Excelsoft Technologies Q1 FY27 earnings call

Excelsoft Technologies Limited reported a robust Q1 FY27, with revenue from operations growing 44.05% year-on-year to INR80.26 crores. This strong top-line growth was primarily fueled by a 177% year-on-year increase in the education technology services business. Profit after tax (PAT) also saw a significant rise of 57.13% year-on-year, reaching INR9.23 crores, with PAT margins improving to 11.5% from 10.54% in the corresponding period last year.

Despite strong revenue growth, EBITDA margins for the quarter contracted to 16.24% from 18.02% in Q1 FY26. This moderation was attributed to deliberate strategic investments, including the expansion of nearshore delivery capabilities, strengthening the global sales organization, and one-time^📎 expenses of INR0.84 crores for recruitment and INR0.62 crores for advanced AI training. Management views these as essential investments for long-term growth and expects EBITDA margins to stabilize around 24-25% by the year-end.

The company's nearshore strategy is yielding positive results, with nearshore operations generating approximately INR10 crores in revenue during the quarter and achieving a gross margin of 26%, up from single-digit levels at inception. Excelsoft has already secured nearly INR40 crores of revenue from these engagements for the current financial year. Management anticipates further improvement in gross margins from nearshore operations, potentially reaching the 35-40% range over time^⏳, driven by higher operating leverage and improved resource utilization.

The strategic engagement with AQA, a major global examination authority, is progressing well. Excelsoft booked approximately INR2.5 crores in revenue from the AQA project in Q1 FY27, with an expectation of INR12-15 crores in billing for the current financial year. The total visibility for this engagement over a four-year period is estimated at USD17 million, reinforcing Excelsoft's credentials in delivering large-scale, mission-critical digital assessment infrastructure.

Excelsoft is actively embedding AI across its products, delivery platforms, and internal operations, with plans to introduce several AI-powered products and solutions. Management emphasized that AI-led innovation is a strategic differentiator requiring continuous investment in upskilling the workforce. These investments are expected to continue for 'a couple of more years' until AI technologies stabilize, indicating sustained cost pressures that may impact short-term margins.

The company is actively pursuing disciplined inorganic growth, evaluating three acquisition targets: one in the United States and two in India. Two of these targets have non-binding offers under negotiation, while the third is in an early interaction stage. A previously discussed acquisition, which was delayed due to the IPO, is now in the 'final stage of negotiation,' with a decision expected within 'a couple of weeks.'

Following recent issues in competitive examinations in India, the National Testing Agency's CEO has approached Excelsoft. The company is aggressively pursuing this new domestic market opportunity and is in discussions with a government-formed task force. Management believes its experience in delivering high-stakes, secure assessment solutions for overseas clients positions it well for this new venture.

Excelsoft maintains a diversified revenue profile, with education technology services contributing 63.4% of total revenue and assessment and proctoring solutions accounting for 23.5%. Despite this diversification, client concentration remains high, with the top 5 customers contributing approximately 70% of total revenue and the top 10 customers accounting for 83%. The company aims to expand its customer base through new logo acquisitions to reduce this concentration risk over time^⏳.