R Systems International Limited — Q1 FY26 earnings call

Call held 14 Aug 2025

Management summary

R Systems International Limited reported a strong Q2 FY25, demonstrating consistent growth in revenue and profitability. The company saw a 4.4% sequential growth in INR revenue and a significant 53.4% YoY increase in adjusted net profit. Strategic investments in AI and cloud capabilities, coupled with large deal wins, are driving this momentum, despite a temporary increase in DSO due to an ERP system rollout. The company is also preparing for future inorganic growth with significant capital approvals.

Highlights

  • Revenue of INR 462 crores (USD 54 million), up 4.4% QoQ (INR) and 5.6% QoQ (USD).

  • Adjusted EBITDA at INR 79.7 crores (USD 9.3 million), an 11.7% YoY increase.

  • Adjusted EBITDA margin improved to 17.3% in Q2 FY25 from 16.5% in Q2 FY24.

  • Adjusted Net Profit stood at INR 46.4 crores (USD 5.4 million), a 53.4% YoY increase.

  • DSO increased to 68 days from 61 days, attributed to a one-off ERP rollout delay.

  • Secured 6 new large deals, with average deal size inching closer to $1 million.

  • Added over 190 associates during the quarter, supporting new wins and sales funnel.

  • Board approved INR 2,000 crores loan and INR 275 crores NCD for inorganic growth preparedness.

Key financials

  1. Revenue ₹462 Cr +6.9%YoY
  2. Revenue (USD) 54 Mn +4.2%YoY
  3. Adjusted EBITDA ₹79.7 Cr +11.7%YoY
  4. Adjusted EBITDA Margin 17.3% +0.8%YoY
  5. Adjusted Net Profit ₹46.4 Cr +53.4%YoY
  6. Adjusted Basic EPS ₹3.9 +53.3%YoY
  7. Gross Margin 36% +0.5%YoY
  8. DSO 68 days
  9. Cash & Bank Balance (net of ST borrowing) ₹203.3 Cr
  10. Non-recurring Income (Land Sale) ₹40.9 Cr
  11. Effective Tax Rate 24%

What they filed

Q1 FY27: revenue up 30.3%, net profit down 26.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue444 449 442 462 499 +12%555 +24%575 +30%602 +30%
EBITDA68 71 71 70 72 +6%94 +32%104 +46%111 +59%
Net profit40 39 39 76 35 −12%36 −8%65 +67%56 −26%
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.

Guidance & targets

Profitability

  • Adjusted EBITDA Margin Profitability · FY25 · High confidence high 16s
    We are committed to maintaining the EBITDA levels that we had said, in high 16s, etc. But we continue to look at the market and we are not going to be shy of making the investments that are needed. So we're keeping ourselves, we're giving ourselves the cushion to invest.

    — Nitesh Bansal

Capital Allocation

  • Acquisition Funding (Loan) Capital Allocation · High confidence INR 2,000 crores
    So, Varun, the INR 2,000 crores approval is a blanket enabling provision, which basically enables us to invest whenever we need specifically for the purpose of acquisition and being able to make an appropriate inorganic move in the market.

    — Nitesh Bansal

  • Acquisition Funding (NCD) Capital Allocation · High confidence INR 275 crores
    The same thing holds good for the NCD approval. It's all basically being ready in the market, whenever there is an appropriate target which we can move forward with, then we should not have any hindrance.

    — Nitesh Bansal

Operating Efficiency

  • DSO Normalization Operating Efficiency · next quarter · Medium confidence normalize in a quarter or so
    DSO is 68 days as against 61 days as at December 31, 2024. This is mainly due to timing reason and start of the global ERP, as Nitesh Ji already explained. It will be normalized in a quarter or so.

    — Nand Sardana

Pipeline Health

  • Overall Pipeline Size Pipeline Health · High confidence 1.25 to 1.4 times bigger
    our overall pipeline has probably improved to become maybe 1.25 to 1.4 times bigger than it used to be.

    — Nitesh Bansal

  • Deals in $1M+ ACV category Pipeline Health · High confidence more than doubled
    the number of deals in that 1 million plus ACV category has more than doubled

    — Nitesh Bansal

Headcount Cost

  • RSU Expense Headcount Cost · next few quarters · Medium confidence INR 5.5-6 crores
    So, I think you can assume that between INR 5.5 crores to INR 6 crores on an average would be the expense for the next few quarters.

    — Nand Sardana

Revenue Growth

  • Year-end Top Line (USD) Revenue Growth · FY25 · Low confidence $220 million $230 million
    Now sir, now we are already, for the H1, we are at approximately $ 105 million top line. So, can we expect to close the year around $ 220 million $ 230 million top line? Your guess is as good as mine. We will continue to push our teams to do as much as possible. And clearly, like I've always said, with a little bit of tailwind, we can certainly be on that kind of growth trajectory.

    — Nitesh Bansal

Risks & concerns

  • Cautious discretionary spending by clients

    medium

    Management notes continued cautious discretionary spending in the market, though data/SaaS platform companies are spending more aggressively.

    Management acknowledged

  • Increase in DSO (Days Sales Outstanding)

    medium

    DSO increased to 68 days from 61 days due to a one-off billing delay from a global ERP rollout, but is expected to normalize in a quarter or so.

    Management acknowledged

  • Seasonal challenges/furloughs in Q4

    low

    Q4 typically faces headwinds from Diwali, Christmas, and New Year holidays, but management hopes strong volume momentum will mitigate the impact.

    Management acknowledged

  • Escalating AI operational costs

    low

    Increased adoption of AI leads to escalating operational costs, which the company is addressing through a partnership with Mavvrik for AI cost governance.

    Management acknowledged

Areas of evasion (2)

  • Specific reasons for top 10 client revenue trends beyond 'no client-specific issue'
  • Firm commitment on year-end top line guidance

Q&A highlights

3 direct
Average deal size and run rate from new clients Direct
Large deals, as we had spoken last time as well, these are typically multimillion dollar deals spread over a couple of years. So the few large deals that we won, typically, we've seen the 2- or 3-year deal engagements come through. So we are looking at clients who will typically make into between USD 2 million to USD 5 million clients a year kind of a thing.

Provides insight into the scale and duration of new client engagements, indicating a shift towards larger, more strategic deals with potential for significant annual revenue.

Asked by Vinay Menon

Continuity of growth momentum in Q3/Q4 and furlough impact Direct
And I think, given that this growth is based on some of the solid wins that we talked about and continuing momentum that we see, I think without really doing guidance kind of a thing, we think that we are confident that we'll continue the growth momentum in Q3. Q4 will always have some seasonal challenges due to furloughs... But hopefully, if we have the volume momentum with us, perhaps, it will still be positive.

Addresses investor concerns about near-term growth sustainability and the impact of seasonal factors, providing a cautiously optimistic outlook for the coming quarters.

Asked by Sandeep Shah

Use of proceeds for INR 2,000 crores loan and NCD Direct
So, Varun, the INR 2,000 crores approval is a blanket enabling provision, which basically enables us to invest whenever we need specifically for the purpose of acquisition and being able to make an appropriate inorganic move in the market.

Clarifies the company's strategic intent for significant capital raising, signaling a strong focus on inorganic growth and preparedness for sizable acquisitions to drive future expansion.

Asked by Varun Kulkarni

3 min read 6 chapters

Detailed narrative

Strong Q2 FY25 Financial Performance

R Systems International reported robust financial results for Q2 FY25, with revenue reaching INR 462 crores (USD 54 million), marking a 4.4% sequential growth in INR terms and 5.6% in USD terms. Adjusted EBITDA stood at INR 79.7 crores (USD 9.3 million), an 11.7% increase year-over-year, with the adjusted EBITDA margin improving to 17.3% from 16.5% in Q2 FY24. Adjusted net profit surged by 53.4% YoY to INR 46.4 crores (USD 5.4 million), translating to an adjusted basic EPS of INR 3.9.

Operational Metrics and Geographic/Client Mix

The company maintained a high utilization rate of 82.6%, though slightly down by 120 basis points from its peak. North America continues to be the largest geography, contributing approximately 75% of revenue, with Europe and Southeast Asia making up 8.8% and 12.9% respectively. Client concentration remains stable, with the top 10 clients accounting for 24.6% of revenue. DSO increased to 68 days from 61 days, primarily due to a one-off billing delay caused by a global ERP solution rollout, which is expected to normalize in a quarter or so.

Strategic Focus on AI, Cloud, and Partnerships

R Systems is actively enhancing its channel partnerships with major cloud providers like AWS, Azure, and Databricks, and has secured research funding eligibility from Microsoft. A new partnership with Mavvrik addresses AI cost governance, a growing concern with increased AI adoption. The company has significantly increased its focus on Agentic AI offerings, deploying multiple GenAI tools across projects and seeing client endorsements for efficiency gains. Mexico operations are scaling up, now serving five active clients.

Inorganic Growth Strategy and Capital Preparedness

The Board has approved an INR 2,000 crores loan and an INR 275 crores NCD as enabling provisions for potential acquisitions, signaling a strong intent for inorganic growth. The primary acquisition targets are in product engineering, digital transformation, cloud data, and AI capabilities, with a focus on North American businesses with India delivery, and potentially delivery locations in Eastern Europe or LatAm. The average working capital cost of capital is 8-8.5%, and NCD rates will be negotiated.

Growth Outlook and Pipeline Health

Management expressed confidence in continuing growth momentum into Q3 FY25, driven by solid deal wins and a robust pipeline. The overall pipeline has improved to 1.25 to 1.4 times its previous size, and the number of deals in the $1 million-plus ACV category has more than doubled. While Q4 is expected to face seasonal challenges from furloughs, the company hopes that strong volume momentum will mitigate the impact. The company is consciously focusing on winning multi-year annuity-based revenues.

Margin Management and Investments

The company is committed to maintaining adjusted EBITDA margins in the high 16s, with any performance above 17% providing a cushion for strategic investments. Gross margin for Q2 FY25 was 36%, slightly down from 36.7% last quarter, partly due to adding over 190 associates and investments in data and AI. RSU costs for the quarter were INR 4.9 crores, expected to average INR 5.5-6 crores in subsequent quarters. A non-recurring income of INR 40.9 crores from the sale of land and building contributed to a lower effective tax rate of 24% for the quarter.

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