Happiest Minds Technologies Ltd Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Yeah. So just wanted to probe further on your comment -- Joseph, your comment on growth to come back strongly. So what's really the organic business outlook for the year ahead? And if you could tie that with the progress that the company has made on the PDES segment, combining DBS and PES, if you could also talk about that, please. Joseph Anantharaju - Happiest Minds Technologies Limited - Executive Vice Chairman & CEO, Product and Digital Engineering Services Sure. So for the PES segment, as Ashok mentioned, we are in the process of setting up the industry groups that Ashok mentioned. We've identified leaders for these groups. We've identified the delivery and salespeople and the domain heads who will form part of this group, and we are in the process of drawing up strategies for each of these groups. And each of the industry group would -- as Ashok mentioned, would be an engine of growth in the form of having an integrated sales and delivery capability, which would empower them better. And just -- we expect will allow us to take advantage of the opportunities that we see in the market and add to the growth that we also expect from gen AI. And as I mentioned, or Ashok also alluded to, we are having multiple conversations going on. We are doing POCs and demos, and that's how we are starting off in the gen AI space with many customers cutting across the industry groups, and we expect these also to translate into larger projects as the year progresses.

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Thank you. This is very useful. And just staying on gen AI point. How do you think Happiest Minds can compete with larger peers here, especially as gen AI deals are more volume-driven in my opinion, which could potentially benefit larger peers at least in the exploratory phase currently? And also, how are the size of deals in gen AI as compared to traditional deal size that is seen with Happiest Minds? And also, if you could highlight how is the flow from POCs to production happening in this segment? Joseph Anantharaju - Happiest Minds Technologies Limited - Executive Vice Chairman & CEO, Product and Digital Engineering Services Sure. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 18, 2024 / 3:30AM, HAPP.NS - Q3 2024 Happiest Minds Technologies Ltd Earnings Call

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Yes. The other question I had was on the outlook on the healthcare vertical, which seems to have been a big driver since its recent inception. So any comments around this? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 18, 2024 / 3:30AM, HAPP.NS - Q3 2024 Happiest Minds Technologies Ltd Earnings Call Joseph Anantharaju - Happiest Minds Technologies Limited - Executive Vice Chairman & CEO, Product and Digital Engineering Services Yes. So I know we see healthcare as being a high potential area, Apurva, and this is cutting across multiple subsegments of healthcare. Some of the areas where we are seeing quite a bit of traction, and which has led to the growth that you've seen, first one is bioinformatics. There's a huge use and employment of AI, analytics, and other such technologies, digital technologies in the bioinformatics space, and we have several customers, as well as conversations going on. Again, if you look at medical devices, there's a lot of advancement and innovation taking place out there, and this is an area that we started focusing on a couple of years back. And this year, we've had a couple of large medical device companies that we've signed up as a customer, along with a couple of smaller ones. So that's the second area where we are seeing quite a bit of traction. The third area that I would call out is even if you look at the providers, the hospitals, clinics, and others, they're -- I think, starting off, or they are midway into their digital transformation journey, and there's a lot of work that's being done on enhancing patient experience, streamlining some of their supply chain and inventory management, enhancing the quality of care through more -- through better diagnostic equipment. So that's the other area that we are seeing quite a bit of traction in. And the fourth area is you have to look at life sciences again. And I called that out separate from pharma. Again, there's a lot of analytics and AI that's being used. These are all technologies that Happiest Minds has focused on and has built deep capability. So for us, we are looking at healthcare as being one of our growth engines, and this will be one of the industry groups that we'll be investing in and focusing on heavily.

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Thank you.

Question: Aditi Patil - ICICI Securities Ltd. - Analyst : Thank you for the opportunity. My question is on revenue outlook for Q4. So as per the full-year guidance of 12% YoY CC, the ask rate for Q4 is around 4.5% QoQ CC. So like, how comfortable are we in achieving that given the continued pressure and discretionary spend?

Question: Aditi Patil - ICICI Securities Ltd. - Analyst : Yes.

Question: Aditi Patil - ICICI Securities Ltd. - Analyst : Okay. Got it. And can you give some color on the clients added, two new clients added in your $1 billion-plus category. Are these new clients? Or have you won new deals in this quarter from those clients? Joseph Anantharaju - Happiest Minds Technologies Limited - Executive Vice Chairman & CEO, Product and Digital Engineering Services Yes. Let me talk a little about the new logos and give you color from two angles, Aditi. The first is after we had 10 new logos that we were able to close in Q3, five of them were in India, three in North America, and two in Australia. And one thing that we've been noticing and observing, and which I'm sure you also observed, is that the Indian economy is holding up well and is growing quite well, leading to quite a few opportunities out here. And many of them are beginning to invest in their digital strategy. And this has given us the five logos that I talked about. If you look at it from an industry-group angle, again, it's been -- the new logos that we have is spread across multiple logos. We had two logos in healthcare, we had one logo in the retail space, four logos in industrial and manufacturing, two in high-tech, and one in edutech. So as you can see, it cuts across all of the industry groups that we have. I hope this helps, Aditi.

Question: Aditi Patil - ICICI Securities Ltd. - Analyst : Okay. Thank you for the detailed color. And so, I wanted to know more about the billion-dollar corporation, which is like 59 in this quarter. So there

Question: Aditi Patil - ICICI Securities Ltd. - Analyst : Okay. Got it. Thank you, Venkat, Joseph, and Ashok for the detailed color.

Question: Sumit Jain - CLSA Ltd. - Analyst : Yeah, hi. Thanks for the opportunity. So my question is to Mr. Ashok Soota in terms of how you are visualizing this whole gen AI opportunity in front of the Indian IT industry, given you have seen five to six decades of the technology cycle. Do you think the India's position is extremely strong in this current cycle? And within that context, given that you are working with multiple players in different industry verticals, how you are positioned to make a difference over the next two to three years?

Question: Sumit Jain - CLSA Ltd. - Analyst : Got it. Thanks for addressing that question. Maybe just a follow-up. I mean, so, in the cloud transformation journey started in 2012 to '15, '16 period, we could see the benefit of that coming more to consulting companies first, and then, to the Indian IT services industry. Now, in this gen AI evolution, we are already seeing benefit coming to the companies, like Accenture where in the last three quarters, they have disclosed their revenues from generative AI, which has actually seen quite a significant jump. So just wanted to understand in this wave as well, do you think first -- and you also mentioned there will be a more consulting requirement. So will the consulting companies, again, be beneficiary slightly ahead of the implementers? So I just want to understand perspective there.

Question: Sumit Jain - CLSA Ltd. - Analyst : Got it. And just very last question, whatever gen AI use cases you are working with your clients, and you mentioned a particular use case with the edutech customer, so what kind of hurdles are you facing to scale up those use cases? And when do you think those hurdles will actually go away? And how much time?

Question: Sumit Jain - CLSA Ltd. - Analyst : Got it. Thanks a lot for your detailed answers, and all the best to the team.

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Yes. Thanks for the follow-up. Question I had on the sharp drop in the top account. If you could talk about the outlook there as well as the outlook in the edutech vertical, and to that as the mix continue to trend downwards. Joseph Anantharaju - Happiest Minds Technologies Limited - Executive Vice Chairman & CEO, Product and Digital Engineering Services So the largest customer, as you rightly pointed out, has seen on a percentage basis, a large decline, but on a dollar absolute value, the decline has been much lower. And the reason why that's happened, Apurva, is the growth that they had projected for the year came in on the -- the actual REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 18, 2024 / 3:30AM, HAPP.NS - Q3 2024 Happiest Minds Technologies Ltd Earnings Call came in lower than the projection that they had made based on which they have made the investments and plans. So they have relooked at the investment. And accordingly, there's been an adjustment in the R&D and technology budget and spend that they've allocated. And that's what's reflected in the numbers. I think going forward, there will be -- you will see this spill over Q4 as well, because that's where the adjustment happened over these two quarters. But after that, we expect the revenues to stabilize. And hopefully, growth picks up and we may also do some acquisitions, which will result in additional work coming from this customer. Going to edutech. I think one of the -- if you look edutech, there are multiple areas. There's K-12, there's higher ed, there's cross-learning workforce development. And we are seeing a fair bit of traction from the K-12 segment, from workforce development and the customers that we have in the corporate learning segment. One area which is still a little uncertain has been higher ed, and you would have also read about some of the challenges that this industry has faced in -- especially in US. There's declining enrolment and the whole first-world rate and other things. But what we have been doing is we've been making sure that our customer base is diversified across the various elements of edutech. And some of the customers that we did sign-up last year were in the other three segments, the workforce development, and in the K-12 segment, which are relatively more stable.

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Okay. And on the operational side, this is pertaining utilization, companies operated at higher levels of utilization in a faster growth environment a year back. Now, what's the scope for utilizations to go higher as you get into better demand at least next year? So how should the utilization number look over a period of time? Because offshoring levels are also pretty much at highs.

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Got it. And could you highlight what's the head count additions planned for next year?

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Sure. And just a bookkeeping one, what was the subcontracting expenses for the quarter?

Question: Apurva Prasad - HDFC Securities Limited - Analyst : Got it. Thank you, and wish you all the best.