Expect second half of FY17 to be positive: Persistent Systems

A: The revenue growth for the quarter was 0.4 percent in dollar terms to USD 105.18 million or 7040 million Indian rupees. This is definitely lower than what we would have wanted but overall in the context of our yearly numbers this is fairly reasonable.

A large percentage of our revenues now come from IP lead revenues and a lot of that has volatility and this being the third quarter of the calendar year. It has all the European holidays and whole bunch of other reasons why IP revenues traditionally in this quarter have been low from what we have understood from partners.

Sonia: How does it set you up for the second half of the year in terms of any kind of growth recovery?

A: Overall we are looking at a fairly positive second half for Persistent. We have been investing in many different things including digital transformation for which we are seeing some very good partnerships. We have added some senior leadership in the team and we are seeing good action in the market.

The IP revenues also should do well in Q3 of our financial year or Q4 calendar year. Q1 is always little tricky from the IP revenue point of view. However, by Q4 calendar, which is our next quarter, should be good from the IP point of view. Overall we are quite pleased with where we stand at this moment. We think the expectations or the numbers we had projected for the year, I think we still hold by all of those numbers. We are not concerned at the annual numbers that we had projected.

Sonia: The margins have been better than estimated, so that is a good thing but what lead to that margin improvement?

A: If you look at margins, they come quarter-on-quarter, so last quarter we had excess on the visa and other related issues. However, overall there has been good operational efficiency that has contributed to this quarter's margin improvement despite a salary hike that came in and overall there has been a general improvement in the way we have managed the financials for this quarter.

Sonia: You do maintain your full year growth estimate. You had said that IBM will contribute about USD 50 million of incremental revenues in FY17?

A: We are not specifically giving guidance but we had said that there will be USD 50 million growth because of the IBM alliance that we had signed at the beginning of the year. We stand by that and everything else will add on to that. So if you look at our annual numbers right now, year-on-year growth numbers should give an indication of where we should see ourselves at the end of the year.

Sonia: How much has IBM contributed in the first half of the year?

A: I will not be able to disclose that at the moment but overall we have had three quarters of revenue figures from the IBM alliance and we had said that we will do 50 million for the first year and we still hold by that number.

Sonia: Digital is the new buzzword. What was your growth rate in digital segment?

A: Quarter-on-quarter growth is about 6-7 percent this quarter in the digital part of the business.

Sonia: You had guided for the IBM deal to negatively impact your margins by 200 bps in FY17. Considering the beat in Q1, can there be any change to that assessment?

A: We are not forecasting a number at this time on both EBITDA and other numbers, but we had said that IBM will give us 2 percent contribution negatively for the margins for this year and we still stand by all of those numbers that we have said.