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KPKPITTECH

KPIT Technologies Q3 FY25 results (Oct–Dec 2024) and concall

Information Technology · Concall AI · Call held 29 Jan 2025

Company page: KPIT Technologies share price, financials & guidance record

Source transcript

Management summary

KPIT Technologies delivered a strong Q3 FY25, marked by robust revenue and net profit growth, and an improved EBITDA margin. The company secured $236 million in deal wins and saw its cash reserves significantly increase. Management raised its EBITDA outlook for FY25 and highlighted a growing pipeline driven by diverse geographies and verticals, while addressing market shifts and initial losses from new ventures like QORIX.

Highlights

  • Revenue grew 17.4% CC and 18.1% reported USD year-on-year, demonstrating strong performance.

  • EBITDA margin improved to 21.1% this quarter, leading to an upward revision of the FY25 EBITDA outlook from 20.5%+ to 21%+.

  • Net profits saw a robust growth of 20.4% year-on-year.

  • Deal wins amounted to $236 million during the quarter, with the overall pipeline increasing by over 20%.

  • Cash generation was exceptional, with cash increasing from INR 9.68 billion to INR 14.2 billion, and DSO at 42 days.

Concerns

  • Global auto volumes are experiencing sluggishness, though KPIT's demand is diversified.

  • Some EV incentives have been removed, leading to market shifts, but management sees new opportunities.

  • QORIX currently shows a share in loss, though revenue contribution is expected next year.

  • Commercial Vehicle (CV) revenues remained softer, attributed to specific client issues.

Key financials

  1. Revenue Growth (YoY CC) 0.174 decimal_fraction
  2. Revenue Growth (YoY Reported USD) 0.181 decimal_fraction
  3. Revenue Growth (QoQ CC) 0.02 decimal_fraction
  4. Revenue Growth (QoQ Reported) 0.017 decimal_fraction
  5. EBITDA Margin 21.1% +0.3%QoQ
  6. Net Profit Growth (YoY) 0.204 decimal_fraction
  7. YTD Q3 FY25 Revenue Growth 0.207 decimal_fraction
  8. YTD Q3 FY25 Profit Growth 0.38 decimal_fraction

What they filed

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25
Revenue1,471 1,478
EBITDA297 306
Net profit204 187
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Inflow this quarter

$236 Mn

Composition

  • Europe (geography)
  • US (geography)
  • Asia (geography)
  • Powertrain (vertical)
  • Connected vehicles (vertical)

Pipeline

deal pipeline tcv

Pipeline increased by about 20% plus during this quarter, driven by large deals and broad-based clients.

The deal pipeline has significantly increased, driven by large deals and broad-based clients across verticals and geographies, with Europe being the largest contributor.

Source: Prepared remarks

Capital allocation

high confidence
  • Dividend ₹2.5/share (interim)
    We have interim dividend of INR2.5 per share as compared to INR2.1 per share last year.
  • Liquidity Cash ₹14.2 Bn Cash for the quarter increased significantly from INR 9.68 billion last quarter to INR 14.2 billion this quarter, indicating strong cash generation.
    The cash for the quarter has increased from INR9.68 billion last quarter to INR14.2 billion this quarter. This is a significant cash generation during the quarter.

Guidance & targets

Revenue

  • Revenue Growth (CC) Revenue · FY25 · High confidence 18% to 22%
    first, we maintain and reiterate our guidance for the revenue we had given at the beginning of the year between 18% to 22%.

    — Kishor Patil

  • QORIX Revenue Contribution Revenue · next year · Medium confidence Contributor
    So I may say that it continues to contribute in some way right now, but I'm sure it will be a contributor for the next year.

    — Kishor Patil

Profitability

  • EBITDA Outlook Profitability · FY25 · High confidence 21%+

    Previously 20.5%+ → 21%+

    We have raised our EBITDA outlook from 20.5% + to 21% +, and that is reflected also in the EBITDA margin for this quarter.

    — Kishor Patil

What to watch in Q4 FY25

QORIX Revenue Contribution

next year (FY26)
Current Currently a share in loss, revenue cycle started.
Target Revenue contribution.

Why it matters

QORIX is a key new growth driver, and its revenue contribution will indicate the success of this strategic initiative.

So I may say that it continues to contribute in some way right now, but I'm sure it will be a contributor for the next year.

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Risks & concerns

  • Sluggishness in global auto volumes

    medium

    While overall auto volumes are sluggish, KPIT's demand is diversified across geographies (Europe, Americas, Asia) and sub-verticals (passenger cars, trucks, off-highway).

    Management acknowledged

  • Softer Commercial Vehicle (CV) revenues

    medium

    CV revenues remained softer, which is specific to 1-2 clients. Management expects to see improved results in this segment next year due to strategic investments.

    Analyst acknowledged

  • Removal of EV incentives

    low

    Some EV incentives are no longer available, but this creates more options for consumers and opportunities for OEMs to explore alternate solutions like hybrids, which KPIT supports.

    Management acknowledged

  • Initial losses from QORIX venture

    low

    QORIX currently contributes to a share in loss, but management expects it to start generating revenue from the next quarter and become a contributor next year.

    Analyst acknowledged

Q&A highlights

8 direct
Geographic demand recovery (US vs Europe) Direct
Where we see recovery from our perspective, given the sluggishness in the total volume of the vehicles being sold. So as Mr. Patil mentioned earlier, it's led by Europe, followed closely by Americas and Asia.

Clarifies the current demand drivers amidst overall auto industry sluggishness, indicating Europe as the primary growth engine.

Asked by Bhavik Mehta

Impact of EV to Hybrid shift on KPIT's work Direct
It's a great opportunity for KPIT. A, we do a lot of the work in the battery electric space, and we think that, that will continue because there is still demand across the world for battery electric vehicles, including the US. The other part is actually the hybrid.

Reassures investors that market shifts from pure EV to hybrid are seen as opportunities, leveraging KPIT's existing capabilities in both areas and broader SDV expertise.

Asked by Bhavik Mehta

QORIX progress and revenue contribution Direct
So actually, I may just say that we are quite on track. The team is already in place. And to some extent, we are building this solution for a much broader base. Last time I mentioned that we have open sourced some part of it as a part of consortium for Europe. We have got one significant OEM as a client for QORIX. And we are also in advanced engagement with 1 European OEM.

Provides an update on QORIX, a key new venture, confirming it's on track with client engagements and expected to contribute revenue next year.

Asked by Garvit Goyal

SDV scope beyond e-Powertrain Direct
If you look at in the past, how OEMs worked was primarily sourcing electronic components... SDV is an initiative for right reasons to actually make sure that most of the software is actually driven by the OEM, controlled by the OEM, owned by the OEM.

Explains the strategic importance of Software Defined Vehicles (SDV) for OEMs, clarifying that KPIT's focus extends beyond just electric powertrains to broader architectural changes and customer experience through software.

Asked by Garvit Goyal

Potential impact of Honda-Nissan merger on existing work Direct
We actually look at this as a greater opportunity, not only from the work that we are doing for Honda, many of the things that we are doing for Honda where Honda is leading the way. So we believe that if all of this goes through, there could be opportunities for us to bring the Nissan part of the partnership also up to speed with what has been done.

Addresses concerns about client consolidation, framing the Honda-Nissan merger as a positive opportunity for expanded engagement and leveraging existing work.

Asked by Karan Uppal

Improvement in deal pipeline conversion Direct
So first thing is we have seen the good conversions during the quarter. So we do hope there are more positive conversations. But during the quarter, we have seen very strong conversions specifically being the last quarter of the calendar year.

Confirms improved deal conversion rates, a key indicator of future revenue, and expresses optimism for continued positive trends.

Asked by Karan Uppal

Increase in other expenses Direct
So I think we had a substantial additional expense during this quarter, where we have actually had a significant investment into both the technology as well as management development, both for AI and competencies. And we did something on our own significantly. Also, we deployed certain consultants for the same. for accelerating our journey to off-highway and commercial verticals.

Explains a notable increase in 'other expenses' as strategic investments in AI, competencies, and consulting for new vertical acceleration, rather than a recurring operational cost.

Asked by Nitin Padmanabhan

Headcount management and productivity Direct
So maybe this is the point I may share with you one thing. If you look at the last December, the same time, our headcount is almost same, only 50 people are more as compared over the year. And our revenues, as you know, have gone up by 18% or so. So it shows what we have been in a position to achieve in terms of this.

Highlights the company's ability to achieve significant revenue growth with a largely stable headcount, underscoring strong productivity gains and efficient talent utilization.

Asked by Ruchi Mukhija

2 min read 6 chapters

Detailed narrative

Q3 FY25 Financial Performance Highlights

KPIT Technologies reported a strong Q3 FY25, with revenue growing 17.4% in constant currency and 18.1% in reported USD year-on-year. Quarter-on-quarter, revenue grew 2% in constant currency and 1.7% in reported terms. The company's EBITDA margin improved to 21.1% from 20.8% in the previous quarter, leading to an upward revision of the FY25 EBITDA outlook from 20.5%+ to 21%+.

Net profits saw a significant year-on-year growth of 20.4%.

Deal Wins and Pipeline Expansion

The company secured $236 million in deal wins during the quarter, which were largely balanced across Europe, US, and Asia. The overall deal pipeline increased by over 20% quarter-on-quarter, driven by a combination of large deals and broad-based client engagements. This pipeline growth is attributed to opportunities across passenger cars, off-highway, commercial vehicles, and semiconductor companies for automotive.

Strategic Focus on Software Defined Vehicles (SDV)

KPIT emphasized that its focus on Software Defined Vehicles (SDV) extends significantly beyond just electric vehicles (EVs). SDV encompasses areas like digital cockpit, autonomous driving (Level 2 to Level 3), and cybersecurity, which are major investment areas for OEMs. The company views the shift from pure EV to hybrid solutions as an opportunity, as it services clients in both battery electric and hybrid spaces, aligning with evolving consumer preferences and OEM strategies.

QORIX Progress and Future Outlook

The QORIX initiative is reported to be on track, with the team in place and solutions being built for a broader base. KPIT has secured one significant OEM as a client for QORIX and is in advanced engagement with another European OEM.

While QORIX currently contributes to a share in loss, management expects it to start generating revenue from the next quarter and become a contributor for the next year, leveraging its open-sourced components and consortium efforts in Europe.

Operational Efficiency and Talent Management

KPIT demonstrated strong operational efficiency, achieving 18% year-on-year revenue growth with an almost stable headcount (only 50 more people compared to last year). This indicates significant improvements in per-person productivity and contribution. The company's attrition rate remains low, about half of the industry average, and it continues to invest in AI and competency development to enhance its talent pool and productivity.

Capital Allocation and Liquidity

The company reported exceptional cash generation, with cash increasing from INR 9.68 billion last quarter to INR 14.2 billion this quarter. The Days Sales Outstanding (DSO) stood at 42 days, slightly better than the typical 45 days. KPIT declared an interim dividend of INR 2.5 per share, an increase from INR 2.1 per share last year.

The management stated its M&A strategy would rely on internal accruals and borrowing, explicitly ruling out a Qualified Institutional Placement (QIP) in the short term.

Summary of a publicly available earnings call transcript; see how call summaries are prepared. Not investment advice.