devang Bhatt. Thank you, and over to you, sir.

Devang Bhatt:

Thank you, Dorwin. Good evening, everyone. On behalf of IDBI Capital, I welcome you all to

Zensar's Q1 FY '24 Earnings Call. We have with us Mr. Manish Tandon, CEO and Managing

Director of Zensar Technologies; Mr. Sachin Zute, Chief Financial Officer; and a few other

members of the senior management team. Before I hand over the call to Manish, I would like to

highlight that the safe harbour statement of the second slide of the earnings presentation is

assumed to be read and understood. Thank you, and over to you, sir.

Manish Tandon:

Thank you, Devang. Hello, good morning, good afternoon and good evening, everyone. Thank

you for taking the time to join us today to discuss Zensar's financial results for the first quarter

of FY '24. With me on this call are my colleagues, Vijayasimha, who's the Chief Operating

Officer; Sachin Zute, who is the CFO; and Vivek Ranjan, who is the CHRO.

With that, I will turn to the summary of quarterly results. For the first quarter of FY '24, we

registered a service revenue of 149.2 million, representing a sequential quarter-on-quarter

growth of 2.4% in constant currency. Our overall revenue stood at 149.3 million, representing a

sequential Q-o-Q growth of 1.3% in both reported and constant currency terms.

In line with our stated strategy, we continue to be focused on pass-through revenues. Let me

walk you through the performance of our geographies and verticals for the quarter. All growth

numbers are in constant currency and correspond to services revenues only. The U.S. region

posted sequential Q-o-Q services revenue growth of 1.3% and a Y-o-Y decline of 0.2%. The

Europe region registered sequential Q-o-Q services revenue growth of 6.0% and Y-o-Y growth

of 3.4% in constant currency. We continue to have good traction in the region from both long-

standing and new clients. The South Africa region saw good growth momentum with sequential

Q-o-Q services revenue growth of 3.4% and Y-o-Y growth of 19.6%.

Our sustained focus through our data experience at engineering and cloud mix capability has led

to a steady growth on the back of new project ramp-ups at some of our key clients in the region.

Coming to the verticals. Banking, Financial Services and Insurance reported sequential Q-o-Q

services revenue growth of 4% and a Y-o-Y growth of 13.2% in constant currency. We are

witnessing consistent growth in this vertical over the last few quarters, aided by new deal wins

at some of our key clients.

Hi-tech, including emerging registered sequential Q-o-Q services revenue decline of 2.6% and

Y-o-Y decline of 4% in constant currency. Manufacturing vertical registered sequential Q-o-Q

services revenue decline of 0.5% and year-over-year growth of 8.2% in constant currency.

Consumer Services registered sequential Q-o-Q services revenue growth of 11.5% and Y-o-Y

decline of 7% in constant currency. In the Hi-tech manufacturing and Consumer Services

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Zensar Technologies Limited

July 20, 2023

Manish Tandon:

Thank you, Vijay, and thank you, Sachin. In conclusion, ladies and gentlemen, our disciplined

program on improving margins along the identified levers has given us meaningful results over

the last 3 quarters. While the near-term demand environment continues to be challenging,

resulting in delayed decision-making and slowdown expense.

We are certain that the long-term secular growth in IT industry will not diminish. Further, over

the last 2 years, we have increased our addressable market through our service line investments.

We are working on gaining mind share with our clients through these service lines and our

conversations continue to remain positive. Our experience to engineering to engagement

proposition is echoing well with our clients. Net new and alliance function is shaping up well,

investing for sustainable long-term growth remains our top priority. With that, we can open the

lines for any questions.

Moderator:

Thank you very much. The first question is from the line of Nitin Padmanabhan from Investec.

Please go ahead.

Nitin Padmanabhan:

Congrats on the great numbers. A couple of questions. So first is, Manish, could you give us a

sense on how the outcome on cross-sell initiatives, any interesting things that you have seen so

far and how it's looking like? The second is your thoughts on -- so far, the results that have come

out in terms of the rest of the industry, I think they have been calling out weakness on a going-

forward basis and so on so forth.

Do you think that sort of raises the risk of sort of any revenue declines in the near term? Or do

you think from a portfolio perspective based on the rigor we should still be in positive territory

relatively. If you could give some colour on the consumer vertical as well and Hi-tech. And

finally, what do you think could be the wage hike impact? How should we think about that

Sachin? And if you could also give a sense on the net new wins during the quarter. So those are

the questions.

Manish Tandon:

Nitin, thanks, thanks for the positive commentary on the results. I think your first question was

around cross-selling. So cross-selling has been positive for us. We are seeing a good amount of

green shoots there. One of the ways that we measure cross-selling is how deeply we are

penetrating certain accounts, and we continue to see very positive momentum on that. And our

storyline around experience to engineering to engagement is showing results.

We are cross-selling a lot of our services into these accounts. Downsides on revenues, I don't

think that I can comment more than what my larger peers have commented, the market remains

tough. But we continue to execute well, and we are hoping that the execution would lead to

consistent results as we move forward. Consumer and Hi-tech, they remain weak spots for us,

they are still work in process. I don't think some of the weakness will go away. And every day,

different sorts of technology companies are declaring some amount of slowdown or furloughs

or letting go of people.