Considering the way other IT companies have reported, Persistent has reported slightly better nos than market expectations http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/3994E319_BBF7_40D6_9A60_8FADEBAEA5D4_194734.pdf
Surprised to see audited results for quarter.
Notes from Q1’FY17 conference call. Kindly add in case any important points missed:
Revenue growth : 33.3% YoY and 4.3% QoQ by $, 40.2% YoY and 3.2% QoQ at 701 million Rs
9% YoY PAT Growth
EBITDA - 15.1 vs 15.9 % qoq due to VISA cost
Utilization 75.3% marginally higher
pat AT 10.4%, high 9% on YoY basis
Operational capex - Rs 138 million
CAPEX Break Up
130 crores , 18 crores on operational capex and balance on acquisition
70-75 crore additional capex this year
2 small acquisitions - geny and tym along with IBM (not IOT but MDM) , - 110 crore spex spent on these
Business Vertical Restructuring
1st quarter with new org. structure 4 P&Ls- services, digital, alliance, accelerite
Services - Customer requirement focus on key customers
Digital - Enterprise digital transformation solutions and platforms
Accelerite - Products business
Alliance - IBM related business (only IBM)
How business was segmented?
Services is Services - working closely doing what they ask us to do. Custom need based custom build solution.Focus is to continue on small set of customers with deep relation
Digital Platform business (apprian, oracle,salesforce, new digitsl EDT) - by pre-building technology and then engaging with enterprise
4 sales teams selling independently
Will add some more sales workforce but not much impact on as a % of revenue cost
Customers increasing their innovation budget : digital
Selected lifescience, healthcare, telecom & media, BFSI and hi-tech as focus verticals
Hired global sales head from HCL, Dell
Right focus on right set of customers , little selective as targeting certain type of customers
Building pre-build solutions upfront and help to transform enterprises through salesforce, appian
Digital leading to agility and engagement to clients and hence differentiating
IBM Business Contribution (Alliance)
No new inorganic deal - IBM, can not disclose IBM numbers due to agreement, owever,a ll alliance revenue coming from IBM
IoT : On target or ahead of target and plans to invest all earning to grow this business
Parts of IBM IOT product on continuous engineering and continuous life cycle product, and if anyone chooses that, persistent gets a pie out of that
No upfront payment but its revenue share agrrement and investing in people. In MDM deal, small deal with upfront payment
Margin Adjustments due to IBM : same 2% as mentioned in last quarter on that levels
50 million dollars through IBM, is it on track?
1st quarter was more of a transactional quarter but last quarter good progress but not close to hit topline but can expect in 2nd half
Do not want to share numbers due to deal
Investment : people from IBM moed persistent and people from persistent moved to build product. Do not look to add more people. So, no additional cost to IBM project
Why amortization is up so much?
On account of products acquired
Expect similar trajectory going forward
service model is changing to product model (traditional to new age)
Volatility in traditioanl business to be offset by new edge business
There will be seasonal QoQ fluctuations in IP revenue and hence need to be seen from long term perspective
Traditional billing on effort based and effort required is going down and hence revenue can keep going on and thast what services or traditional business is. However, new business is goal based
Don’t look business on QoQ
Product companies are seasonal and hence we will have to live with it
Liked IP led growth though understand it wont be linear
IBM deal looks doing ok , however, need to research more on watson as what i understand , there are very few instances of IOT commerialization
Need to understand the impact of acquisitions on product and business attractiveness
Disc: Invested 3% approx of current portfolio
Can someone throw light on “IBM IOT product on continuous engineering and continuous life cycle product” through Watson?
@suru27 As far as I understand, IBM has a platform called IBM Watson for IOT. Persistent has partnered with IBM to provide services on this platform. It is continuous hence called continuous engineering. These services will be used by others to provide different services to their clients and Persistent will get revenue share.
Good Revenue growth. But profits have not increased accordingly. Any idea why Employee cost and Admin cost sky rocketed.
I am indirectly linked to this industry through analytics. Can see that lot of PoCs happening around IOT but yet to see a strong commercialization model (except GE type cases but not yet very sure). Any idea who are these watson clients, taht will give us some clue. Also, when persistent mgmt confirmed that whenever anyone buys watson iot solutions for continuous engineering and continuous life cycle, does it mean that it is an exclusive agreement for a specified no. of years? I mean why can not IBM sign another partner tomorrow and split the coming business between both partners? Also, though mgmt never commented about IBM revenue predictability, indirectly, they hinted that by tracking IBM IOT revenue, we can get some clues. I am not sure if IBM discloses in that granularity.
Also, is it a deal to build a product together or would be similar to headcount revenue based model? By thsi article does not look like a linear headcount model. Looks like a unqiue partnership based solution which would be a mix of platform created and headcount based services intact:
“While announcing this alliance, Deshpande had said that the company would be investing in the IBM platforms for continuous engineering and continuous lifecycle management to realise the idea of software driven things. This is a preferred alliance where IBM would take Persistent’s solutions and services to Industry 4.0 customers to drive digital transformation.”
I tried to understand where persistent falls but could not see them in list of partners:
If i am not worng watson iot will be copeting with GE Predix?
Of course, you should be having a much better idea. Mine is just an outside view.
Difficult questions raised by you. All answers may not be available.
From what I have read it seems that anyone interested in making the best use of the data insights to improve the processes could be a client. I checked online and you can use the services for free on trial basis.
Whirlpool example is provided by Persistent to show how IOT can be supported. But I think it truly can cover lot more industries than just manufacturing of consumer goods. IT security, Financial services, anything that uses data can benefit from the platform.
Regarding commitment to Persistent, I think the relation has been built for more than 20 years. That is a big positive. However I do not this it is exclusivity for Persistent. there could be other partners in the initiative. The below news is of AT&T joining as partner.
However this should strengthen the platform and lend more credibility which in turn should bring in more developers to the platform.
On revenue perdictability, the management has said that they expect 15-20% increase in revenues from this initiative. When and how they achieve that is to be seen.
When I search for competitiors I got Microsoft Azure ML and Metamind
GE Predix comes under Microsoft Azure
Got your points. Actually IOT in itself is a multi-layered architecture where no one rules. What I have understood is, its a multilayered architecture covering sensors,network, protocols, analytics, api,data, .So, a company to be successful with need to have right partnerships as each layer of IOT and together they should emerge as industry defacto standard. The competitors are azure,predix. linux has also launched its IOT. i was having discussion with some of folks in office who are working on some of IOT pOCs. Their view was watson is not an IOT platform. Will have a detailed discussion with them to know their perspective.did not know that predix is being offered under azure.i had a one day training on predix last month which I missed. Should ve attended
Good video to watch…
The company has shown small demo of this technology in their AGM. This could be game changer for Indian legislature as well as judiciary as it will help to digitize all the government records… If executed well, it would be real “acche din” for “aam adami” as our PM has envisioned…
To be honest, I hope at least it would bring acche din for Persistent systems
Disc - invested . No transactions in last 6 months.
Revenue Outlook by Anand Deshpande … quite old but worth to watch
Hi Forum Members
I do understand that asking why stock price is going down is against the rules, but I was trying to understamd if there is any news which I am not aware of which is causing a slide in the price performance of this ticker.
The results were above estimates and future looks to be bright, even then the price slid from close to 700 down to 600 in a bull phase which is surprising. Can anyone throw any light on the probable causes and if there are any red flags that I missed? I am accumulating this counter and I am confident on the fundamentals, but the sliding prices make me wonder if everything is still intact.
None which I know of. It seems to be a very safe buy at current levels.
But being contrarian is not very easy. There is pessimism for whole of IT sector in India.
Look at similar companies in US like EPAM. It trades at forward PE of 20. So you can guess undervaluation and pessimism here.
This may continue till US elections but one never knows.
Disc: Accumulating from 615 and lower.
Tweet from ET Now (Ajaya Sharma)
Ambit> Persistent: worried by recent mgmt comments that it is targeting Govt contracts (lower mgs, higher receivables, risk), SELL tgt 550
if any one can find full report plz share.
Ambit also had Sensex target of 22000 for 2016
Andrew Holland and Sourabh Mukherjea give contradictory opinion within a couple of days. So as a House Ambit will be correct. Even broken watch shows correct time twice
But aren’t other companies working on Govt contracts. TCS passport network, Infosys GSTN, Wipro BSNL, HCL - aadhar
Business is always about managing risks. India is at an inflection point as far as digital wave is considered and will throw up very interesting opportunities. It will be foolish for companies to miss out on those.
Even road construction companies which are at complete mercy of government trade at similar PEs.
Wouldnt the govt contracts be over and above the current order sets? That would add to the topline rather than hamper it! Ambit as far as I know has been always bearish on IT. So I am now assured that this is an opportunity to add more and there are no red flags
One of the reasons PSL or other IT stocks are down is the lack of business demand from end customers. This has resulted in nearly all major players reducing their forecast numbers. PSL will not be an aberration. Also, the point that needs to be understood is that the IT landscape is changing and the areas where PSL specializes in are being taken up actively by others.