COFORGE — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Sudhir Singh
Coforge Limited January 27, 2022
Questions and answers
Sandip Agarwal
Coforge Limited January 27, 2022 More recently, at the start of the current fiscal year, we had indicated that we plan to grow at least 17% in organic CC terms.
Over the next two quarters, we had raised that guidance to at least 19% and subsequently to at least 22% organic constant currency growth.
Given the sustained growth momentum, we are pleased to revise our annual revenue guidance upwards.
We now believe that our consolidated revenue will grow around 37% in constant currency terms over last year, and that our organic revenue will grow around 24% in constant currency terms over last year.
Reported dollar growth based at current exchange levels will be higher in our view.
In the last fiscal year, we delivered an adjusted EBITDA margin of 18%.
This year, we continue to target an adjusted EBITDA margin of 19%.
And we believe we will end the year between 18.9% to 19% adjusted EBITDA margin.
This will require another sequential expansion in the adjusted EBITDA margin in Q4 over Q3 by around 130 bps and we are working towards that.
To sum up, we expect consolidated revenue to grow around 37% in constant currency terms, and adjusted EBITDA to grow around 44% in CC terms for the year.
Fiscal year '22 continues to promise to be a landmark year in our 40-year history.
We believe that our growth this year has set us firmly on the path to be a billion dollars plus IT services firm next year.
The significant and concurrent jump in both revenue and adjusted EBITDA margin during a supply constrained year, a structural change in our cost structure with an improvement in both offshore-onsite mix and the operating pyramid, continued broad-based growth, significantly augmented employee headcount, strong growth with our top clients, material attrition in the Fortune 1,000 clients numbers, sustained large deal wins, an ability to onboard senior talent at scale, successful integration of acquired businesses and attrition below industry average, we believe set us up very well to continue on the path to robust, sustained and profitable growth in the years to come.
With that, ladies and gentlemen, I come to the end of my opening remarks and I look forward to hearing your comments and to addressing your questions.
We will now begin the question-and-answer session.
The first question is from the line of Sandip Agarwal from Edelweiss.
Please go ahead.
Sudhir, while you very clearly are confident of a billion-dollar roadmap for the next year and the kind of margin we are reporting all set to be very positive, there are a couple of things which investors are always wanting to know.
Do you also see that this high growth demand environment is going to be there for a longer period of time and it is not a short period of time the way we think?
Number two, if you see the digital portion of the businesses are becoming substantial, because the structure of the deals have changed in the last two, three years, and the way digital spends are driving revenue for the enterprises, you think that digital at any time can start decelerating or leave aside the base effect, but the proportion of the business will be substantial going forward in next two, three years, maybe 80%, 90% of the overall business and even if that grows at 20%, 25% versus 35%, 40% now, then, structurally, we're moving in a trend where growth will keep on surprising positively, do you believe it is a possibility?
Finally, Coforge
Sandeep Shah
Coforge Limited January 27, 2022 how difficult is the supply side situation?
Has it started to show signs of peak bend behind, or you think peak bend will probably be next quarter or current quarter, what is your sense on that?
Thank you, Sandip, for all the three questions.
Let me take them in order.
As far as the first question around demand environment and the demand outlook is concerned, we continue to see no slackening in the demand environment from what we've seen over the past few quarters.
We also believe at the same time that robust sustained growth in the future will also come from factors besides just the demand environment being positive.
Where we stand today, we have $701 million 12 month booked orders compared to a number that was only $501 million in the same quarter last year.
That gives us confidence.
We also derive confidence from the number of large deals signed, and the fact that a lot of those deal ramp ups have really begun around the middle of the current fiscal year.
There should be a step jump next year from that factor.
In the case of revenue, still 18% to 19% comes from the travel, transportation, hospitality sector and we expect another bounce back and another fillip next year as the sector bounces back in calendar year 2022.
Of course, the fact that the roster of clients now has 60-plus Forbes Global 1000 clients, the fact that the farming engine is doing very well and the number of $10 million clients has doubled over the last few years, the fact that our client concentration is low, and we are not banking on one particular client to drive growth, the fact that growth continues to be broad-based across our businesses and importantly the fact that order intake this year in the first three quarters cumulatively is 9% higher than what it was all of last year, gives us comfort both around the growth outlook, and also the demand environment which is positive.
So, that's the answer to question one.
Question two around digital expanding.
If you look at the last five-odd years, I did call out the fact that across the five service lines - product engineering, data, cloud, intelligent automation, enterprise integration, revenue numbers are already at 72%.
We do not have a material legacy service line, like a big portion of our revenue coming from mainframe.
The remaining 27% out of the remaining 28% of our revenue which comes from ADM is increasingly being pivoted to a product engineering first mindset.
I suspect at some point in time, it will be really very difficult to call out any portion of the revenue that we have asa quasi-legacy or legacy revenue.
For the portion that we are calling out as 72%, the five service lines, we see strong growth going forward across them as well.
Third, as far as the supply side situation is concemed, we expect attrition in Q4 may be marginally higher, but more or less very close to what we've already experienced in Q3. We haven't seen a slackening on the supply side pressures, but we haven't seen a very material increase on those fairly substantial pressures from the previous quarter.
You would have noticed that despite the supply side pressures, we've been able to manage margins, actually grow margins materially sequentially and we continue to be able to hire at scale.
This quarter itself the headcount has gone up net on the technology services side by 7.5% sequentially.
The next question is from the line of Sandeep Shah from Equirus Securities.
Please go ahead.
Sudhir, just wanted to understand when you have given a guidance of 37% in constant currency US dollar terms, if I assume a 50-basis points kind of a cross-currency tailwind, it comes to Coforge
Coforge Limited January 27, 2022 37.5% for the dollar terms.
So, in that scenario, Q4 implied growth could be 5.5%.
So, am I mathematically correct because Q4 generally we have a seasonal strength coming out of WHISHWORKS related revenues also?
Question number two is in terms of your Q4 adjusted EBITDA margin could be 20.8% which would be higher than your full year margin of 19%.
So, it seems that your upward journey in margin may even continue in FY'23 as well.
Can you share some outlook about the growth because some of your mid-cap peers have been indicating confidently that more than 20% growth is likely even in FY'23 on organic basis?
Thanks for the question, Sandeep.
I don't have a ready translation of the annual CC growth into the USD number.
So, I can't confirm the 50 bps upside that you are talking about.
In CC terms, the 37% that we have offered is a number that we feel very confident about.
And as always, as in the past, the intent will be to reach that number and again the attempt will be to exceed it.
That's how we see the revenue growth numbers and the guidance.
As far as Q4 adjusted EBITDA of 20.8% is concerned, that calculation is correct.
Even the 19.5% that we registered in Q3, is the highest ever over the last 10-years.
So, that 130 bps is going to be a very smart further fillip on where we have landed already.
That calculation around 20.8% I can confirm is correct and is a number we are going for and we will attempt to reach in Q4. As far as growth is concerned, the intent is to drive very robust growth.
We are not at a stage right now where we can offer a hard number as a +20, -20 or 20 at this stage.
But everything that I talked about, the 12-month booked orders, the fact that large deal ramp ups signed this year are still happening and will be a fillip, the fact that in our case travel is 18-19% of our revenues and that industry clearly is poised for a smart demand rebound, the fact that farming is doing well, the fact that client concentration is low and hence to that extent we feel de-risked, the fact that all businesses are doing reasonably well and very well, gives us comfort that next year should be a solid year.
If you look at this year, I have already offered you information that we will in organic CC terms grow 24%.
This was a good demand outlook year.
Last year through the pandemic, if you were to take out the stressed travel vertical we had grown about 18.4%.
So, the intent will continue to be to drive robust growth.
Is it fair to say 4Q has a seasonal strength because of WHISHWORKS that may continue in this year as well.
And when you say 37% CC growth, is it in dollar terms or is it in INR terms?
It's in constant currency terms.
Okay, 4Q will have a seasonal strength because of WHISHWORKS?
WHISHWORKS, AdvantageGo, the erstwhile Incessant which is DPA, they've all been fully integrated, I do not believe that we will see the kind of ups and downs that we were seeing earlier.
It will be a smoother gradient than what you've seen in in WHISHWORKS in the past.
There was a delay in booking of the AdvantageGo license revenue from 1Q to 2Q to 3Q.
Is that done or there is something which is still pending in terms of license revenue booking which can come in 4Q as well?
Page 10 of 19 oforge
Vibhor Singhal
Coforge Limited January 27, 2022 The AdvantageGo license revenue from the previous quarter came but AdvantageGo has sequentially declined over Q2. So, the fact is that our margin has done well despite the fact that we expected AdvantageGo to be a margin fillip but that did not translate, that did not come in.
AdvantageGo today is of course a very important part of our overall portfolio, but it is only 3.5% of our aggregate revenues as we stand.
The pending revenue from Q2 did flow in but Q3 what we expected was still not materially realized.
The revenue growth numbers that I called out, equally importantly, the EBITDA growth has come despite those assumptions not playing out.
Our attempt is in Q4 over Q3 to drive a sequential growth that should again hopefully provide a fillip to growth numbers and to the EBITDA expansion plan.
The 37% growth year-on-year we are talking about is on a constant currency growth.
From a dollar perspective, it will be higher, and the final number will be dependent upon how the dollar behaves in the next couple of months.
That's why I asked, if ] assume 37.5%, then dollar numbers implied growth comes to 5.5%.
We can't confirm that as the dollar will behave the way it will behave.
I understand.
So, I think 37% number which you are saying is in dollar terms, CC, nght, not INR terms.
It's constant currency basically assuming all the currencies remain at the same level as of last year.
The next question from the line of Vibhor Singhal from PhillipCapital.
Please go ahead.
Sudhir, just taking cue from the last question, what is the outlook on the insurance sector going forward, not just from a quarterly perspective, but let's say FY'23 perspective itself, do you see this vertical recovering meaningfully, AdvantageGo also to become start basically reporting growth in a decent manner, how are we looking at this sector over next quarter and the next three to five quarters?
We expect insurance to do well for us and to perform strongly.
Even in the current quarter, I did call out the fact that AdvantageGo which is about 20% or slightly lesser of our insurance portfolio saw a sequential decline in the holiday season.
But overall, the insurance core services business has grown more than 6% sequentially in Q3. The core insurance services business continues to do well.
AdvantageGo is likely to bounce back, and we feel positive about the insurance vertical.
We have also been adding very strongly both to the senior SME pool and the senior leadership pool in the vertical because we feel good about this business and the growth prospects for this vertical continue to be strong.
Is there any reason that AdvantageGo is showing the kind of weakness that it is or is it something related to the overall maybe the industry or seasonality?
Page 11 of 19 Coforge
Sudhir Singh
Coforge Limited January 27, 2022 We have had two quarters of sequential decline in AdvantageGo and we expect that to reverse in Q4 nght now.
This is a business where revenue recognition is contingent on licenses getting signed and that signing process normally is delayed by prospects till the last week of the quarter.
So, there are some ups and downs that happen, as a consequence of when the license gets signed.
Currently, we believe that next year this business will be growing over the current year and even next quarter it should grow over Q3. My second question was actually on the margins front.
So, just want to understand a bit on the margin walk that you are expecting going forward.
So, as our guidance is that we maintain the 19% pre-RSU margin guidance, and as you mentioned that we were around 130, 140 basis points expansion on a QoQ.
So, that means we will probably touch somewhere let's say 20%, 21% kind of EBITDA margins in Q4. So, just wanted to check that, thereafter, how do you see the margins playing out — do you think we can sustain those kinds of margins going forward after that as well?
And what are going to be our acquisition costs next year?
Vibhor, I am going to request Ajay, after I respond to the first question to give you a sense of the acquisition costs for next year.
Let me start off by commenting on the margin question.
We do expect to get to 18.9% to 19% adjusted EBITDA for the full year, which does imply an around sequential expansion of another 130 bps. We see eight levers to accomplish this.
We are working across all the eight levers to get to the sequential expansion that we’ve indicated.
Those eight levers are one, the fact that ramp up of the large deals from Q1, Q2, Q3 continues and the offshore factory as a consequence, should continue to grow.
That’s lever one that we’ re looking at.
Lever number two that we are focused on is the upside that we are likely to get, as a consequence of the AdvantageGo business growing sequentially next quarter.
Number three is the fact that quarter four will not see the holiday related furloughs that quarter three saw.
The next lever that we’re looking at is of course the fact that the number of billing days in quarter four, outside of furloughs, is going to be more than the number of billing days in quarter three.
We do anticipate currently, in quarter four an increase in sequential utilization, that number should jump that’s the other lever we’re looking at.
Also, in the background is the other lever around operating leverage that comes from higher growth.
And the final lever, the 8th lever in play from our perspective is the delivery pyramid continued flattening, with the number of campus hires this year, being six times of what it was two years back and I] would venture to say more than three times than what it was last year.
So, those were the eight levers basis which we think there will be strong sequential expansion on adjusted EBITDA margin in Q4 over Q3. To the other part of your question around to what extent is it sustainable, it’s a little early for us to talk about how sustainable this new level is.
But we feel good, we feel actually very confident about what we’ ve created.
If we do exit quarter four of the current year at around 20.8% adjusted EBITDA, and you contrast that with where we exited last year, last year our exit on adjusted EBITDA was at 18%.
So, it’s a very material restructuring of the cost structure and the margin profile that has been done through a very, very difficult year.
We would expect some of it to flow through.
But we’ll be able to offer a clearer outlook at the end of this year when we talk Coforge
Coforge Limited January 27, 2022 about next year in total.
Finally, I’m going to request Ajay, Ajay can you please address the question around acquisition related costs?
Sure, thank you Sudhir.
Vibhor, for the acquisition related costs if there are no new acquisitions, which we may do for financial year 2023, the acquisition cost will be zero.
Right.
So, the entire SLK related cost will be basically consumed in this year itself and nothing in the next financial year?
That is correct.
Great, thanks.
If] can just squeeze in just one more question, could you be able to give an update on the timeline and what is the current status of our ADR issue and where we are in that process and when can we expect that process to complete?
Yes, absolutely.
So, we are proceeding with our plans to list in the U.S., and we have publicly filed a registration statement on form Fl with the U.S. SEC. When we actually trigger that and when the event actually happens will of course be subject to market considerations and to other factors including approval from the board.
So, that’s where we stand, we are proceeding with our plans as of now as | called out.
Okay, but you wouldn’t be able to provide a timeline as to when that would close out as of now?
From a timeline perspective Vibhor, in the U.S. we are not running against any regulatory deadline for the listing.
We do have to refresh the Fl as and when required by the SEC. And in India, we will continue to seek approvals on the timeline as required under the local regulatory framework.
There is no deadline to when that process needs to complete.
But we are proceeding with the plans to list and that public filing and the registration statement on form F1 with the U.S. SEC has been done.
Thank you.
The next question is from the line of Vimal Gohil from Union AMC.
Please go ahead.
My question on margins has been answered.
I just wanted to understand the guidance a little bit better, just a organic and inorganic contribution really.
So, if | were to look at the organic guidance you said about 24% is the growth which will need lead to about $780 million, and your inorganic guidance will lead to about $862 million so to say.
Now, that means that the SLK will probably do $81 million of revenue in FY22. Is that calculation correct?
Vimal, SLK will do significantly better than 81 million this year.
This year we are only recognizing 11 months of SLK revenues because the acquisition was consummated at the end of April.
Last year SLK, as a firm had registered revenue of $73 million.
We had guided in the past that the SLK business this year will grow at least 22% and we remain committed to it.
It will grow at least 22% almost in-line with the 24% guidance for the aggregate firm.
So, it’s not Page 13 of 19 oforge
Coforge Limited January 27, 2022 $81 million, it’s a higher number. $81 million is going to be the broad number for 11 months of revenue.
Okay.
So, FY23, will be materially better number because of one more year of additions plus you expect the growth to continue, would that understanding be correct?
That’s absolutely correct Vimal.
As we look at the SLK acquisition, we feel very pleased about it, we feel very pleased about the demand outlook that we are seeing for next year.
And indeed even for next quarter for that specific business.
So, you’re absolutely nght on those counts.
Would you want to share the contribution from SLK this quarter?
SLK is the only business where we will be calling out their performance.
Ajay, can I request you to share information for this business because the other have all been integrated fully.
Ajay, can I request you to share those numbers?
Yes.
Thank you Sudhir.
The SLK contributed $22.4 million in the current quarter.
And just to confirm, last quarter it was around 22.3?
It was 22.2.
So, it has been flattish on a quarter-on-quarter basis, which I would assume is probably because of seasonality or are there any other takeaway?
No major issues, its transaction-based business with low number of days and hence lower revenues.
And as Sudhir had indicated, we believe that we will have a sequential growth in quarter four.
Thank you.
The next question is from the line of Ashwin Mehta from Ambit Capital.
Please go ahead.
Sudhir two questions, one in terms of sales and marketing, we’ve seen a pretty good leverage play out in sales and marketing over the last year.
So, what’s driving that and secondly, what explains the 5% reduction in sales and marketing headcount this quarter.
And the second question was in terms of ESOP charges, we were at close to 1%, in terms of ESOP charges, how do you see that playing out in the next year?
Sure, thanks for both the questions, Ashwin.
I’1l take question number one and I’ll request Ajay to take question number two.
Sales and marketing, Ashwin, we continue to invest very, very strongly and one of the things that we didn’t reference in my upfront commentary was the fact that this EBITA expansion is happening despite a very strong investment, both in front end sales and also in capabilities.
If you look at the number of folks that we have in the front-end sales, pre-sales activities, that number is roughly around 280 as we speak now.
Same quarter last year, Coforge
Coforge Limited January 27, 2022 that number was 180.
So, on a gradient basis, it’s been going up very strongly.
And the third quarter FY’22 number could be a blip.
Most offers that you make in and around the holidays really see people joining post holidays.
We have been committed and we remain very strongly committed to both increasing the number of folks that we have at the front end and making sure that there’s a very definite caliber improvement.
This quarter has seen us hire two Executive Vice Presidents.
And as you know, overall, we have only about 12 to 13 EVPs.
Both of them have joined in the markets.
I’m going to request Ajay to address number two please.
Thank you Sudhir.
Ashwin, for the current year, we believe our cost of ESOP would be 85 basis point, though we have seen an increase in quarter three.
That is one time blip which we are seeing because of certain exercises that happened in quarter three.
We expect this number to be lower in quarter four, taking the full year estimate to be 85 basis points.
And how do we see this playing out, going into the next year do you think it can stay stable or we expect that to come off?
We believe that this number will go down by 10 to 15 basis points.
And Sudhir just one question if I can squeeze in, in terms of travel how are you seeing the outlook going forward and any impacts near term because of Omicron or that’s not necessarily there?
So, Ashwin travel has bounced back smartly already.
Year to date first nine months, we are higher than where we were not just year to date last year but also year to date, fiscal year 20.
Year to date this year travel business for us is higher than where it was pre pandemic.
As we look forward, we do recognize that a lot of our recovery has happened from new account openings and from wallet share expansion in the existing clients that we had.
There are clients, particularly European clients, where the business recovery has not been to the extent that we and they had anticipated in the current fiscal year.
They are likely to bounce back on the IT spends aspect next year.
So, that’s a tailwind that we believe is still reserved for next year.
Overall travel has executed a smart bounce back.
Every other commentary that we have, all the other analysis that we’ve seen, again for the travel sector next year is projecting strong growth.
Some of the broader drivers for that industry, of course, are purpose driven trips, the value that is now being placed around vacation time and the increased investment that’s being done on crafting unique experiences.
Also, Ashwin there has been an accelerated investment in digitalization with the focus on streamlining passenger journey experience.
And the latest report from SITA which also happens to be one of our clients, did talk about the fact that 85% which is a very high number for this industry, 85% of the CIOs and CEOs expect IT budgets for airlines and airports to expand sequentially in 2022 over 21.
Overall, we feel very good about the fact that we are where we are ona YTD basis.
And we do expect travel to register strong growth on a go forward basis as well.
Page 15 of 19 Coforge
Abhishek Shindadkar
Coforge Limited January 27, 2022 Thank you.
The next question is from the line of Satwik Jain from Generational Capital.
Please go ahead.
So, I had a couple of questions.
So, now that say in the next one, one and a half years, we'll be crossing the billion dollar run rates.
So, how do you see the new possibilities coming up.
And the second one was a bookkeeping question, that if you see the current tax rate was around 17%.
Mr. Jain your line is not very clear.
Would you mind repeating the question, please, you’re breaking up a little.
So, basically, within the next one, one and half years, you would be crossing the billion dollar mark in revenues.
So, how do you envisage the new deal wins or the new growth spectrum post that.
And the second one was a bookkeeping question, that the current tax rate is coming around 17% which is lower in absolute numbers also, compared to year-on-year, as well as last quarter so could you shed some light on that.
These were two questions from my side.
Sure Mr. Jain, I’ll take question number one and Ajay is going to address question number two around tax.
It definitely could be a billion dollar plus in the next fiscal year.
And everything that we have, by way of the 12-month order confirmed, by way of the large deals ramp up that we are looking at currently, by way of the fact that key accounts are scaling up very fast and the number of 10 million clients has gone up, by way of the fact that client concentration is low and hence we are not reliant on one particular client to drive growth which would pose a potential risk, the fact that all businesses seem to be on a very even clip, the fact that we’ve invested as much as we have in the front-end and in the back end capability makes us feel good that we should grow strongly.
We have always said this over the last five years, that the primary focus of the firm is growth.
And that’s not going to waver when we grow beyond a billion dollar as well.
We will continue to focus on attempting to deliver very robust, sustained and profitable growth going forward.
Ajay can you address the tax rate question please.
Sure.
During the quarter we had recorded a benefit of INR 142 million, pertaining to a deduction available under Indian income tax laws.
This is in respect to the dividend income received from our foreign subsidiaries.
And that is driving the tax rate for the current quarter lower.
This benefit includes for one year nine months, so therefore that drop is significant for the current quarter.
Does that answer your question.
Yes, that was very helpful.
So, it won’t continue in the future, the dividend income benefits?
It would continue but not at the same rate.
Thank you.
The next question is from the line of Abhishek Shindadkar from InCred Capital.
Please go ahead.
Just a couple of questions, you mentioned about some senior hires in your earlier comments.
Can you just add any color in terms of service lines, verticals, and which organizations they are Coforge
Sudhir Singh
Coforge Limited January 27, 2022 coming from, anything you can elaborate?
The second is on largely pipeline, how is it compared to last quarter and same time last year.
And the third is a follow on to that is, in terms of joint events with SLK any color on that in terms of how it is progressing related to our assumptions when we acquired.
Thank you for taking the questions.
Thank you, Abhishek.
Let me answer all three questions in order.
Senior hires as I said, we continue to hire senior folks and two Executive Vice Presidents have been hired since we spoke last around three months back.
Our Executive Vice President strength should be in the region of around 14 for the company globally.
So, these are clearly important additions for us.
The first leader has come and is going to straddle global sales across the BFS and the BPS business, which is the erstwhile SLK business.
The SLK business had a very strong bias towards BFS.
We have hired this gentleman to be the Global Head of Sales for the BFS vertical reporting into the current business leader and also reporting to the current BPS business leader.
So, that’s the first hire.
He was the transformation head of one of the largest BFS BPO players globally.
That’s his profile.
The second leader has joined us and will run the insurance North America business reporting into the current insurance business leader.
He again comes in with about two and a half, close to three decades of experience with tier one organizations.
We’ve always had a very strong bias over the last five years as we’ve recreated the management team to hire people from tier one organizations.
These are people who’ve seen scale, feel comfortable with scale, and can help scale up and grow businesses rapidly.
So, both these two Executive VP hires are in line with that.
In addition, we continue to hire other very senior leaders.
Many SVPs have been hired both at the front-end and at the back.
That’s how I would characterize the hiring, Abhishek.
As far as large deal pipeline is concerned, if reflect back on the current year, we signed a $100 million plus, four-year eight-month contract in Q1 Followed that up in quarter two with two $50 million plus contracts.
We’ve signed the $45 million plus contract in quarter three, which as all of us know is a shorter quarter.
The pipeline is robust.
We are seeing growth not just come from short duration deals.
That of course is there because the general environment is bullish.
But we have continued to stay very focused on figuring out a way of carving out large deals as well, because that is what is allowing us to ramp up our offshore factory, structurally change our cost structure, expand EBITDA despite all the ambient pressures around supply side.
We feel good about the pipeline that we have, the recreation of the front-end that is an ongoing process, the investment that has been made .and I talked about it 280 odd people today versus 180 odd just four quarters back, again is what is helping us do that.
Finally, as far as SLK is concerned, as I noted, we expect SLK to grow broadly in-line with the rest of the organization for which I’ve already called out an around 24% organic CC growth.
SLK has grown very smartly, they’ve grown completely in-line and I dare say higher than what we had expected them to grow when we were initially looking at this transaction.
The other important aspect about the SLK, now the Coforge BPS business, is the fact that we expected it to be EBITDA accretive to the rest of Coforge.
And despite the increase in the firm’s EBITDA profile, it still continues to be EBITDA accretive.
So, we feel very, very good about that Page 17 of 19 Coforge
Moderator · Conference Operator
Coforge Limited January 27, 2022 acquisition.
And as Ajay and I have noted, even in quarter four we believe there’s going to be a material upward blip on the revenue side in that specific business.
Cross sell has been very promising.
As I said the new EVP who’s been hired over the last 90 days is going to straddle the erstwhile SLK, now Coforge BPS business, and our BFS vertical, and be the joint sales leader for both.
There’s a clear and very significant joint pipeline that is in play, which is why we brought him on board to make sure that this transition goes through.
Thank you.
The next question is from the line of Shradha Agrawal from AMSEC.
Please go ahead.
Just two questions.
Can you give us some more information on the large deal that we signed this quarter the $45 million deal in the Europe region?
Yes, Shradha thank you for that question.
The large deal that we signed in this quarter Shradha was signed in Europe, it was signed with a public sector institution.
It’s slightly north of $45 million and is a six-year contract that we’ve signed.
Normally our large deals are between three to five years.
This is a public sector transaction.
It’s a six-year contract. $45 million.
Europe based.
And the execution will start from 4Q itself?
Absolutely.
Okay.
And would it be possible for you to give out the number for AdvantageGo in this quarter as well as last quarter what was that number?
Shradha, we are calling out numbers only for all entities that have not been merged fully with Coforge.
So, AdvantageGo, WHISHWORKS both of them got merged as was Incessant in the past.
We will continue reporting the service line numbers for BPS and for product engineering, where SLK and AdvantageGo fall respectively.
We won’t be calling out standalone numbers.
But just qualitatively, if you can indicate what was the extent of decline in AdvantageGo in this quarter because it did indicate that it declined even in this quarter on a sequential basis.
Was it a double-digit kind of?
I can, absolutely Shradha.
As I said the insurance services business grew more than 6% for us.
AdvantageGo is now roughly about 2.5% of our consolidated revenues.
So, it’s obviously an important differentiating business.
But it’s not a scale business from our vantage.
That saw sequential decline in quarter three, which we expect to reverse in quarter four.
Thank you.
Ladies and gentlemen, due to time constraint that was the last question for today.
I now hand the conference over to Mr. Sudhir Singh for closing comments.
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January 27, 2022 We'd like to end the conversation by thanking you once again for your interest, for the comments that you have offered and for the insights that you’ve shared.
Your questions always make us reflect on where we are headed, what we need to tweak, what we need to focus on.
I know, a call this early morning specially for folks on the East Coast is always a little difficult.
As it is because it’s late evening for the folks across Asia as well.
So, thank you once again.
And we look forward to speaking with you three months from now.
Thank you.
On behalf of Coforge Limited, that concludes the conference.
Thank you for joining us and you may now disconnect your lines.
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