IKS — earnings call
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“IKS Health Q3 FY ’25 Earnings Conference Call” February 06, 2025 MANAGEMENT: MR. SACHIN GUPTA – FOUNDER AND CHIEF EXECUTIVE OFFICER MS.
NITHYABALASUBRAMANIAN– CHIEFFINANCIALOFFICER MR. SARANSH MUNDRA – ASSISTANT VICE PRESIDENT, INVESTORRELATIONS MODERATOR: MS.
RUCHIMUKHIJA–ICICI SECURITIES Page1of20 Inventurus Knowledge Solutions Limited February 06, 2025 Moderator: Ladiesandgentlemen,goodmorning,andwelcometotheIKSHealthQ3FY'25Earnings Conference Call, hosted by ICICI Securities. Asareminder,allparticipantlineswillremaininthelisten-onlymode.Andtherewillbean opportunityforyoutoaskquestionsafterthepresentationconcludes.Shouldyouneed assistanceduringtheconferencecall,pleasesignaltheoperatorbypressing"*",then"0"on your touch tone telephone.
Please note that this conference is being recorded. InowhandtheconferenceovertoMs.RuchiMukhijafromICICISecurities.ThankYouand over to you. RuchiMukhija: Thankyou,Ryan.Goodmorning,ladiesandgentlemen.Thankyouforjoiningustodayforthe Q3FY'25earningscallofIKSHealth.OnbehalfofICICISecurities,Iwouldliketothankthe management of IKS Health for giving us this opportunity to host this earnings call. Today,wehavewithusMr.SachinGupta–FounderandCEO;Ms.NithyaBalasubramanian– Chief Financial Oficer; Mr. Saransh Mundra – AVP (Investor Relations). IwillhandovertoSaranshfortheSafeHarborstatementandtotaketheproceedingsforward. Thank you and over to you, Saransh. SaranshMundra: Thankyou,Ruchi.Goodmorning,everyone.WelcometoourFirstEverEarningsCallforthe quarterended31stDecember2024.IamSaranshMundra,IheadInvestorRelationsatIKS. Wehopeyouhavehadanopportunitytoreviewthe“EarningsReleaseandthePresentations” that we have issued last night. BeforeIhandovertoSachinandNithyafortheirviewsontheresult,letmejustbeginwiththe Safe Harbor statement. As part of our remarks and during Q&A, we make certain statements which are forward-looking and may involve significant uncertainties. IKS does not take any responsibilitytoupdatesuchforward-lookingstatementsandyourdiscretioniswarranted while making any investment decisions.
Over to you, Sachin. SachinGupta: Hi,goodmorningandgoodevening,everyone,dependingonwhereyouare.Thankyouso muchforjoiningourfirstearningscallasapubliccompanyforthequarterthreefiscalyear 2025. Today, Iwantedtostartofwithafewremarksandalittlerecapaboutourbusinessmodel, becausethisisourfirstcallandperhapsthelasttimeIspokewithmanyofyouwasonthe roadshow.So,wewillstartwithaquickrecapofthebusinessmodel,thenIwillremarkalittle bitaboutthekeythemesthatthebusinessisstrategicallyexecutingon.AndthenIwilldive intosomekeythemesthatwearespecificallyfocusedoninFiscal‘25.Andfromthere,Iwill dovetailintoahigh-levelsummaryofourQ3Fiscal‘25Results,afterwhichIwillturnitover to Nithya to talk through the details of the financials for you.
And then we can dive into Q&A. So,asyouallwouldrecall,IKSisaCareEnablementPlatformthatoperatesinthephysician segmentoftheUShealthcaremarket.Thatphysiciansegmentconsistsofabout900,000-odd physiciansdriving$1.5trillionofrevenueinwhatisanearly$5trillionUShealthcaremarket. ThatphysiciansegmentoftheUShealthcaremarketwethinkisthefulcrumandthemost importantpointofcaredeliverywithinthecontinuumofcare,simplybecauseastheUS healthcaresystemtriestoachievesustainabilitybysolvingforthecost,qualityandaccess challengesthattheyarestruggledwith,webelievetheonlywaytoreallydothatisthroughthe transformationofcaredeliveryfromareactivehospital-centriccaredeliverysystemtoa Page2of20 Inventurus Knowledge Solutions Limited February 06, 2025 proactivephysician-ledandpatient-centriccaredeliverysystem,inwhichphysiciansreassume theirroleasbeingquarterbacksofcaretrulyconfiguringcareattachedtopatients'value system. Andso,giventhatthisphysicianmarketisbecomingthenewfulcrumofcaredelivery,what wesawwhenwestartedourbusinessandstartedbuildingthisCareEnablementPlatformis thatthephysicianmarketwouldrapidlyconsolidateaspeoplewouldrealizethatitisthenew fulcrumofcaredelivery.Andalongwiththatconsolidationwouldcomeamaturitythatwould leadthemtoactuallyrediscoverwhatwecalltheircoreversuschoresequation,andstartto reallyfocusonthecoretasksaroundpatientcareandpatientexperience.Andidentifyallof thesechoresthataretakingthemawayfromthecoretaskofpatientcare.Andthenstartto delegateoroutsourcethesechorestosomeentityorplatformthatcoulddothesechoresbetter, cheaper, faster at scale. Remember, themostimportantentityincaredelivery, thephysician,wastraditionally spendingasmuchas50%oftheirtimeonnon-patientcarenonvalueadd,non-discretionary tasks.Andthroughthedeploymentofourplatform,notonlyaretheyabletodirectalotofthat 50%oftheirtimebacktopatientcarewhichthenimprovescostofcareandqualityofcare,but alsothenfundamentallychangestheireconomicsfromarevenueandcostperspective.Justto putinperspective,physiciansarespendingnearly15%oftheirrevenueonthesechoretasks, which is about $225 billion.
And the physician market is growing at about 8%. Andsowearetalkingabout$225billionTAMgrowingat8%,whichisnearlythesizeofthe ITservicesindustryinIndiatoday, that$225billion.Andwhat'sinterestingisthatonly $30-oddbillionofthat$225billionhasbeenoutsourcedtodatetoplatformslikeus.Andthat outsourcedTAMnowrecognizingthevaluethatthisoutsourcecancreateisactuallygrowing at12%.So,whiletheindustryisgrowingat8%,theoutsourcedTAMwithinthat$225billion, which is at about $30 billion, is really growing at about 12%. AndwithinthatecosystemwhatIKShasdoneis,hascreatedatech-ledhumanintheloop CareEnablementPlatform.Andreallytheonlyplatformintheworldthattrulydelegatesallof thesechoretasksthathavebeendiscoveredsofarthroughtherightcombinationofthe proprietarytechnologythatwehavebuiltandtheglobalhumancapitalthatwehavedeveloped over these last 18-odd years. AndIsaytheonlyplatformbecausegiventhatthesechores,there'sabout16-oddchoresthat onehasidentifiedacrossthecontinuumofthephysiciansetting,whatwehavediscovered reallyisthatalotofcompanieshavebeenbuiltovertheyearsthatarefocusedonone,two, three,maybefiveofthese16tasks.Butbuyersarestartingtodiscoverinthephysician enterpriseworldthattheyshouldnotbeinthebusinessofbuyingindividualpointsolutions andthentryingtointegratethem.Imaginebuyershavingtobuy10,12,14,15pointsolutions, thenintegratingthemandholdingthebagonconsolidatingandcreatingvaluefromthosepoint solutions. AndsoIthinkbuyersarediscoveringthatthevalueofthewholeismuchgreaterthansomeof theindividualparts.Andastheydiscoverthatandbuyingbehaviorshiftsfromsortofbestin classpointsolutionstotheoverallplatform,Ithink,IKScontinuestobeperhapstheonly company in the world that truly provides them that alternative. Page3of20 Inventurus Knowledge Solutions Limited February 06, 2025 Overtheselast18yearsIKShasbuiltabusinessmodelwhere95%plusofourrevenueis recurringinnature.Wehaveverylowclientattrition,it'sastickybusinessmodel.Ourtopten clientsandourtopfiveclientsareallhavingaveragevintagesoffiveplusyears.Wehave growntoaworkforceofabout13,150employeesasofDecember31st,2024.Ofwhichnearly 500employeesaretechnologiststhatarebuildingourproprietarytechnology,andnearly2,500 employeesofthose13,150areclinicallytrained.Andit'sthroughthecombinationofour proprietarytechnologyandourhumancapitalthatwearebeingabletodelegatethesetasksto them better, cheaper, faster and at scale. Letmejustcommentquicklyonthekeythemesbywhichweareexecutingonthisbusiness throughwhichweintendtocontinuetoretainandconsolidateourleadershippositionasthe Care Enablement Platform of choice in this space: ● Thefirstthemereallyistocontinuetofurtherenhanceourjourneyfromwherewe werehuman-ledandtechintheloopforcertainofthesechores,tonowbecoming moreandmoretech-ledandhumanintheloop.Thatafectsboththescalabilityof ourtasksaswellasobviouslythepricingandtheprofitabilityatwhichweareable to deliver these. ● Second,theidea,becausethebuyingbehaviorisstillintransitionfrompoint solution,bestinclassbuyingtonowstartingtobuymoreandmoreoftheplatform manifest,oneofourstrategicexecutionpredicamentscontinuestobethatweneedto benumberone,twoorthreeineachofthefeatures,eachofthe16featuresinthe platform,evenaswearetheonlycompanyintheworldthathasthefullbreadthof the platform. ● Andnumberthree,obviously,continuetoproliferatethefullbreadthoftheplatform intoourcaptivecustomerbase.Whichasyouimagine,asyouknownow,ourcaptive customerbasewentfromabout50-oddlargeenterprisescalecustomers,whichhas traditionallybeenourareaoffocusatIKS.Becausewebelieveinamarketthat's consolidatingyouwanttoworkwiththelargeconsolidatorsversustheonesgetting consolidated.So,traditionallywehad50-oddlargeenterprisescalecustomers.But throughtheacquisitionofAQuityInc.,weexpandedthatcustomerbasetonorthof 850-odd customers, of whichreally500-oddtendtobethatenterprisescale consolidator customers. Andso,acrossthese500-oddenterprisescalecustomersthatweintendtoreallyfocuson goingforward,there'snearly150,000physiciansthatareemployedbythem.Which,asyou canimagine,isnearly18%oftheoverallphysicianmarketintheUS.Andthefullmanifestof theplatformbeingcrosssoldtothatentireinstalledbaseof150,000physicians,itmakesfora massivegrowthrunwayoverthenextcoupleofdecades.Andthat'sreallythejourneythatwe are on. So,thosearethethreebigexecutionthemesatastrategiclevel.Andthenspecificallyfroman FY '25 perspective, just to remind everybody the themes that we have been executing on is: ● First,efectively integratetheAQuityacquisitionintomakingIKSoneintegrated platform.Asapartofthat,oneofourkeythemesisthat,becauseourtraditional focushasbeenandwillcontinuetobeonlargeenterprisescalecustomersthatare consolidators, with the additional AQuity we have growntoabout850-plus Page4of20 Inventurus Knowledge Solutions Limited February 06, 2025 customerstogether.AndwewillactuallythroughFY'25andperhapstheearlypart ofFY'26,continuetocutsomeofthattailandreallyconsolidateinto500-oddlarge customers.Andso,oneofthebigthemesofFY'25wastoreallystarttocutthattail and bring the customer base to those large customers that we want to focus on. ● Thesecondbigthemethatwehavebeenexecutingonis,asyouknow, AQuity traditionallydidnothavetoomuchproprietarytechnology,norweretheyusingthe globalhumancapitalmodelthatefectively.Andsooursecondbigexecutiontheme forFY'25reallywastotransformtheAQuityoperatingmodelwiththeIKS operatingmodel.Andinthatprocess,takeourblendedmarginsthathaddropped from24%proformaafterAQuity'sconsolidationintoIKSbacktowardsthatearlyto mid-30swhichwethinkiswherethesteadystatebusinessshouldsettledownat.So, that was our second big theme for FY '25. ● Andourthirdbigthemewastoreallyactivatethemoststrategicaspectofthe acquisition,whichisthecrosssell,wherewewillbeabletocrosssellthefull breadth of our platform across these large 450-plus enterprisescaleAQuity customers that have come to us through this acquisition. So, those are the three big themes that we have been executing on through FY '25. Withthat,Iwillnowactuallydivealittlebitandprovideahighlevelintrotoour“Q3FY'25 Results”: Iamveryhappytonotethatactuallywehavebeenabletoexecutebetterthanwehad imaginedacrossallofthethreethemesforFY'25.AsIhadmentionedearlier,becauseweare cuttingthetailforsomeofthesmallercustomers,aswellasbecausewearetransformingthe AQuitydeliverymodelbydeployingtheIKStechnologyandglobalhumancapital,thathasa dampening efect on our revenue growth in FY '25. ● One,becauseofcoursewearereducingourcustomerbasewhichasyouseehas gonefrom850-plustonowabout750customersbyDecember31st,2024,thathasa revenuedampeningefect. Andthesecond,becausewearegivingthetraditional legacyAQuitycustomersincentivesintermsofdiscountstotransformtheirdelivery modelleveragingtheIKStechnology,thathasalittlebitofadampeningefecton the revenue. So,aswehavebeengoingaround,wehavebeenmentioningthatFY'25willbesomewhat mutedfromarevenuegrowthperspective.Ofcourse,overaperiodoftime,webelievethatour growth will continue to be well north of that 12% that the outsourced TAM is growing at. HappytonotethatinFiscal‘25Q3,inspiteofthedampeningefectofthosetwostrategic endeavors,wehaveactuallybeenabletogrowthebusiness16%year-on-yearfromFY'24Q3. Andinconstantcurrencyterms,that'sabout12%year-on-year growth.So,inspiteofthe dampeningefect,thatwasverydeliberateinourFY'25revenues,wehavebeenabletogrow 16% year-on-year in revenue terms to a revenue of about Rs.
657.2 crores. Second,wehaveactuallybeenabletoaccelerateourearningssignificantlyfasterthanwehad imagined.Asweweregoingaroundinourroadshows,wehadmentionedthatwebelievewe willgettotheearlytomid-30sconsolidatedEBITDAmarginsperhapsoverthenext18to24 months.Very happytoreportthatwehaveactuallyclockednearlya31%EBITDAforthe quarterendingDecember31st,2024,whichisforuswellaheadoftheglidepaththatwehad Page5of20 Inventurus Knowledge Solutions Limited February 06, 2025 inmindtogettothesortofearlytomid-30s,whichiswherewewillstabilize.Thatreflectsa 24%year-on-yeargrowthinEBITDAmarginsanda28%growthinPATmarginsbetweenQ3 Fiscal ‘24 and Q3 Fiscal ‘25. Obviously, alotofthishasbeenachievedbyactuallyinsteadofincreasingheadcount, decreasingheadcount.So,wehaveactuallytakenheadcountfromQ3Fiscal‘24,whichis about13,250peopleto13,150byQ3Fiscal‘25.Whichmeansfora16%year-on-yeargrowth, wehaveactuallyreducedheadcountbyabout100peopleinsteadofgrowingheadcount.And thisisinspiteofactuallyincreasingSG&Aheadcount,becausewecontinuetoinvest significantlyinsalesandmarketingtoactivatethecrosssellmotionaswellasinR&Dto continuetodrivemoreandmoretransformationfromhuman-ledtechinthelooptotech-led humanintheloop.So,thatcontinuedsortofnon-linearitybetweenrevenuegrowthandpeople growthcontinuestobeexhibitedintheactualheadcount.Andthen,ofcourse,inthemargins themselves that are exceeding our expectations. AndoneotherthingthatIwanttomentionisthat,becausewewereabletoactivatesomeof thecrosssellfasterthanwehadimagined,wearestillbeingabletodemonstratefasterthanthe TAMgrowthof12%to16%year-on-yeargrowthinrevenue,inspiteofthedampingefect. So,wefeellikewehavebeenabletoactivatethecrosssellrelativelyfasterthanwehad imagined, which is leading to this revenue growth and keeping it relatively robust. That'sabroadsummaryofsortofwhatourfiscalperformancehasbeen.Nithyawillobviously dive into the details of some of this financial performance as we get along here. OnethingthatIwillmentionis,evenaswearepublishingyear-on-year growthand quarter-on-quarter growth,it'sreallyimportanttonotethatinourbusinessyear-on-year is reallywhatisrelevant,becausethereissignificantseasonalitythathappensfromonequarterto the other. Forexample,Q3andQ4aretraditionallyweakerquartersthanQ1andQ2becauseofthe seasonalitythatsetsinpatientvolumesduetotheholidayseasoninQ3andduetothesevere winterweatherinQ4.Andso,Iwouldencourageeverybodytothinkofourbusinessmuch moreonyear-on-yeartermssothatwearedoingalittlebitofalike-on-likecomparisonversus aQ-on-Qterms,eventhoughwearepublishingtheQ-on-Qnumbersforyourbenefitsitself. So, that's some high level remarks on the financials. Movingon,someofourrevenuemomentumisactuallybeingdrivenbycertainlysomeofthe crosssellthatwehavebeenabletoactivateincustomerslikeLouisianaChildren'sMedical Centerandseveralothers.ButIthinktherevenuemomentumisalsobeingdrivenbythefact thatweareactuallybeingabletoexecuteonourstrategicthesisofdrivingmoreandmoreof the full platform penetration. So,reallyhappytoreportthattherehavebeenthreeverysignificantcustomerwins.Theseare newcustomerwinsoverQ3.First,$1billionhealthsystemcalledPalomarHealth,asyoumust haveseeninthepressrelease,havecommittedtothefullplatformmanifestofIKSfortheir employedphysiciangroupina15yearpathbreakingdealforwhichtheyhavecommittedto ourplatform.Inthisdeal,PalomarwilldeploythefullbreadthofIKS'platformacrossour featureclustersofrevenueoptimization,clinicalsupportandvaluebasedcareintheirentire physicianinstalledbase.Andfromthatdeploymentweareexpectingsomeverysignificant upsides. Page6of20 Inventurus Knowledge Solutions Limited February 06, 2025 Theotherthingthatmakesthisdealuniqueiswehaveactually,basedonourownmodelingof whatupsideswewillcreate,wehaveactuallyguaranteedanupfrontedasignificantamountof thoseupsides,about$16.5milliontoPalomarinthisprocess.Andinauniquearrangement, thewaythiswillhappenis,asthoseupsidesstartaccruingnowthatwehavegonelivewith Palomar,uptothe$16.5millionwillaccruedirectlytoIKS.Andthenevenbeyondthat$16.5 millionovertheyears,there'sasignificantgainsharearrangementthatIKSwillhavewith Palomarwhichwillcontinuetoaddnon-linearitytoourmargins andyetcreatesignificant value for Palomar. Similarly,weareveryproudtoannounceadealwithRadiologyPartners,whichisthelargest consolidationofradiologyphysiciansacrosstheU.S.Theyare10xthesizeofanyother consolidatedentityintheradiologymarketintheU.S.,nearly$3.5billioninrevenueand 3,000-plusradiologists.Partneringwiththem,wearecreatingaveryuniquevirtualradiology assistantmodelthatthroughacombinationoftechnologyandglobalhumancapitalhasthe potentialtoimproveradiologists'productivityonthesamefixedcostbyasmuchas25%to 30%.So,imaginetheimpactofafullymanifestedVRAmodelona3,000radiologistsgroup likeRadiologyPartnerswith$3.5billioninrevenue,thenumbersstarttogetvery, very significant at north of $600 million, $700 million a year in value creation. AndthewaywehavecreatedthismodelwithRadiologyPartnersis,oncethemodelis manifestedatasignificantscale,thiswillturnintoaJVwhereRadiologyPartnersandIKS willtogetherthentakethisuniqueradiologyenablementplatformtothemarket,totheentire radiologymarket,basedonthecredibilityandthelearningsandtheIPthatwewouldhave developed through that relationship with Radiology Partners. Lastbutnottheleast,IwouldliketocommentalittlebitonWesternWashingtonMedical Group,whichisoneofthelargestindependentmedicalgroupsinthePacificNorthwest.While theinitialrelationshipthatwehavestruckwiththemisontherevenuecycleside,that relationshipisrapidlymaturingintoothermanifestsoftheIKSplatform.So,strongdeal momentum,bothonnewcustomeracquisition,butfaster-than-anticipatedmomentumonthe AQuity legacy installed base cross-sell. Withthat,Iwouldliketojustturnattentiontoacoupleofproduct-relatedexcitinglaunchesas well.SuperexcitedtoannouncethelaunchofScribbleNow,whichisourfullyautonomous GenAIandNLP-enabledoferingforclinicaldocumentation,ambientclinicaldocumentation. WithScribbleNow,today,IKSisnowthemostcomprehensivesuiteofclinicaldocumentation ofering totheU.S.healthcareindustry. BythatImeanthatdependingondiferent care deliverysettingsanddiferenttypesofspecialties,thereisaneedfordiferenttypeofclinical documentation solutions in U.S. healthcare. Allthewayfromsettingslikeradiologyandpathology, wherethereisnoconversation between the physician and the patient, there you still need technology-enabled transcription-typesolution,whichweenablethroughourScribbleTranscribeproduct;tolive virtualscribingforwhichwehaveourScribbleLiveproduct;toScribbleProwhichisreally importantforcomplexencountersthatoftenprimarycare-typephysicianshave,wherethere aremultiplepathsofdiagnosis,therewehaveourGenAI-enabledandclinician-supervised ScribbleProproduct.AndthenwealsohaveourScribbleSwiftproduct,wheretheGenAIis supervised by a human to eliminate any hallucinations. Page7of20 Inventurus Knowledge Solutions Limited February 06, 2025 So,throughthisbreadthofclinicaldocumentationofering, whichIthinkisuniqueinthe world,wearenowabletomeetthevariousphysiciansandtheirsettings,wheretheyarein theirjourneyofclinicaldocumentationneeds.AndIthinkthisshouldturnouttobeavery significant competitive advantage for us over a period of time. Andthen,giventhatwearelivinginthisworldofsomuchhypeandattentiontoGenAI,I thoughtIwillspendjustacoupleofmomentstalkingatahighlevelaboutourAIstrategy.So, ourapproachtoautomationenabledbytechnologyreallybegansortofin2017-'18,firstwith RPA, non-cognitiveRPA, andthenwithcognitiveRPA, asyoumusthaveseeninthe presentationthatwasshared.Andnottooversimplify,butifyoureallythinkaboutRPA,what itdoesisit'satechnologythatfollowsspecificinstructionsandcommandsthroughsome rule-based automation. OverthelastcoupleofyearswegraduatedthatuseofcognitiveRPA toreallyintelligent GenAI-embeddedautomation.Wehavesevenoreightusecases,justlikeScribbleNow,across the16featuresofIKS,whereweareactuallyembeddingGenAIinthosefeatures.Andasyou canimagine,thevaluefromGenAIreallyisthatithelpscreatecomplexcontentbasedon prompt engineering that really leads to significant enhancement in productivity and eficiency. So,onewaytothinkaboutitis,whilecognitiveRPAmaybeleadsto5%to15%automation, GenAIcouldleadto20%to35%automation;andinsomecases,likeclinicaldocumentation, even70%to85%automation.AndreallyaswearenowstartingtoseethebenefitsofGenAI, weareexcitedtolaunchourjourneytowardsAgenticAI,wheretheactualAgenticAIagents understandthegoalofthetaskandareautonomouslyabletodetermineandexecutethenext steps to achieve those tasks. So,wearesuperexcitedtosortofembarkonthisjourney,empoweredbythesuccessofthe automationthatwehaveseenthatisreflectedbothinourscalabilityandourcontinuedmargin improvement.Infact,happytonotethatbasedonallthesuccesswehaveseen,weareactually launchingaGenAIcenterofexcellenceintheU.S.Thatwillbeworkingacrossalloftheuse casesthatwehavedevelopedovertheseyearsandthathavethepotentialtonotonlyleverage GenAI, but now move towards the Agentic AI world. So,withthat,IwillquicklysummarizeourperformanceforQ3again.Solidexecutionacross allourmacrobusinessthemes,aswellasthespecificthemesforFY'25.Aheadofglidepath executiononmargins, relativelyrapidactivationofthecross-sellintotheAQuityinstalled base.Andappropriateoptimizationofthecustomerbasesothatwecanreallyfocuson growing the customers that will create value over a period of time. With that, I will turn it over to you, Nithya, to dive into some details of the financials. NithyaBalasubramanian: Thankyou,Sachin.Goodmorningandgoodafternoontoeveryoneonthecall.Thisis obviouslyaveryspecialcall,notjustbecausethisisourFirstEarningsCall,butalsobecause not too long ago I used to be on the other side of the call. So, diving into the numbers, if you're following the slide deck I am on Slide #10: Ourrevenues,wereportedRs.657.2croresinQ3FY'25,whichwasavery,veryhealthy16% year-on-year growth.LookingatEBITDA,again,weareveryhappytoreportsignificant marginexpansion.SomeofyouwillrememberthatinFY'24ourproformaEBITDA,which is12monthsofAQuityandIKScombined,cameinat24%.Andfromthere,wehavebeen abletoachieveasignificant650bpsexpansionto30.5%or31%almostEBITDAinQ3FY Page8of20 Inventurus Knowledge Solutions Limited February 06, 2025 '25.We continuetobelievethataswecontinuetotransformAQuity'sdeliverymodel,these numberswillkeepinchingupinthefutureaswell.So,thegrowthinEBITDAcameinat24% year-on-year. Lookingatprofitaftertax–againaveryhealthy20%iswhatwewereabletoreportinQ3FY '25,whichisagainasignificantexpansionevenifyoulookatquarter-on-quarter,wehavebeen abletoexpandthesenumbersbymorethan200bps.AndyouwillnotethatPAT growth actuallycameinat28%.Sachinmentionedthisbefore,thegrowthinPATisactuallyhigher thanthegrowthinEBITDA,becauseourinterestexpensehascomedown,whichhasbeen enabledbythestrongcashgenerationandthereforeourabilitytopaydownthedebtthatwe had assumed when we acquired AQuity. LookingatouradjustedPAT, whereweareadjustingoutamortizationofintangibleassets whichwehadrecognizedduringtheacquisition,which,asyouappreciate,isanon-cash expense.LookingatadjustedPAT,itcameinat22%inQ3FY'25.Andwesawagrowthin adjusted PAT of 31% year-on-year. Moving on to other operating metrics: Again,EPScameinataveryhealthy, almostRs.8pershareinQ3FY'25.AndROE continuestobeonahealthyexpansiontrend.Ofcourse,priortotheacquisition,ourROE metricsinFY'23,ifyoulookatthefullyear,wewereat36%.Ourcurrentnumberscontinue toseeahealthyexpansionasweareabletoachievetheAQuitytransformation.So,ROEinthe quarter was at 33.2%. Ididmentionhealthycashgenerationbefore,asyoucanseeontheslidedeckinslidenumber 12,youwillseethatouroperatingcashflowcameinatRs.154crores,ourfreecashflowat Rs.109.5crores.Andlookingatnetdebt,haditbeenbusinessasusual,ournetdebtposition wouldhaveactuallylandedatRs.503crores.Iwilljusttakeamomenttoexplainthese numbers. So,ifyouremember,inFY'24ournetdebtpositionwasRs.850crores.Throughveryhealthy cashgeneration,wewereabletopareitdowntoRs.553croresbythefirsthalf.Andbusiness asusual,thiscashgenerationthatwehaddonewouldhavebroughtdownournetdebtposition to Rs.
503 crores. Therearetwoexceptionalitemsinthequarter. OneofwhichisalmostRs.25crores IPO-related expense, which was advanced by the company on behalf of the selling shareholders.AndthishasalreadybeenrecoveredfromthemintheJanuarymonth.So,thisis aone-of non-recurringitem.AndtheotheritemistheRs.139crores,orthe$16.5million, thatwehaveadvancedtoPalomar,whichisanupfrontguaranteeoftheneteconomicvalue addwewillbeabletodelivertothemthroughourplatform.Thisagain,Sachinexplainedin detail during his remarks. So,ournetdebtposition,haditbeenbusinessasusual,wouldhavebeenRs.503crores.And whatyouwillseegoingforwardisthisnumbercontinuetoinchdownaswecontinueto generate cash in the business. Looking at our Summary Financials: IwilljustcalloutsomeadditionalitemswhichIhavenotcoveredonthepreviousslides.So, revenuecameinatRs.657crores.Ourotherincome,excludinginterestincome,whichis non-operating,therestisalloperatingotherincome,cameinatanadditionalRs.20crores. Page9of20 Inventurus Knowledge Solutions Limited February 06, 2025 OuradjustedEBITDA,whereIamadjustingESOPcost,adjustedEBITDAcameinatRs.207 crores,whichtranslatesintoamarginofabout31.5%.IncludingESOPcost,ourEBITDAwas Rs.
201 crores and EBITDA margin was at 30.5%. Ourfinancecost,Ialreadymentionedthatwehavebeenalreadyabletoparedownourdebt fairlysignificantly,whichiswhyyouseethatnumberiscomingdownanditwillcontinueto comedowninthefutureaswell.OurfinancecostwasaboutRs.20croresinthequarter.Our taxexpensewasaboutRs.30crores.OurETRinthequarterwasabout19%,andthereforethe profitfortheperiod,orPAT, cameinatRs.130crores,oraPAT margin ofabout20%. Adjusted profit, adjusting for amortization, came in at Rs.
145 crores and a margin of 22%. Withthat,Iwillconcludemyremarks.Weare,ofcourse,very,veryexcitedbythestrongand healthytrendsthatweareseeingacrosstheboard.Thankyouforyourattention,andwewill now open the floor for questions. Moderator: Thankyou.Ladiesandgentlemen,wewillnowbeginthequestion-and-answersession.The first question comes from the line of Seema Nayak from ICICI Securities.
Please go ahead. SeemaNayak: Hello.Yes,congratulationsonthefirstquarterafterlisting,andthanksfortakingmyquestion. Myfirstquestionis,outofyourserviceoferingssuchasRCM,coding,Scribble,etc.,which oneisgettingthemaximumtraction?Andwhatistherevenuebreakupofserviceoferings? AndmysecondquestionisregardingAQuity,whatkindofcross-sellingtractionareweseeing with the newly acquired large set of clients? SachinGupta: Thankyouforthequestion,Seema.Iappreciateit.So,asitrelatestoyourquestionaround whichofthe16featuresareseeingthemosttraction,Iamhappytonotethatactuallywehave sortofstratifiedthese16featuresintothreefeatureclusters;revenueoptimization,clinical support,andvalue-basedcare,basedonthetypeofvaluetheycreateforthecustomer.Andat this point I can tell you that we are seeing a pretty secular growth trend across those features. Also,giventhatourgo-to-marketnowisreallynotfeature-wisebutisreallymuchmore platform,Ihadmentionedearlierthatourgo-to-marketnowhaspivotedfromyoucanbuy certainfeaturestoeitheryoubuytheclinicalbundleoryoubuytheadministrativebundle.And theclinicalbundleconsistsofaboutnineofthe16features,andtheadministrativebundle consists of about seven of those 16 features. Andso,giventhatwearegoingtomarketinthatmannerwhereeitherthecustomerbuysthe entireclinicalbundleandthentheycanpickandchoosefromtheadministrativebundle,or theybuytheentireadministrativebundleandtheycanpickandchoosefromtheclinical bundle,wedonotreallyreportnumbersbasedonindividualfeatures.ButIamhappytonote thatthegrowthissecularacrossthethreefeatureclustersorthetwobundles,dependingon how you look at it. YoursecondquestionwasreallyaroundtheAQuitycross-sell.Look,likeIwouldmentioned earlier, weactuallyhadanticipatedthatthecross-sellwilltakealittlelongertoactuallyput intomotion,becausewehadtocreateanoverlayconsultativesalesenginethatwouldtake someofthemoretransactionalpointsolution-basedrelationshipsthatAQuitytraditionallyhad andelevatethemtoaplatformsale.So,weactuallycreatedthatoverlaycross-sellenginein thefirstsixmonthsofthefiscal.ButhappytonotethatinQ3itselfwewereabletostarttosee tractioninthecross-sellmotion.Thereareseveraldealsthatwewereabletoconsummatein Q3.TheonethatIamabletopubliclyannounceistheLouisianaChildren'sMedicalCenter, Page10of20 Inventurus Knowledge Solutions Limited February 06, 2025 whichisaverysignificanthealthsystemintheNewOrleansarea.Butthereareseveralother marqueesystemsthatarealreadystartingtoconsumeothermanifestsoftheIKSplatform beyond what they traditionally had in the AQuity relationship. So,that'soneofthereasonswhywehavebeenabletodelivera16%year-on-yeargrowthfor Q3inspiteofthemutedefects ofcuttingtheAQuitycustomertailaswellasofering customerdiscountsandincentivesinordertoallowustotransformtheiroperatingmodelthat is now then showing up on the bottom line. Seema Nayak: Thank you, and all the best. Moderator: Thankyou.ThenextquestioncomesfromthelineofAbhishekKumarfromJMFinancial. Please go ahead. AbhishekKumar: Hi.Goodmorning,Sachin.Alwaysgoodtohearfromyou.Acoupleofquestionsfrommy side.First,aswelookat12%dollarrevenuegrowthyear-over-yearthisquarter,canwebreak thisdownbetweenthegrowthintheheritageIKSbusinessandintheAQuity?ThereasonIam askingis,asyoupointedout,thereissomedampeningimpactoftailcuttingandofshoring. So,justwantedtoappreciatethestrengthintheheritageIKSbusinessfromayear-over-year perspective. SachinGupta: Greatquestion,Abhishek.Thankyou.Andgoodtohearfromyou.So,look,obviously, becausethedampeningefectoftherevenueislargelyintheAQuityinstalledbase,obviously theIKSlegacybusinessandinstalledbaseisactuallygrowingsignificantlyfasterthanthe 12%.Whilewedonotwanttogivespecificnumbersbecausewereallyarenowoperatinglike onecompanyandoneplatform,IwilltellyouthatthegrowthinthelegacyIKSbusinesshas beenrobust.Also,there'sbeensometremendousnewlogoaddition,likeIcalledoutindeals likePalomarandWesternWashingtonandRadiologyPartners,whichareallreflectinginthe IKS numbers. Andsoyes,theIKSbusinessisbacktoitshistoricalgrowthrates,whichyouhaveevidenced FY'22to'24.ThelegacyAQuitybusinessobviouslyisgoingthroughadampeningefect.But again,astheAQuitycross-sellmotionstartstotrulygetactivatedandkickin,wehopetobe abletoovercomethat.Andthenobviouslytheblendedgrowthrateswillcontinuetobefar superior than the 12% that the industry is going at. AbhishekKumar: Okay.Maybearelatedquestion.WhenIlookatthestandalonenumbers,onaY-o-Ybasisthey seemtohavekindofremainedflatoraslightdeclineactually.So,Iwaswonderingifthat standalonenumberisareflectionofheritageIKSbusinessortherearesomesubsidiaries which are excluded and therefore my reading is wrong. NithyaBalasubramanian: Sachin,Icantakethat.So,thestandalonenumbersarenotreflectiveoflegacyIKSbusiness. WehaveothersubsidiariesintheU.S.wheretherestoftherevenueshavebeenbooked.So,I think you should refer to Sachin's comments on the growth related to the legacy IKS business. AbhishekKumar: Okay. Onelastquestionfrommyside.Palomardeal,wehavementionedthatwehavepaid upfrontguaranteeofRs.139croresandSachin,youindicatedthatit'sa15-yeardeal.So,first, IwantedtojustunderstandthestructureanddoesthisRs.139crores,or$16.5million, representthesavingthatwewilldoforthemoverthe15yearsthatthetenureofthisdealis for.AnycoloronhowwestructureandthenhowoverallwhatkindofROI,etc.,wemakeon this upfront investment?
Thank you. Page11of20 Inventurus Knowledge Solutions Limited February 06, 2025 SachinGupta: Greatquestion,Abhishek.Thankyou.So,thewaythePalomardealisstructuredislikeIwas sayingit'sa15-yearnooutforconveniencedealandwhat'smostuniqueaboutitisthatthey arecommittedtodeployingthefull16-featuremanifestoftheIKSplatformfromtheget-go. Atthedeploymentofthisfull16-featureplatform,weactuallyanticipatethatthevalue created,theneteconomicvaluethatwewillcreateforPalomarattheconfluenceofthecosts thatwewillsaveforthemandtherevenueupsidesthatwewillgenerateforthemwillbemany multiples of that $16.5 million. Icannotrevealexactlyhowmuch,butitwillbemanymultiplesofthe$16.5millionandso hencewewerecomfortableadvancingthat$16.5milliontothem,andthewaythedealis structuredisthefirst$16.5millionoftheneteconomicvalueaddthatwillbecreatedwill cometoIKS.Afterthat,uptoacertainthreshold,theneteconomicvalueaddisshared50-50 betweenIKSandPalomar,andthenanothercertainthreshold,alargeramountofthebenefit accrues to Palomar. So,averyuniquedealstructure.Very excitingforus,becausetraditionallyourdeals,even thoughourcustomerstickinessislonger,tendtobefourtofiveyear-duration,thisis15years, nooutforconvenience,fullmanifesttotheplatform.Andbasedonourestimatesofthevalue thatwillbecreatedwhichismanymultiplesofthe$16.5millionoverthe15years,notonly willweexpecttoclawbackthe$16.5millionrelativelyrapidly, butthenstarttoadd significantnon-linearityinourmargins beyondthetraditionalgrossmarginsthatweexpect from our platform. Abhishek Kumar: Great.
Thank you, and all the best. Moderator: Thankyou.ThenextquestioncomesfromthelineofSrivathsanfromAvendusSpark.Please go ahead. SrivathsanRamachandran:Yes.Hi,justtwoquickquestions.One,doesthelastyearsalenumbersfactorinthefullthree quartersofAQuity?That'sone.Second,justwantedtogetyoursenseonthisPalomardeal,is thisafirstdealofthisnatureandisthereanyexistingrevenuefromthisclientthat'ssittingin the financials already?
Thank you. SachinGupta: So,thisisabsolutelyourfirstdealwiththiscustomerandthatmakesitevenmoreexcitingthat nowlargecustomersaretrustinguswiththefullmanifestoftheplatforminsuchalong-term dealconstruct.So,thereisnootherexistingrevenuefromPalomarpriortothisdeal,which makesitevenmoreexciting.Astoyourearlierquestionabouttheninemonths,Iamsorry,I didnotquitecatchthequestion.MaybeNithya,ifyoudid,youcanansweritorifyoucan please repeat your question. Nithya Balasubramanian: Yes, I did.
So, to your question,in Q3 FY '24, there is two months of AQuity baked in. Srivathsan Ramachandran:Okay, thank you. Moderator: Thank you.
The next question comes fromthe line of Gaurav, an investor.
Please go ahead. Gaurav: Yes. ThankstotheIKSteamforthisandcongratulationsonthephenomenalresults.Oneof myquestionsis,aswetalkaboutintegrationandamalgamationofAQuityintotheIKS structure, are we also looking at any other similar acquisitions now or in the near future? SachinGupta: Thankyouforthequestion,Gaurav.Look,IthinktheAQuityacquisition,asyouknow,was thefirstsignificantacquisitionthatIKSdidafternearly16yearsofexistence.Andwedidthis throughacombinationofthecashwehadonthebalancesheetandaveryconservativeamount ofdebtasamultipleofourEBITDA.Throughthis,asyouknow,wehavecreatedamassive Page12of20 Inventurus Knowledge Solutions Limited February 06, 2025 customerbasethatweareactuallytryingtorightsizesothatwecouldreallyfocusonthose 500-oddenterprisescalecustomers.AndIthink,asImentionedbefore,those500-odd enterprisescalecustomersemploy150,000-oddphysicians,whichis18%oftheentireU.S. physician market. Ifweweretobeabletosuccessfullycross-sellourplatformacrossthose500-oddcustomers, wearetalkingabouta90xgrowthopportunityfromourcurrentscale.So,ourpreferredgrowth pathfromhereisreallygoingtobeorganicinnature,giventhemassivecustomerbasethatwe develop. Our inorganic strategywillbemuchmorefocusedonperhapsbleeding-edge technology-typeacquisitions,wherewewillbeabletobringthepowerofourmassive customerbaseandtheaccesstodataandcontextthatwehave,bywhichwecanmaturethat technologyrapidly. So,theinorganic strategywillbemuchmorefocusedontuck-intech acquisitions. Asagenepool,wearenotacompanythatreliesonacquisitionsforgrowth.Infact,even beforewedidAQuity,asyouknow,weweregrowingatnearly30%year-on-yearCAGR.So, AQuitywasauniquestrategicmerger,really,thatweembarkedon,andIthinkwehavealot ofgoodworktodoaheadofustocapitalizeonthebenefitsofthat.Inorganicactivitieswillbe muchmorefocusedontechnologytoaccelerateourjourneyfromhuman-ledtech-in-the-loop to tech-led human-in-the-loop. Gaurav: Got it.
Thank you, Sachin. Moderator: Thankyou.ThenextquestioncomesfromthelineofSagarDhawanfromValueQuest.Please go ahead. SagarDhawan: Yes. Thankyoufortheopportunity, andcongratulationsonagoodsetofnumbers.Justa questionontheSlide14thatwehaveinthepresentation,revenuefromtop10customers, whichisthereRs.272crores.Doesthisincludeanycustomerwhichhasgottenconsolidatedin thistop10intotheacquisitionofAQuity,ortheseareonlythetop10customersoftheIKSex of AQuity? NithyaBalasubramanian: IfyouarereferringtotheQ3FY'25number, thisincludestop10customersofthe consolidatedentity.ButifyouarecomparingittoQ3FY'24,therewasonlytwomonthsof AQuity, as I mentioned before. SagarDhawan: Right.So,couldyoupleaseprovidetherevenuefromthetop10customersonaY-o-Ybasis, ex of AQuity, just from the top 10 customers of IKS, ex of AQuity? Nithya Balasubramanian: We can take this offline.Somebody from our team will be in touch. SagarDhawan: Sure.Andthere'sjustanotherquestiononthecross-sellopportunity.Justwantedtounderstand whether,basicallywhatkindofrevenueperclientpotentialdoweseeintheAQuity'scustomer base for the cross-sell, if you can just provide some guidance on that. SachinGupta: So,that'sagoodquestion.Look,Ithinkonewaytothinkaboutthatisthatouropportunityset inacustomertendstobe,iftheyarespendingabout15%oftheirrevenueonthesetasks,atthe fullmanifestofourplatform,theywillprobablyenduppayingus,dependingontheirspecialty mix,payermix,somethingintherangeof10%to12%ofrevenue,right?Andsowhenyou starttothinkabout18%ofAmerica'sphysicianmarketexistinginthese500-oddlarge enterprisescalecustomersthatwewillwanttoretainandcross-sellto,youcanstarttodothe math. Page13of20 Inventurus Knowledge Solutions Limited February 06, 2025 Typically,the500-oddcustomersthatwearereallygoingtofocuson,atthefullmanifestof IKS,shouldallbeabletogeneratenearly$100millionayearofrevenuetoIKS.Andthat'sthe typeofcustomerbasethatweareretaining.Andthat'ssortoftheACVpotentialatthefull manifestoftheplatform.That'salsowhythePalomardealissoexcitingforus,becauseit startstosetaparadigmforcustomersembarkingonjourneysthatapplythefullmanifesttothe platform.So,that'ssortofahigh-levelwayofthinkingaboutwhattheACVpotentialwillbe isthatwearereallyfocusedonretainingthose500customersacrossthelegacyIKSand legacy AQuity customer base that at full manifest could be $100 million ACV customers. Sagar Dhawan: Understood.
Thank you and all the best.That's it from my side. Moderator: Thankyou.ThenextquestioncomesfromthelineofNileshJainfromAstuteInvestment Management.
Please go ahead. NileshJain: Hi,congratulationsonagreatsetofnumbers.Firstly,IhadaquestiononAQuity.Atthetime ofacquisition,whenwehadacquired,itwasa9%margin. Wherearewenowintermsof journeytopresently,atwhatmarginswillbeAQuityoperating?That'smyfirstquestion.And maybe I can take other questions. SachinGupta: So,thankyouforthekindremarks.Iwillsaythat,likeIwassayingearlier, wearenow operatinglikeoneplatform.Andso,wereallywouldnotliketorevealindividualmargin profilesofAQuityandIKS,butit'llsufice tosaythatthere'sobviouslybeensignificant margintransformationinthelegacyAQuitybusiness.Andourestimateofbeingabletogetto sortofthemid-30sonablendedbasiswasbasedonthatjourney,exceptthatwehavebeen abletoacceleratethatjourneysignificantlyfasterthanwehadthought.Andso,wehavegotten tonearlya31%EBITDAmargin anda32-oddpercentadjustedEBITDAmargin inthis quarteritself.ButIthinkyoucansafelyassumethattheAQuitymarginsarewellontheirway to transformation and there is still a significant runway ahead of us. OneofthemaththatIwouldsharewithmanypeopleintheroadshowswasthat,forevery humanthatweareabletotransformorreplacethroughacombinationofourtechnologyand somesupervisionthroughaglobalhumancapital,weareabletocreateabout,giveortake, $20,000ayearofadditionalgrossmarginthrougheveryhumanthatwereplace.Andwhenwe startedout,therewasnearly2,500-oddhumansintheU.S.So,dependingonwhatweareable totakethatdownto,basedonourcustomeragreementsandcustomercomfort,thatwill eventuallysignalsortoftheendofthatrunwayforAQuitymargintransformation.Iwillsay that we are probably not even at the halfway mark yet. NileshJain: Allright.Allright.Mysecondquestionis,youmentionedyouhavearound16tasks.So,just wantedtounderstand,arethereanyotherfeaturesortaskswhereyouarenotpresentand whicharenotpartofyourofering.Andwhatwouldbethoseandifyouarelookingtoadd those as well? SachinGupta: Absolutely.Greatquestion.Thankyou.So,look,Ithinkatanygivenpointoftime,wehaveat leasttwoorthreenewfeaturesortasksthatareinco-developmentwithcustomersthat obviouslycontinuetothenincreasetheTAM furtherthanwhatisavailabletoday. Andso happy to note that we have at least two or three in co-development right now. Onesuchexample,forexample,wouldbeseveraltaskswithinthevalue-basedcarefeature clusterofourplatform.Thatvalue-basedcarephenomenonintheU.S.isgoingthrougha majorshift.Initiallyalotofthefocuswasonriskandqualityoptimization,whereasnowthe Page14of20 Inventurus Knowledge Solutions Limited February 06, 2025 focusisintotalcostofcaremanagement.Andsowhenyoustarttothinkofcarecoordination, transitionofcaremanagement,riskstratificationofpopulations,utilizationmanagement,at least the back ofice of the utilization management, those would all be new features. Also,therearesomeotherfeatureswithinthephysician'sworkflowthatareapplicablebothin fee-for-service andvaluethatareunderdevelopment.Forexample,oneexampleforthat wouldbeorderentry, bothsynchronousandasynchronousorderentry. So,yes,constant developmentofnewfeatures.Iwouldnotbesurprisedifwewouldrevealthreetofournew features over the next 12 to 18 months. NileshJain: Goodtohear.Andthenlastquestionis,Imean,wehaveseenthatthere'sbeenalotofM&A activityrecentlybyprivateequityontheRCMside.So,wheredoyouseecompetitiononyour revenueoptimizingsideofoferings,whichyouhave?Howdoyouseethemandhowdoyou compete? SachinGupta: It'sagoodquestion.Look,Ithinkthat'saveryinterestingmarket,andit'sreallychanging rapidly.Ifyouthinkaboutit,onewaytothinkaboutitis,traditionally,thereweresortoftwo genresofcompaniesinthewebcyclespace,maybethreegenresofcompanies.One, U.S.-basedcompaniesthatweredirectlycontractingwithhealthcareprovidersandleveraging a combination of their U.S.-based human capital, their U.S.-based technology, and subcontractingabunchofofshore labortodelivertheRCMoutcomestocustomers.So, companiesinthatgenrewouldbecompanieslikeR1RCM,whichwasformerlycalled Accretive, or Ensemble Health or Conifer.
Those would be that type of RCM companies. ThesecondtypeofRCMcompaniesweretheonesthatgrewupandtraditionallyasIndian taskvendors,thosearetheonesthatIthinkhavebeenalotinthenewsintheIndian ecosystem.YouheardofAccessHealthcareandGeBBSandOmega.Theirlegacywaswhere theyweresubcontractorsoftasksforU.S.RCMcompanies,buttheydidsuchagoodjobof executingandgottosomuchscalethatnowtheyareactuallygoingupstreamandtryingto acquirecustomersdirectlyinordertobeabletodeliverthoseeficienciestothecustomers. Mightthatcreatesomechannelconflict?Maybe,butwehavetogivethemcreditforthetype of scale they've driven. AndthenthethirdgenreperhapsisacompanylikeusthatwasneitheraU.S.companynoran Indiancompany,butdeliberatelycreatedaglobalexecutionmodelwithproprietarytechnology andalwayshaddirectcustomersintheU.S.wherewetookaccountabilityfortheiroutcomes. AndsoIthinkthosewouldbethethreegenresofthecompanies.Ifeellikeallthosethree genrestodayareconvergingintothatgloballyenabledtech-drivenRCMsolution.Someofus perhapsstartedlikethat.Othersareconvergingtothat.So,itwillbeveryinterestingtosee how the winners emerge in this space. Butagain,remember,ourcompetitivepositioningisthatRCMisjustonepartoftheoverall valuechainofchoresthatphysiciansarestraddledwith.Andsoourcompetitivepositioning reallyandourrighttowinoftenhasbeenthatnotonlyareweabest-in-classRCM,butweare actuallyabletodrivealotmoreimprovementinthephysicianproductivitythroughour clinicalsupportsolutions.Andthenalsobeyondthefee-for-service patientpanelsthatare afected byRCM,weareactuallyabletohelpphysicianswiththeirvalue-basedcarepatient panel with our VBC feature cluster. Page15of20 Inventurus Knowledge Solutions Limited February 06, 2025 NileshJain: Thankyouforthatdetail.Justalastbookkeepingquestion.You generatedaroundRs.500 crorestoRs.600croresofoperatingcashflows.Bywhendoyouthinkyouwillbepayingof your entire debt or you will become debt free?
That's it.
Thank you. SachinGupta: So,allthingsremainingequal,remember, wehaveoperatedfor16yearswithnodebtand actuallysignificantamountofcash.So,allthingsremainingequal,weshouldbeabletoget debtfreesometimenextfiscal.Butobviously,theremightbeotherusesofcapital,including tuck-intechacquisitions,moreinnovativearrangementswithcustomerswherewealignthe valuethatwecreatewiththeiroutcomes.Andsodependingonthat,theremightbesome dethrowstothat.Butallthingsremainingequalandusnotembarkingonanysuchendeavors, there's no reason why we wouldn't be debt free next year. Nilesh Jain: Thank you.
And all the best. Moderator: Thankyou.ThenextquestioncomesfromthelineofSiddharthMishrafromFidelity International.
Please go ahead. SiddharthMishra: Hi,SachinandNithya.Goodtohearfromyou.Iwantedtoaskacoupleofquestions.Oneis, firstly,Iappreciatetheverylong-termopportunitywhichisthereandcongratsontheprogress whichyouhavedoneintheAQuityacquisition.Ijusthadaquestiononthedealswhichyou woninthelastquarter.Whatistheramptimelinesofthesedealsandwhendotheyconvert into revenues? Andsecondly,Q4willbe,Ithink,thequarterwhereyouwillhaveabasewhereyouhavethe fullAQuitycompanyinthebase.So,doyouexpecttogrowasstrongaswehaveseeninthis quarter, even in Q4, considering the ramp-up of the deals which you won in Q3? Andsecondly,thisismoreofaphilosophicalquestion.So,youareat750customersasofend ofDecember2024andyouwanttogettothat500customerswithAQuity.So,justwantedto understand,howaggressivewillyoubeincuttingtheAQuityclientsversushavingalsoagood overall growth, top line growth? Willyoukindofgoinapacewhichwillstillkeepouroverallgrowthgoodinthedouble-digit category?OrdoyouthinkyouwillfirstbeveryaggressiveincuttingAQuityclients irrespectiveofwhatimpactitmighthaveonrevenues?Andthenhowwillitimpactyour profitability growth as well?
So, these are two questions. SachinGupta: Great.Thankyou.Thankyou,Siddharth.So,look,firstofall,justtosortofrecap,ourtheme forFY'25wastocutthelowesthangingfruitofthetailthatwedefinitelydonotwanttoplay withgoingforward,whichIthinkwehaveexecutedonforthelargepart,andreallygetthe blended margins of the business to the place that they need to be in. Andsoasyouhaveseen,wehavereallybeenexecutingtothat.AndIamfairlyconfidentthat wewillbeabletocontinuetoexecutetothosethemesinQ4andbeyond.Theonewaytothink aboutitis,eveninspiteofalloftherationalizationofcustomersaswellastransformationof margin-relateddiscounts,wehavedelivereda16%year-on-yeargrowth.Andthisisbeforethe cross-sellhasgottenactivated.Andthisisbefore,likeyounoted,someoftherampefectof the IKS new customers come into play. So,Ihavemaintainedthroughtheroadshows,andIwillstillmaintainthattheopportunitythat wehavecreatedforourselvesistoexecutefarfasterthanthe12%TAMgrowthoverthenext 10,15years,notjustoverthenextfewquarters.So,IhavenoreasontobelievegoingintoQ4 Page16of20 Inventurus Knowledge Solutions Limited February 06, 2025 andwellintothenextseveralyears,wehaveanyreasontoslowdownthatgrowthtoany lower than much faster than the 12%.
So, that's one. Yes,wewillcontinuetooptimizemargins.Wehavebeenalittleluckyinthatwehavebeen abletoacceleratethatfasterthanwhatwehadoriginallythought.AndIthinkaslongaswe stayonthatpath,maybewegettothesteady-statemarginstowardsthemid-30sinsteadofthe nexttwoyearswithinayear.So,yes,Idobelievethatwewillbeabletodeliversignificantly fasterthanthe12%growthandcontinuetoruntowardsthatsteady-stateEBITDAmargin profile of getting to the mid-30s over the next year. Asitrelatestoyourspecificquestionaboutwhenthesedealswillramp,allofthesethreedeals actuallyhavegoneliveaswetalkandtheywillrampthroughQ4ofFiscal‘25andQ1of Fiscal‘26.So,thefullefectwillbefeltoverthenexttwoquartersandthatwillcontinueto reflect in even faster year-on-year growth than perhaps we have been able to witness in Q3. SiddharthMishra: Yes, thanksforthat.So,justtoclarify,the16%year-on-yeargrowthwhichisshowninthis quarterisoverabasewhichhadonlytwomonthsofAQuity,right?AndinQ4,youaresaying thatevenwiththefullimpactofAQuityacquisitioninthelastyear,youstillexpecttogrow very strongly.
Is that a fair understanding or -- Sachin Gupta: While I am not giving formal guidance,I think that will be safe to assume. Siddharth Mishra: Okay.
Got it.
Thanks.
Thanks a lot. Moderator: Thankyou.ThenextquestioncomesfromthelineofChiragKachhadiyafromAshika Institutional Equities.
Please go ahead. Chirag Kachhadiya: Hi, am I audible? Moderator: Yes, please go ahead. ChiragKachhadiya: Yes.So,Ihaveonequestion.So,everyyear,whataveragepriceincreasetookplaceinforthe 16 available features on platform for the existing legacy clients?
Yes. SachinGupta: So,goodquestion.Thankyou.Look,firstofall,let'sallrecognizethatweareoperatinginan environmentwhereit'ssignificantlyintenselycompetitiveandcustomersarelookingformore andmorevaluefromtheirpartnerships.Havingsaidthat,Ithinkareflectionofthestrengthof ourplatformhasbeenthatwehavecostoflivingadjustmentclausesinourcontractswithmost of our customers that are indexed to U.S. inflation. Andweareworkinghardtowardsnotonlyretainingthoseclauses,butthenalsocreating further non-linearity opportunity in our contracts through conservative, but unique value-sharingarrangementslikewehavedoneinthecaseofPalomarandseveralothers.So, generally,wehaveCOLAindexedtoU.S.inflationandbeyondthat,wearecomingupwith value-sharing constructs that will give us further protection and enhancement of margins. ChiragKachhadiya: Okay.Inadditiontomyquestion,sointhegrowthwhichweareanticipatingnorthof5%,that isindustrygrowth,whatisCOLAledandnetnewgrowthwillbethereonincrementalbasis? Yes. SachinGupta: Yes, Ithinkthebulkofthegrowthisactuallyincrementalgrowth,Iwouldjustsaythatthe bulkofthegrowthisactuallyincrementalgrowth,becauselegacyAQuityreallydidnothave muchCOLAintheircontractsatall.AndsoIwouldsay,thebulkofthefutureanticipated growthshouldbeattributedtorealgrowthinexistingcustomervolumesornewcustomer additions. Chirag Kachhadiya: Okay, thank you. Page17of20 Inventurus Knowledge Solutions Limited February 06, 2025 Moderator: Thankyou.ThenextquestioncomesfromthelineofRuchiMukhijafromICICISecurities. Please go ahead. RuchiMukhija: Hi.Ihavetwoquestions.Wehaveannouncedthreelargedealwins.Sachin,canyoudefinefor us what constitutes large deal for IKS? SachinGupta: Yes,thatbenchmarkcontinuestochange,Ruchi,overaperiodoftime.ButIwillsaythatin today'sworld,alargedealforIKSstillisonethatisabletocontributenorthof$10millionin annual contract value per year. Ruchi Mukhija: Got it. SachinGupta: Now,manyofthesedealswilltakesometimetoramptothat.Butaslongastheyhavethat type of a commitment and potential embedded in them, they will qualify for the large deal. RuchiMukhija: Noted.Secondly,wehavegivenagingofourtop10andtopfiveclients.Theagingreported forthreequartersimpliesthattheyhavebeenshowninourtopfiveand10accounts.Isthatthe right understanding?
And the reason for that? Thesecondpartofthisquestionis,whatbusinessattributebyyou,asamanagementteam, looktotrackwhenyouarelookingataclientaging?Istheclientvintage,whichstressesthe deepclientrelationship?Inthatcase,thisnumbershouldshowconsistentandgradual increase?Orisitachurn,whichhasbeenthecharacteristicofthismetricwhenyoulookatthe past history? NithyaBalasubramanian: Hi.Letmetakethat,Ruchi.Thankyouforthequestion.So,whatdoyouseeontheslidein termsofvintageoftopfiveandtop10,thenumbersarenotreallycomparable.Ifyoulookat IKSlegacy, ourvintagehasonlyimproved.TherearesomeclientsafterAQuityacquisition whogotintoourtop10andtop5whohadslightlylowervintage.So,that'sthereasonyou haveseen,let'ssay,ifyouarelookingatQ3FY'24,ourtopfiveclientvintage,thenumbers mightlooklikeit'scomedownfromsixtofive,it'sonlybecausethemixchangedwithAQuity acquisition. RuchiMukhija: So,goingforward,whatIamtryingtounderstandisthechurnisaconstantfeatureofthis metric,orshouldweexpectthatthelargeclientstayinthistoppositionandthisvintagekeep on increasing? NithyaBalasubramanian: No.Thisvintagewillkeeponincreasing.Ithinkattheoutset,Sachinhadmentionedthat95% ofourrevenuesarefromrepeatclients.AndIcansharethatevenamongsttheAQuityclients, sinceouracquisition,wehavenotreallylostanytopclientsthatwearefocusingon.Andof course, IKS clients as well remain steady with us. Ruchi Mukhija: Got it.
Thank you and all the best. Moderator: Thankyou.ThenextquestioncomesfromthelineofDeveshMehtafromPreetiInvestment Managers.Pleasegoahead.Ladiesandgentlemen,Deveshhasleftthequestionqueue.We moveontoournextquestion,whichisfromthelineofHemendraKumar,aninvestor.Please go ahead. HemendraKumar: Goodmorning.Thanksfortheopportunity.Ireallyappreciatethebusiness,themodelofwhat IKSoperates.Myquestionis,asyouhaveaplatformhelpingadminjobsandtakingcareof physicians'tasks,etc.,whatisthecompany'sperspectiveoncontinuumofcaretopatients? Maybe I am not aware of U.S. policies about patient care. Andareyoudoinganythinginthataspectwhereyoucandeviseamodelwhereyoucangivea dietarymanagementorlifestylemanagement,cardiovascularmanagement,etc.,allsuch Page18of20 Inventurus Knowledge Solutions Limited February 06, 2025 lifestylediseaseswhereyoucanfocus?Becauseyouhaveaverylarge humancapitaland maybeyoucanoperateonthismodelalso.Butagain,asapilotproject,canyoudothesame forpatientsinIndiasothatasapilotbatch,youcangeneratethesameacrosstheU.S.?Thank you. Sachin Gupta: So, Nithya, do you want to take that?I had trouble following the question. Nithya Balasubramanian: I did too.
I am sorry.
Ifyou do not mind repeating the question. HemendraKumar: Yes. Myquestionwasbasicallyoncontinuumofcaretopatientswheretypicallyyouare operatingamodelwhichisofphysicianstakingcareofadmintasks,physicians,etc.,joining thehospitalandexitingthehospital,etc..Butisthereanymodelfromyoursideofcontinuum ofcaretopatientswhoareleavingthehospitalandleadingalifewheretheyarehaving lifestylediseases,chronicconditions,andarewedoinganythingtomanagesuchpeople?Is thereapolicyintheU.S.whereyoucancontactpatientsandgivecontinuumofcarebecause you have a large human capital?
And can you do the same in India also? SachinGupta: It'sagreatquestion.Actuallytwoquestionsthere.So,yes,likeasIwasreferencingwhenthe questionwasaskedaroundsomeofthenewfeatureswearecreating,ourentireoferingthat enablestotalcostofcaremanagementinfullydelegatedriskcontractsactuallyinvolves exactlythat,wherewearebuildingcarecoordination,transitionofcaremanagementmodels, enablingefectivehome-basedcareforpatients,community-basedcareenablement,allofthat isreallyaimedatmanagingthepatientacrosstheirjourneywithinthecontinuumofcare, including their home. Andsoyes,fromourtotalcostofcareofering,sir,wewillactuallystarttotakebabystepsin therealmthatyouaretalkingaboutbecausetherealityisthatoutsideofend-of-lifecare,as muchas60%to70%ofallcostofcareisdrivenbychroniclifestyledisease.Andtomanage thosepatients,oneneedstosortoffollowthemandmeetthemwherevertheyareintheircare journey. So,yes,wewillstarttoseesignificantexpansionintomanagingourcustomers'customers, whichisourcustomers'patientsacrossthecontinuumofcare.AsitrelatestoIndia,wefeel rightnowwearestillfocusedintheU.S.TheIndianmarkettousseemsalittleimmature.For example, a lot of the ambulatory physician ofice-based care isn't even covered by insurance. So,astheIndianmarketmaturesalittlebit,Iamsuretherewillbelearningsfromourjourney in the U.S. that we will be able to bring to India, but that's not an immediate-term focus. HemendraKumar: Yes.Thanksforthatanswer,butIjustwanttoupdateyouthatfrom2008or'09onwards,the workshopdomeofaU.S.-basedcompanyhasinvestedincontinuingofcareforthediabetes managementmoleculeinIndiaandIwasapartofthatprogramwhichwassuccessfulandI haveseenreductioninHbA1c,cardiovascularmanagement,patientsatisfaction,etc.,dietary management.Itwasawonderful,wonderfulprogram.So,youcantakefeedbackfromsuch companiesandimplementandmaybeguideyourteamonmanagementpractices,etc.Thank you. Sachin Gupta: Thank you for the suggestion. Moderator: Thankyou.Ladiesandgentlemen,astherearenofurtherquestions,Inowhandtheconference over to Mr. Saransh Mundra for his closing comments. SaranshMundra: Hi.Thankyou,everyone,forjoiningourfirstearningscall.Itwasareallyinsightfulsession.I thinkmanymoreparticipantscameinthanweexpected.Foranyfurtherquestions,pleasefeel Page19of20 Inventurus Knowledge Solutions Limited February 06, 2025 freetoreachouttomeoranyoneinthecompany.Wewillbeveryhappytoansweryou.Thank you, everyone. Moderator: Thank you. SachinGupta: Andagain,Iwilljustendbysayingthatweareliterallyatthestartofthis,whatIthinkisa multi-decadalsecularjourneytodrivesustainabilityintheU.S.healthcaremarketandweare super excited to have you on this journey with us. Moderator: Thankyou.OnbehalfofICICISecurities,thatconcludesthisconference.Thankyoufor joining us and you may now disconnect your lines. Please note that this transcript has been edited for readability. Page20of20