Coforge Ltd - Jan 2025 Earnings Call Transcript Analysis

April 14, 2025 · 4 min read

Earnings Call Transcript Analysis Report #

Revenue: $397.1 million in Q3 FY25
- Sequential CC growth: 8.4% (Cigniti: 3.5%, Non-Cigniti: 9.4%)
- Y-o-Y CC growth: 40.3%
- Y-o-Y USD growth: 40.8%
- Y-o-Y INR growth: 42.8%
Adjusted EBITDA: $70.5 million
- Sequential growth: 15.4%
- Y-o-Y growth: 39.3%
Adjusted EBITDA Margin: 17.8% (up 122 bps sequentially)
- Cigniti Adjusted EBITDA Margin: 17.3% (up from ~11% three quarters back, and 12% last year)
- Excluding Cigniti Adjusted EBITDA Margin: 17.9%
- YTD Adjusted EBITDA Margin: 17.4% (up 70 bps on last year’s pro forma financials of 16.7%)
EBIT Margin: 11.8% for Q3, 12.3% YTD (reflecting 25.8% YTD growth)
Order Intake: $501 million in Q3
12-month Executable Order Book: $1.37 billion (up 40.1% Y-o-Y)
Net Cash Position: $30 million (Cash and bank balances of $110 million, working capital loan of $80 million)
Operating Cash Flow (OCF): $47 million in Q3 FY25 (vs $33.5 million YoY). YTD OCF: $86.5 million (vs $33 million YoY)
ESOP Cost: 2.1% of revenue (up 130 bps QoQ, in line with guidance)

Revenue run rate grown almost 60% in less than two years (from $1 billion to ~$1.6 billion).
Cigniti EBITDA margin jumped >600 bps to 17.3% from ~11% three quarters back.
Order intake of >$500 million for the second consecutive quarter.

ESOP cost to marginally go down over next two quarters, then to 100 bps of revenue from Q3 FY26, creating a tailwind. CFO Saurabh Goel: “EBIT margin should be expanding close to from 11.8% currently should be hitting roughly 13.5% by Q3 next year.”
Expectation of sustained robust growth and margin expansion.
Tax rate guidance: “inching towards 25 odd percent.”
Management expects to repeat margin expansion in Q4.

Broad-based Growth: “balanced nature of the growth across all cuts. That is, across all geo units, all industry verticals and every service line of ours.”
Geographic Growth (QoQ): Americas: 9.2%, EMEA: 8.9%
Vertical Growth (YoY): BFS: 20.4%, Insurance: 20.3%, Travel: 43.4%, Government (ex-India): 48%, Other Emerging Verticals: 88.2%
Service Line Growth (QoQ & YoY):
- Engineering: 6.3% QoQ, 69.2% YoY
- Intelligent Automation: 5.1% QoQ, 11.2% YoY
- Data and Integration: 4.1% QoQ, 22.9% YoY
- BPS: 1% QoQ, 17% YoY
- Cloud and Infrastructure: 19.4% QoQ, 42.1% YoY
Client Cohort Growth (QoQ & YoY):
- Top 5 Accounts: 13.5% QoQ, 22.5% YoY
- Top 10 Accounts: 14.4% QoQ, 23.1% YoY
Cigniti Integration & Performance: Significant turnaround in both revenue growth (3.5% CC sequentially) and EBITDA margins (17.3%)
Decline: Integration and merger expenses down to $1.9 million from $3.5 million in Q2

Cigniti Amalgamation: Board approved scheme of amalgamation of Cigniti with Coforge (1 Coforge share for 5 Cigniti shares). Effective date April 1st, 2025, process to take ~12 months.
AI-First Organization: Continued expansion of AI/GenAI portfolio (30+ capabilities).
Quasar AI Platform Enhancement: Used by clients for agentive AI applications.
Strategic Partnerships: Active work with Microsoft and ServiceNow to embed AI/GenAI.
Global Capability Centres (GCCs) CoE: Formed to help clients establish/scale GCCs. Example: GCC setup for a US wealth management firm.

GenAI powered submission centre solution for insurance (cut email processing time).
GenAI accelerators for application development productivity.
GenAI solution to reverse engineer legacy mainframe applications (25-30% time/cost savings).
Offerings for brownfield and greenfield GCCs.
Core Banking Testing, DORA compliance solutions in BFS.
AI-powered platform for financial crime prevention (human trafficking).
Low-code/no-code SaaS platform for customer care in travel.

Cigniti Integration: “complete operational integration of the Cigniti business.”
AI Upskilling: “Under our AI Spark initiative, 95% of our workforce has been certified in AI tools and foundational AI concepts.”
AI Innovation Lab: Working with AI hardware providers on edge AI and large dataset processing solutions.

Large contract to enhance record management and operational efficiency (public sector).
Large healthcare project to modernize the British healthcare system (60-year scope).
Strengthening agile frameworks for a global bank’s wholesale banking division.
Partnering with Fortune 100 bank on a financial crime prevention program.
Large program to develop a scalable SaaS platform for a major transport company.
Four large deals closed in Q3, one within Cigniti client portfolio.

Demand Environment: “definite yet gradual improvement in demand across all sectors that is playing out.”
Travel Sector: “continues to show impressive resilience and growth despite the ongoing inflationary pressures. The forecast for next year is a robust 7% growth in revenue passenger kilometers.”
BFS Sector: Demand in operational resilience, regulatory compliance.
Insurance Sector: SMB market transformation, demand for underwriting effectiveness, claims processing, customer experience, fraud detection. GenAI use cases are emerging.
GenAI Adoption: “demand from a revenue addressing perspective is increasingly pivoting towards engagements that are more focused only on data to begin with.” Focus on data pipelines, data maturity assessment, data cleansing, data vectorization, and infrastructure for AI model training.
GCCs: Growing demand for setting up/scaling GCCs.