Sagility Limited

Sagility Limited demonstrated strong momentum in Q2 and H1 FY26. Q2 consolidated revenues reached $189.4 million (INR 16,585 million), marking a 20% YoY growth in constant currency and 25.2% in INR terms. Organic growth was 11.1% in constant currency. Adjusted EBITDA for Q2 was $49.8 million (INR 4,352 million), representing a 26.2% margin and 25.6% YoY increase. Adjusted PAT surged 84% YoY to INR 3,010 million. For H1 FY26, revenues stood at $369.9 million (INR 31,974 million), growing 21.4% YoY in constant currency, with adjusted EBITDA of INR 8,039 million (up 26% YoY) and adjusted PAT of INR 5,007 million (up 62.4% YoY).

The company secured $34 million in aggregate Annual Contract Value (ACV) this quarter, stemming from business with 24 existing clients and 5 new clients, bringing the total active clients to 82. Notable wins include a regional Blues plan, a home medical supplies provider, and a regional healthcare organization. Sagility also announced a cross-sell win from a subsidiary of a large national Payer and an incremental SOW from the same client. The company received 'Great Place to Work' certification in India and Sagility Philippines won the 'Asia CEO Awards 2025' for Service Excellence Company of the Year.

Management addressed several external factors. Tariff-driven increases in medical equipment and pharmaceutical costs primarily impact Provider clients, with no tangible effect on Sagility. The 'Marketplace Integrity and Affordability Final Rule' may reduce membership in the ACA market, but Sagility's low exposure minimizes impact. The proposed 'Higher Act' (25% excise tax on outsourcing payments) has not passed Congress, and its likelihood is considered low; if implemented, benefits from offshoring and client negotiations are expected to mitigate the impact. H-1B policy changes are not a major concern due to Sagility's high proportion of US-based citizens and green card holders (over 99%).

Sagility is actively leveraging GenAI, acknowledging its transformative potential and some revenue cannibalization, but focusing on delivering significant client value. The company has deployed 25 distinct AI use cases across nine clients. Three case studies were presented: a transformation project for a large national Payer (20% savings via process reengineering and GenAI, charged on a PMPM basis), an engagement services transformation for a regional player (25-40% savings via GenAI-powered cloud solution, with AI agents charged at a fraction of human agent cost), and a revenue-increase solution for a national Payer involving technology and services.

Given the strong momentum, Sagility has increased its full fiscal FY26 revenue guidance in constant currency to '21% plus' from the previous 'low to mid-teens'. The adjusted EBITDA guidance for FY26 has also been raised to 'close to 25%' from '24% plus'. Management broadly maintains a medium-term EBITDA margin target of 24-25%, indicating a strategy to reinvest any margin gains into capabilities and revenue growth rather than solely focusing on margin expansion. The company expects H2 FY26 to be stronger than H1, with Q3 benefiting from the annual enrollment period (AEP).

The company announced an interim dividend of 0.05 or 5 paise per share to be paid in Q3. Management indicated a directional commitment to paying dividends, with the quantum likely to increase as debt is extinguished. Sagility has an external commercial borrowing at an 8% coupon rate from its parent company, with scheduled repayments in H2 FY26 (end of Q3 and beginning of Q4), aiming to clear the entire debt by the end of next fiscal year. The company continues to pursue acquisitions selectively to enrich capabilities and expand market access, while maintaining prudent fixed asset additions and improved cash position.