LTIMindtree reported a sequential decline in revenue and net profit during the quarter ended March and missed the Street expectations due to extended furloughs and delay in deal ramp-up. However, the management is optimistic about bouncing back to profit in the first quarter of financial year 2025.
“If I talk about Q4 specifically, we had already called out that we had some higher than usual pass-throughs in Q3, and the absence of those pass-throughs definitely means that we had a lower revenue coming in Q4,” Debashis Chatterjee, CEO of LTIMindtree said in a post-earnings press conference.
Additionally, “We had a gradual reversal of the furloughs, which also impacted the overall revenue ramp-up. There were some of the large deals that we had closed, the ramp-up was slower than what we had expected… So that’s why we saw a dip as far as Q4 is concerned,” he added.
The consolidated revenue fell to Rs 8,892.9 crore in January-March from Rs 9,016.6 crore reported in December. This also fell short of the Bloomberg estimate of Rs 8,975 crore. The operating margin, calculated as earnings before interest and tax, fell 70 basis points quarter-on-quarter to 14.7%, against the company’s aspirational range of 17-18%.
When asked about the gap between the company’s aspirational margin range and that of the reality, the management said that in the mid of FY24, they realised some of the “assumptions we made were not happening due to wider industry trends. Now, the focus remains the same but to reach there we will take a few more quarters”.
Further, with a dip in revenue, the Mumbai-based company’s net profit fell nearly 6% on quarter to Rs 1,099.9 crore, also missing the analysts consensus of Rs 1,154 crore. The fall in the bottomline was “offset to a great extent by the operational efficiencies,” the company’s management said.
As a result, LTIMindtree expects to swing back to profit in Q1 of FY25 and also expects an uptick in revenue growth. “We don’t normally get into guidance, but what we can confidently say is that we will get back to growth as far as Q1 is concerned,” Chatterjee said.
VERTICAL PLAY
India’s sixth-largest information technology company’s revenue from its largest vertical, the banking, financial services & insurance, saw a 2.8% sequential decline in constant currency terms. Meanwhile, manufacturing and resources fell 9.6% from the previous quarter.
“As far as the overall BFSI is concerned, we did have unexpected cancellations of two projects in that client base, resulting in some impact on our EBITs. These are all resulting from decisions where clients have reprioritized their spending, and that’s why you see a dip in BFSI,” Chatterjee said.
And, sales from technology, media and communications, the second largest, expanded by 5.1% in constant currency terms. Revenue in healthcare, life sciences, and public services and consumer business segments saw an increase of 4.5% and 1.2%, respectively.
The company also said it was seeing strong traction in the generative artificial intelligence space and added that it would be difficult to give a revenue number as GenAI is now embedded in most projects.
“We have also got more than 140 client conversations going on in terms of proof of concepts or use cases and out of that, around 30 use cases have also moved into production,” the management said.
Further, the company’s revenue contribution from North America improved marginally in the March quarter. While the revenue from Europe and the rest of the world saw a decline. The revenue contribution from North America rose 0.1% on a constant currency basis to 73.8% and that from Europe fell 0.2% to 14.6%.
It’s not fair to say the (macroeconomic) situation has worsened further. It is just that it has not recovered the way everybody was anticipating. The macros and the geopolitics are weighing in very much as far as the overall recovery is concerned, and we’ll probably have to give it some more time where we can see the real green shoots,” Chatterjee said.
EMPLOYEE METRICS
LTIMindtree’s total headcount fell by 821 in the March quarter to 81,650. And in FY24 the company’s workforce fell by 2,896. This is a contradiction from the previous year when the company had added about 500 employees.
Further, the company’s attrition rate also rose 0.2% quarter-on-quarter to 14.4%, while the utilisation fell to 86.9% in January-March from 87.4& in the previous quarter.
The fall in the headcount is in line with the other IT giants. Throughout FY24, Infosys, TCS, and Wipro collectively saw a workforce reduction of 63,759 employees, marking a significant pivot from the hiring frenzy that characterized the post-pandemic period.
However, LTIMindtree said it recruited 500-odd freshers in the quarter ended March. “As far as campus hiring is concerned, we onboarded 500 plus freshers as part of our this quarter’s plan, and we’ll continue to,” Nachiket Deshpande, chief operating officer of the company said. “We have a specific quarter-by-quarter onboarding plan, and we’ll continue to execute that plan,” he added.
LTIMindtree also declared a final dividend of Rs 45 per equity share. On Wednesday, the stock rose 0.2% on the National Stock Exchange to close at Rs 4,733.