Expleo Solutions

Expleo Solutions reported a robust FY25, with operating revenue growing 6.2% year-on-year to INR 10,248 million. Total income increased by 7.1% to INR 10,410 million. The company achieved an EBITDA margin of 16.2%, an 80 basis points improvement over FY24, driven by higher revenues, improved utilization, and effective bench control. Profit after tax (PAT) stood at 9.8%, up 0.8% from FY24, and EPS grew 14.2% to INR 66.52. The cash position at the end of FY25 was INR 2,294 million.

For Q4 FY25, operating revenue was INR 2,558 million, a slight 0.7% sequential drop, mainly due to project closures in the auto industry. Total income remained flat QoQ at INR 2,603 million, supported by higher forex gains. The EBITDA margin for the quarter was 15.6%, down from 16.9% in the prior quarter, primarily due to wage increments. However, EBIT improved to 12.5% from 12.1% QoQ due to lower one-time^📎 depreciation costs in the previous quarter, and PAT increased to 9.1% from 7.4% due to a forex gain of INR 15 million compared to a INR 51 million loss in the prior quarter.

The company's strategy for FY25 focused heavily on growing existing customers and improving service diversification. They identified 7 key account managers for the top 20 accounts, which contribute 70-80% of revenues, and implemented account-based marketing initiatives. This focused effort has shown significant results in at least 75% of these accounts. The go-to-market strategy prioritized regions with good past results, specifically the US and Middle East, which continue to show promise.

In the US, Expleo increased its visibility through AI and data conferences, focusing on the QSR industry, with a major roundtable already held in New York City and another planned for Chicago in September. In the Middle East, a subsidiary has been created and is operational in Saudi Arabia, with plans for a soft launch. Dubai continues to grow, with the highest-ever headcount. India has also re-entered focus, particularly with 22 GCCs (Global Capability Centers) being engaged, expecting results from June/July onwards. BFSI and retail are promising, while auto and aero continue to decline, with defense showing growth.

Expleo made significant investments in AI and data capabilities in 2024, hiring over 60 associates and launching 'expleo.ai' as a platform. This platform offers ready-built accelerators, LLMs, and copilots. The company has conducted nearly 50 proofs of concept globally and has started generating revenue from 4 accounts by April. An AI lab has been set up in Pune with a dedicated execution team. AI and data services currently contribute 7-9% of total revenues, with the bulk coming from data, which is foundational for AI-related services.

The company has extensively worked to control operational expenses, significantly reducing them over the past year, and plans to maintain the lowest overhead expenses. While the headcount has seen a dip, management clarified this is due to strict bench control and not directly AI. Going forward^⏳, headcount growth is expected to parallel revenue growth, estimated at 6-7%. The focus on cost rationalization will extend to SG&A expenses this year.

Expleo's primary capital allocation strategy is to invest in M&A opportunities that complement growth. Dividends are considered a secondary priority if no suitable M&A targets are identified. The company currently holds INR 2,294 million in cash and equivalents. A related party loan of INR 115 crores is in place, which is time-bound and at arm's length pricing, available for disposal when needed. Management emphasized the intent to utilize cash effectively rather than holding large reserves.