Sagility Limited — Q4 FY25 earnings call

Call held 15 May 2025

Management summary

Sagility India delivered a strong performance in FY25, meeting its guidance for mid-teen revenue growth and 24%+ EBITDA margins. The company successfully integrated the BroadPath acquisition, which significantly expanded its mid-market client base and onshore presence. Despite profitability pressures in the U.S. Medicare Advantage segment, management remains bullish, viewing client cost-cutting needs as an opportunity for further outsourcing and transformation work.

Highlights

  • Full-year FY25 revenue reached ₹5,569.9 crores ($658.3 million), representing 17.2% YoY growth in INR terms.

  • Q4 FY25 revenue stood at ₹1,568.5 crores ($181.8 million), up 22.2% YoY in INR terms and 17.7% in constant currency.

  • Adjusted EBITDA for FY25 was ₹1,468.5 crores, a 28.4% YoY increase, with margins at 26.4%.

  • Payer vertical grew 20.8% YoY, contributing 89.7% of revenue; Provider vertical grew 36.9% YoY.

  • Onboarded 38 new clients during the year, including 30 through the BroadPath acquisition.

  • Operating cash flow for FY25 was ₹1,214.1 crores, representing approximately 90% of reported EBITDA.

  • Reported EPS for FY25 grew by 119.3% YoY to ₹1.17 per share.

Key financials

  1. Revenue ₹5,569.9 Cr +17.2%YoY
  2. Adjusted EBITDA Margin 26.4%
  3. Adjusted PAT ₹239.8 Cr +45.2%YoY
  4. Adjusted EPS ₹1.76 +27.7%YoY
  5. Attrition Rate 27.5% 0%YoY
  6. Headcount 39,409 employees +12.4%YoY

What they filed

Q1 FY27: revenue up 27.6%, net profit up 45.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,325 1,453 1,568 1,539 1,658 +25%1,971 +36%2,024 +29%1,963 +28%
EBITDA301 392 373 346 415 +38%511 +30%485 +30%438 +27%
Net profit117 217 183 149 251 +115%268 +24%258 +41%217 +46%
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.

Segment breakdown

SegmentRevenue ContributionYoY Growth
Payer Vertical89.7%20.8%
Provider Vertical10.3%36.9%

Guidance & targets

Revenue

  • Organic Revenue Growth (CC) Revenue · Medium Term · High confidence low- to mid-teens
    we continue to expect low- to mid-teens revenue growth in the medium term

    — Ramesh Gopalan, MD & Group CEO

  • Total Revenue Growth (CC) Revenue · FY26 · Medium confidence >20%
    if you include, BroadPath on top of that, our constant currency total growth is likely to be upwards of 20% for FY '26.

    — Ramesh Gopalan, MD & Group CEO

Margin

  • Steady-state Adjusted EBITDA Margin Margin · FY26 · High confidence 24-25%
    the steady state will be around the 24% to 25%.

    — Ramesh Gopalan, MD & Group CEO

  • BroadPath EBITDA Margin Dilution Margin · FY26 · High confidence 120-150 bps
    For the full-year also, we expect BroadPath acquisition to be dilutive of EBITDA margins by almost 120 to 150 basis points, at least for the next fiscal.

    — Ramesh Gopalan, MD & Group CEO

Debt

  • Promoter Debt Repayment Debt · Next 2 years · High confidence ₹820 crores
    So in the next two years, broadly, we should be fully committed... We should be done with it.

    — Sarvabhouman Srinivasan, Group CFO

Risks & concerns

  • Medicare Advantage Utilization Spikes

    medium

    High utilization in 2024 impacted client profitability, leading some to exit unprofitable segments.

    Both acknowledged

  • BroadPath Margin Dilution

    medium

    Acquisition is expected to dilute EBITDA margins by 120-150 bps in FY26.

    Management acknowledged

  • AI Revenue Cannibalization

    low

    Automation reduces effort/billing; currently 1.5-2% impact, expected to rise to 4-5% in 2-3 years.

    Both acknowledged

  • Forex Losses in Philippines

    low

    Forex losses due to balance sheet restatement in the Philippines impacted Q4 margins by 80-90 bps.

    Management acknowledged

Q&A highlights

3 direct
Medicare Advantage Profitability Pressures Direct
those profitability pressures in fact, have increased the propensity for clients to work with service providers like us.

Clarifies that client-side financial stress is a tailwind for outsourcing demand rather than a risk to Sagility's volumes.

Asked by Manik Taneja, Axis Capital

Q4 Margin Bridge and Dilution Factors Direct
out of the 260 basis points, about a 110 basis points is because of BroadPath. And the salary increase net of the headcount reduction is about 60 to 70 basis points. And the balance 80 to 90 basis points is basically the Forex loss.

Provides a granular breakdown of margin compression, distinguishing between structural wage hikes, acquisition impact, and transient forex losses.

Asked by Abhishek Kumar, JM Financial

AI Revenue Cannibalization Direct
the cannibalisation impact that we see currently is in the range of about 1.5% to 2%... We predict that in over the next two, three years that, 1.5% to 2% could go as 4% to 5%.

Quantifies the expected negative impact of AI-driven automation on revenue, which is already factored into their mid-teen growth guidance.

Asked by Pranay Roop Chatterjee, Burman Capital

2 min read 5 chapters

Detailed narrative

BroadPath Acquisition Drives Mid-Market Expansion

The acquisition of BroadPath has significantly altered Sagility's client profile, adding 30+ new clients primarily in the mid-market and smaller healthcare payer space. While the acquisition is currently dilutive to EBITDA margins by approximately 120-150 basis points, management expects to recover this through synergies in SG&A and vendor consolidation. Early cross-selling efforts are already underway, with active conversations with over 10 BroadPath clients regarding Sagility's broader service portfolio.

Navigating U.S. Healthcare Payer Headwinds

Management addressed concerns regarding profitability pressures in the U.S. Medicare Advantage segment, noting that high utilization rates in 2024 have squeezed client margins. However, Sagility views this as a strategic opportunity, as clients under pressure are more likely to outsource core administrative processes to reduce costs. The company has seen no slowdown in its deal pipeline, adding eight new clients during the year and maintaining active final-stage negotiations with three more.

AI Strategy and Revenue Cannibalization

Sagility is proactively managing the impact of GenAI and automation, which currently results in a 1.5% to 2% revenue cannibalization. This is expected to increase to 4-5% over the next 2-3 years as pilots move to full-scale implementation. The company's strategy is to remain margin-neutral by passing productivity gains to clients while charging for implementation and transformation, ensuring that their mid-teen growth guidance remains net of these impacts.

Margin Resilience Amidst Wage Hikes and Forex Volatility

Despite a sequential dip in Q4 margins, management provided a clear bridge: 110 bps from BroadPath consolidation, 60-70 bps from January wage hikes, and 80-90 bps from forex losses in the Philippines. The company maintains a steady-state adjusted EBITDA margin target of 24-25% for FY26. They intend to continue investing in technology and healthcare-specific solutions (e.g., provider data management) to maintain long-term margin resilience.

Strong Cash Generation and Debt Deleveraging

Sagility demonstrated robust cash flow generation, with free cash flow reaching 80.5% of EBITDA. The company funded the BroadPath acquisition entirely through internal accruals without additional borrowing. Management is committed to repaying the remaining ₹820 crore promoter debt over the next two years following a structured schedule, as prepayment is not an option under current regulatory frameworks. A formal dividend policy is expected to be announced within the next two quarters.

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