ECLERX - eClerx Services Limited Share Price

eClerx Services reported a strong Q1 FY26, with operating revenue reaching USD 109.2 million, up 4.2% sequentially and 17.1% year-over-year. In INR, revenues amounted to INR 9,346 million, a 4% sequential increase and 19.5% YoY growth. Margins exhibited resilience; EBITDA was INR 2,346 million at a 24.8% margin, down sequentially but up 25.3% YoY. The PAT for the quarter was INR 1,417 million, with a margin of 15%.

Management highlighted significant deal wins of $32 million for the quarter, alongside a 6% growth in Analytics and Automation, surpassing overall growth rates. The BFSI segment showed robust demand driven by high volatility, with promising KYC onboarding opportunities. However, the Fashion and Luxury segment remains weak, affected by U.S. market struggles.

A new operation center in Lima has launched, with Cairo set to open in Q2. The management expressed optimism about maintaining growth in emerging markets and across various verticals, while cautioning about macroeconomic volatility. They expect continued sequential growth in Q2, building upon the current momentum.

The management also noted an uptick in DSO to 86 days due to client-driven process changes but reassured shareholders of strong collection capabilities. They reported a significant investment in employee upskilling, with 40% of the staff trained in advanced AI technologies.

For FY26, management anticipates higher ACV than FY25's $140 million and maintains a margin guidance of 24% to 28%, citing ongoing investments in the business. Overall, the outlook remains cautiously optimistic, focusing on strategic growth despite uncertainties in the macro environment.

1. Question: "Is there a seasonality in the ACV booking from Q4 to Q1? Do you believe the decline QoQ is seasonal and may continue in the future?"

   Answer: "Yes, there will always be some volatility QoQ. Last year, we did roughly $140 million in ACV. For this year, we expect to exceed that on a full-year basis."

2. Question: "Can you provide some commentary about roll-off, is it continuing at the scale of 15%, 20% of the top line?"

   Answer: "Yes, the roll-off percentages remain about the same, showing no significant changes."

3. Question: "Is the robust employee addition indicative of healthy growth visibility in the near term?"

   Answer: "Yes, we certainly see client demand, and our overall strategy is proving effective in terms of service capabilities and vertical focus."

4. Question: "Given Q1's lower margins due to wage hikes, do you think we could be near the upper end of the 24%-28% margin guidance this year?"

   Answer: "It's uncertain. The year has just begun, and potential investments could adjust margin trends. The executive team will make decisions as the year progresses."

5. Question: "With the buyback concluded last year, can we expect a buyback consideration by the board in the near to medium term?"

   Answer: "Yes, it's possible."

6. Question: "Can you quantify the headwinds and tailwinds for margin on a QoQ basis for this quarter?"

   Answer: "About 250 bps decline is due to wage hikes and 20 bps from new delivery centers. Strong growth, especially in BFSI and CMT, allowed us to maintain margins."

7. Question: "Can you explain the DSO increase and what exactly has changed in client systems and processes?"

   Answer: "Some clients are changing internal systems for tracking purchase orders. This has caused some invoices to be on hold, affecting DSO, but there's no risk to collections."

8. Question: "What number of people are being trained on GitHub Copilot to drive productivity?"

   Answer: "Out of about 1,700 in our technology team, we anticipate around 60% engaged in relevant work, which translates roughly to 25% of that workforce benefiting from productivity improvements."

9. Question: "What is driving growth in Emerging clients this quarter despite concerns in the Fashion segment?"

   Answer: "Growth is driven by larger deal sizes and our ability to cross-sell and upsell services to existing clients, particularly strong in BFSI."

10. Question: "Do you see the overall demand scenario improving compared to the beginning of the year?"

    Answer: "We are cautiously optimistic as our strategies for cross-selling and upselling are resonating well, but the macroeconomic environment remains volatile."