Inventurus Knowledge Solutions Limited (IKS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the IKS Health Limited conference call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Seema Nayak from ICICI Securities. Thank you, and over to you.

Thank you. Good morning, everyone. Thank you for joining us today on the Q2 FY '27 earnings call of IKS Health. On behalf of ICICI Securities, I would like to thank the management of IKS Health for giving us the opportunity to host this call. Today, we have with us Mr. Sachin Gupta, Founder and CEO; Ms. Nithya Balasubramanian, CFO; and Mr. Saransh Mundra, Head of Investor Relations. I turn it over to Mr. Saransh for his brief statement and to take the proceedings forward. Thank you, and over to you, Saransh.

Hi, everyone. Good morning. Welcome to our investor call. the first one after our acquisition. Before I hand over to Sachin, Nithya, just a disclaimer: as part of our prepared remarks, we may make certain statements which are forward looking in nature. We take no responsibility to update such forward-looking statements, and your discretion is warranted by making investing decisions. Over to you, Sachin and Nithya.

Thank you, Saransh, and hi, everyone. Good morning, good evening, depending on where you are. Earnings release for our eight quarters since we've been public, is now with you. It came out last night. I hope you have had a chance to go through it and glance through it at least a little bit. Without further ado, I will kick things off. I know this is a busy festive season for everybody. But happy to report that we have continued strong momentum in the fiscal Q2 of fiscal year 2027 or '26-2027. And what I do, I'll kick it off with a few remarks on the state of the union of the business, and then we will start -- dig into the financials. I'll provide little bit of financial summary and Nithya will provide some more details, and we'll turn it into QA. So with that, I think given that this is the eighth quarter of public company earnings, I don't need to introduce IKS to you all. You know, we're in the business of enabling providers to deliver better, safer care, predominantly impacting the cost of care, quality of care and access to care positively. So that's the business that we're in. As you all know, we had started in the ambulatory or physician space. We're starting to build an offering in the hospital or acute market. And then with the acquisition of TruBridge and the integration that is underway, we are now firmly across the continuum of care, ambulatory through acute. So excited to report that evolution. We will -- again, I think you guys are all familiar with the TAM and stuff like that. One of the things that we continue to take pride in, we believe that the ultimate care enablement platform will be the right combination of AI and human in the loop. And I think the way IKS, the new IKS has come together, I think we have the best combination of those 2 key levers for success within world and also in an approach that is a true end-to-end platform-based approach versus a point solution-based approach. So with that, I will just move on to really talking about how the business is trending. And you're aware of the 5 pillars of our strategy. We've spoken about that extensively. So I'll leave that on the screen for your read. But I think the most interesting part of that, that everybody is interested in is the TruBridge integration. So really happy to note that the TruBridge integration is done the way and going well. I measure the TruBridge integration across 5 or 6 dimensions. And what I'll try to do is give you all some color. First, I'll say that over the last 3-odd months since we closed TruBridge, I've had the privilege of being on the road and meeting more than 50 TruBridge customers. In fact, we're just coming off a conference 2 weeks ago where we had 75 of the senior executives of some of the largest IKS customers in a room for 2.5 days. And so it's been a very interesting set of conversations big headline for you all is that I think our message around the only company in the world that is a true deep integration between a system of record and a platform system of action. That message is resonating dramatically. Certainly, in the TruBridge installed base, which is where that value proposition will primarily manifest itself. And then with the legacy IKS installed base, that platform system of action manifests is really starting to come through well. So the dimensions on TruBridge that I think about from an integration perspective, when you acquire a large asset like this, we're obviously looking at it outside in and you have certain hypothesis. And then 3.5, 4 months later, you're able to truly have a view of how that's trending. So I'll start with the People and Culture dimension first because whether it's AI or not, it's the people that make everything happen. Happy to note that we went in knowing that the people and culture dimension of TruBridge was a scenario where this was a company that was moving from a lifestyle company to truly a execution-oriented intense organization. that transition was underway but not complete. I think looking in, I think that has got validated. And I think there's also been some very interesting developments as we started integrating 3 of the top 5 executive leaders of TruBridge have now assumed executive leadership roles in the combined entity. Chris Fowler, who's one of the senior most executives who was CEO of TruBridge has been there 25-plus years now is the Chief Strategy Officer of the combined IKS, but also continues to mentor the TruBridge book that is now part of the acute business unit or the hospital business unit within IKS. He certainly believes in our vision. Many of you a chance to meet with him. When we did our last quarter's earnings release, he was in India, and so continues to be a key pillar for driving success in the joint platform. Amaris, who now is our global CHRO, was the CHRO of TruBridge. And so that was a very important decision maker global CHRO of the combined entity. As you can imagine, that gives the TruBridge people tremendous confidence on their representation and importance in the combined entity. And then David Harts, who used to run the TruBridge EHR business, which I think is the crown jewel of this acquisition for many reasons. It has continued to assume the role of the GM of the EHR business, which also sits in our acute business unit. So 3 of the top 5 executives have committed to the long term, are not part of the larger executive leadership team at the combined IKS. And I think that's going to augur well for this continued transformation of the legacy TruBridge business and its integration into IKS. One of the other key dimensions that we had as an assumption going in was that the EHR business is highly sticky. Very happy to report that I think the business is even stickier than we had imagined. Through these 50-plus conversations with TruBridge EHR customers, I have to say that they are almost pleading for us to both modernize that EHR and to really start to integrate our system of action to make it even more functional and accretive for them. So beats expectations on that stickiness front from an EHR perspective. The next one was, I think, a very key strategic dimension of acquiring TruBridge was the fact that with TruBridge, we would get access to a whole bunch of data that could then -- that we could then convert into a context there and make it an AI training mode. And we have gone in with the assumption that we would have access to about 5 million patient records. Very happy to note that actually the access to patient records is even greater. I think the number is 3.5x to 4x of that. With that kind of treasure trove of data, our ability to accelerate the training of our own models, and build our proprietary air mode is significantly enhanced. So certainly beats expectations on that front. And then the other dimension was that we had a thesis around margins and the potential synergies that existed in the TruBridge book, I have to say that we firmly beat expectations on that front our initial review reveals that there is a whole bunch of opportunity, certainly without compromising any of the customer satisfaction needs of TruBridge. So our ability to drive synergies while improving the performance of the TruBridge financial business appears to be stronger than we saw from the outside in. And then last, but not the least, the resonance of our system of action message in the TruBridge EHR customer base. Remember, there are 600-plus hospitals on the EHR and probably not more than 200 of them have the financial health offering in there. So there's a huge white space. And in our conversations over the last few months, it's apparent that there is a robust demand environment in that installed base for our financial health offering, which is the RCM offering, but then also our larger system of action. So I think our thesis that we will be able to transform TruBridge from a steady to declining revenue asset to eventually a highly profitable growth asset still has merit and there's more to follow on that front. So all in all, good learnings. Obviously, there's a lot of work to do as it relates to modernizing the EHR and building that integrated system of record and system of action. But I think the initial report, from our perspective, seems to be solid. And as I think about what we are really going to do with everything that we are learning, I'd like to lay out a little bit of a thesis that will define what we're going to do. Also, this will serve as sort of the AI update, the dimension of AI update that I think everybody is looking for. And so if you really think about the logical architecture, not the physical architecture, but the logical architecture of what the care enablement platform will look like once it's truly AI-first and human in the loop, the way to think about it is you always have the EHR, which is a system of record, which is the longitudinal data repository and the single source of truth. Now remember, the data in that system of record is transactional and somewhat disconnected. So while it captures what is happening in the patient journey, it is transactional and hence, you can't just take that data and have these highly sophisticated LLMs start to reason with that data. The data is not organized it does not have the context built-in. And so no matter how to do it, you have to transform the data into a context there, which is what we call the system of intelligence. And that essentially starts to bring semantic interoperability in the data. That's where you start to then build the knowledge graphs and the ontologies that enable the semantic interoperability and then you can start to really use AI LLM and cognitive compute for predictive insights. So that layer, that system intelligence there is a very important alpha. And of course, the system intelligence led cannot be built meaningfully without the system of record data. But what we're doing is we're starting to build this system of intelligence layer in a relatively agnostic manner. By that, I mean, obviously, there's millions of patient records that will be used to build the system intelligence layer from the TruBridge data, but also there's all these in our legacy IKS business, we get access to data as we are delivering the care enablement platform across other EHRs. And so we're building the system of intelligence such that it can receive data across EHRs, including TruBridge and become that context layer that then enables the system of action platform that we have which really then sort of does all the workflow optimization, automation, orchestration and includes the human in the loop for the safety and oversight and the complex transactions or the nondeterministic complex transactions that the AI cannot process autonomously. So I think it's very important to sort of internalize this architecture and know that we now have already begun the effort of building the system intelligence in a manner where the system of record where we're agnostic to the system of record that is driving the system of intelligence. And then that system of intelligence is really what is feeding AI agentic autonomy into the IKS platform system of action. And that essentially leads to 2 offerings, one for the legacy IKS market and the other for the rural and community market that we now have access to through TruBridge. If you look at the existing IKS legacy market, that's the 1 that we will continue to build on the existing architecture, where there'll always be the EHR system of record at the base, it could be TruBridge or anybody else. We will have our proprietary system of intelligence that is constantly getting trained largely to TruBridge data, but also data that's coming off our other EHRs that we integrate with. And then that's feeding the platform system of action that we've built over the last 20 years. So that's going to be the platform system of action offering for our traditional IKS large physician group market, both health system and as well as large single and multi-specialty groups. And then for the actual rural and community market, that's where we're really going to be building this game-changing future operating system of health care. And that's a true AI native platform that will -- what it will essentially do is it physically integrate the system of record and the system of intelligence there, such that that becomes that AI native substrate that we will build from the ground up, right? So now you have a truly integrated versus a transactional database from a legacy EHR, we will actually combine that system of intelligence and system of record into area substrate and that then integrates deeply in the native with the system of action that then leads to this whole 0 latency data flows with no middleware interfaces needed and true real-time without contact switching end-to-end clinical and financial automation. So these are the 2 parallel paths that we will be pursuing to truly AI-enable this care enablement platform that I think is going to be a significant opportunity for us and for the industry going forward. You already know that these are the 16-odd features of our platform on the ambulatory side and 5 features of our system of action platform in the acute side. By the way, with the acquisition of TruBridge, we have now launched already 2 extensive customer assessments of legacy TruBridge customers where they have indicated interest to take our full platform system of action. So excited to report that. As a part of that, what will happen is you'll see that this bottom row of the system of action for the in acute settings, the features of that will get expanded because obviously, in the hospital setting, there are additional tasks that the providers and the administrators should not be doing. We will now start pulling those tasks into the acute platform system of action. And so obviously, these 5 features that you see for the in acute settings will grow and that will continue to expand our TAM for the in acute setting. Now as we are going about building this AI-native operating system for the rural and community care market, what became evident as we met these 50-odd customers over the last few months is that there are certain features of our current platform system of action that have very high appeal today to the TruBridge customer base. So what we did is after a whole bunch of survey, we prioritized these 3 broad offerings from our IKS legacy system of action, and we are now bringing these offerings first, integrating them into the current TruBridge EHR. Think about it like -- it's like a smelting process, right? We're building that system of intelligence layer. Through that system of intelligence, first, we'll focus on the system intelligence layer for these 3 features, denial, prediction and prevention; coding; and then all things that drive clinical productivity or tying back to providers, including clinical documentation and virtual care assistant. So for these 3 features, we're prioritizing, building that system of intel and through that system of intel, we will first bring these 3 features into the TruBridge customer base because these 3 features have the maximum demand and the maximum ROI in the TruBridge customer base. Our objective is that these 3 features will be live in the legacy TruBridge EHR. The old cobalt-based legacy TruBridge EHR through this smelting process, in the customer base sometime by Q1 of FY '28. So by Q1 FY '28, these 3 features are integrated into TruBridge EHR and are available for release to the TruBridge customer base. And that's what we are prioritizing. And by that time, in parallel, we would have launched the effort of what we call Project Endeavor, which is building from the ground up this AI native operating system will be an absolute one of a kind for the entire industry. So that's going to be our strategy on how we -- even as we are stabilizing the current churn in the TruBridge financial health customer base, we start to build the engines that will actually drive growth going into FY '28 and beyond. So that's generally the strategy that we have. That's an update on the TruBridge integration and the strategy that we have to both stabilize the TruBridge customer base from an FH delivery perspective, but then also start to integrate growth in that customer base and to do it in a way where whatever we build through the system of intelligence is applicable in an EHR-agnostic manner into the legacy IKS customer base as well. So that's a brief update on the TruBridge integration. Obviously, any quarter like this is exciting because while we were doing the TruBridge integration, we were still able to drive a whole bunch of deal wins and customer expansions into the legacy IKS business. And generally, going forward, at least for the next few quarters, when I say legacy IKS, think of legacy IKS as the original combined business of IKS and acuity, right? So if you remember, when we sort of announced the deal -- when we closed the deal, I had said that the way to think about it from a revenue run rate perspective is that the legacy IKS business is, give or take, about a $385 million run rate business and the legacy TruBridge business after eliminating the things that we don't want to keep is about a run rate $300 million business. So when I say legacy TruBridge, I'm referring to that $300 million annualized run rate business. And when I say legacy IKS, I'm referring to that $385-odd million legacy IKS business. So happy to report 4 wins in the legacy IKS business, one of which was a major cross-sell into Augusta Health, which is part of the broader Mayo Clinic network. So it was a nice cross-sell win in the acuity customer base. The other 3 are new logos that we have added within the IKS business, the traditional IKS business. White Wilson and Evolve being multispecialty and single specialty freestanding medical groups and then, of course, UMass Movil being the big health system in the Greater Massachusetts area. So -- and then, of course, TruBridge added a new customer called which is a specialty surgical hospital. And so I guess the other question in your mind is, how should you think about combined growth in the business? I think while you have seen the numbers, and we've come in through a strong quarter as it relates to our overall performance with INR 1,592-odd crores in revenue at about INR 442-odd crores in EBITDA which, right, coming out of the gate is already a 28% EBITDA. So -- which is right in line with our expectations. So we have had no leakages either on the IKS -- legacy IKS EBITDA side, where if you remember, Q1 FY '27 legacy IKS has had an EBITDA of about 34.5%. I'm happy to report that we are able to maintain those margins in spite of significant acquisition expenses, which -- of which there were about nearly INR 25 crores of acquisition expenses in this quarter. And then on the legacy TruBridge side, the EBITDA continues to be right in line with what we had expected, which was some of that annualized $68 million run rate. This is obviously the pre-synergy EBITDA. And so all that resulted in, like I was saying, INR 1,592 crores of revenue, which is about 104% year-on-year growth in rupee terms, and obviously, at about a 78% growth Q-on-Q in rupee terms. But obviously, you all are interested in the constant currency growth and want to break up. The way to think about it is the constant currency revenue or the U.S. dollar revenue was about $169 million. And the way to think about it is of that, the IKS business grew a little bit better than it did in Q1. Year-on-year, the growth in the IKS business was a little over 13% in U.S. dollar terms coming in at about $101 million. So better than improved growth over Q1 on a year-on-year basis, and then on the legacy TruBridge business, we came in right around $68 million. So give or take, like I said, the run rate of the legacy TruBridge business was about $75 million a quarter, $300 million a year. We have 82 days of consolidation in this quarter. So when you do 82 by 90-odd or 91-odd you come right around that $68 million. So that's the way to think about the constant currency growth. How do you think about growth going forward in revenue? The way to think about it is this. Look, we continue to believe that in spite of the fact that our execution bandwidth is now spread across a much larger book we feel like we can continue to drive better than industry growth in the legacy TruBridge or in the legacy IKS business. So I've always said that business -- the industry is growing at 12%, we will continue to do better than that on a constant currency basis. We feel like in spite of our bandwidth being stretched, we'll be bold enough to say that we should be able to maintain that. Of course, it's not always exact, but we get optimistic about our ability to do that. And then the legacy TruBridge business, the way to think about it is this is a year of consolidation and stabilization. So we've already had almost a full quarter. We have 2 more full quarters there. This year, we will focus on truly integrating the TruBridge business and stemming and stabilizing the customer base. So if I were you, I would not be modeling any significant growth in the TruBridge business this fiscal year. But starting fiscal '28, I think we should start to see significant green shoots of growth, and I'm talking about net growth, in the TruBridge business, which then going into late FY '28 and early FY '29 that TruBridge -- legacy TruBridge business should really start to edge towards in the system of action component, the industry growth, that 10% to 12% that the industry is growing at, the rural and community market for system actually is doing in that, I would say that, that -- our aspiration, I'm not giving guidance again at all, but my -- our aspiration is that we get to that 10% to 12% growth in the TruBridge system of action business. Obviously, the TruBridge system of record business, our ambition is to keep it relatively flat. So I wouldn't model too much growth at least for FY '28 and FY '29 in the TruBridge system of record business because the idea is that's the platinum mine, that's what helps us build our AI system of intelligence layer and eventually the system of action, that is also that platinum mine that allows us to cross-sell our system of action into that installed base. Our ambition is to keep that relatively flat. And then once project endeavor is launched, where we have this true operating system of health care, which is the truly integrated system of record and system of action for the rural and community market, which probably is going to be FY '29 onwards, hopefully, we can drive some moderate growth at that point in the TruBridge EHR business. So that's the way to broadly think about growth. I know everybody is wondering, I will repeat that we are not giving guidance at all as it relates to growth. So please, please be mindful of that. This is the ambition. And obviously, we want to be the best company in business. I feel like we've put together the right assets to be the best company in the business. And now it's about executing to those assets going forward. Obviously, the other question is, so what should we think about EBITDA? We've already come in at 28% EBITDA this quarter. I've always maintained that at the other side of this acquisition, we should be able to get back to our traditional margins early to mid 30s. I reiterate that we should be able to get that. Whether that's happened sooner rather than later, time will tell. I already mentioned to you all that our early analysis on synergies is that we have the opportunity to beat our own expectations on synergies from the acquisition that meet them. So optimistic about margin and the confluence of all that, I feel like we feel while there is a lot of execution ahead of us that general 2 North target of INR 3,000 crores that we have given for FY '30, we continue to be optimistic about that while continuing to reduce our leverage. You must have seen that on INR 442 crores of EBITDA, our net leverage is already under 3x EBITDA. And hence, we feel optimistic about taking that leverage down to near 0 levels by the end of FY '30. So that's a broad summary of our Q1 performance, the TruBridge update, how we're thinking about growth going forward and our ability to continue to deliver to our true North objectives for FY '30. All this, while building for the rural and community market, the most exciting and relevant operating system of the future and for the legacy IKS market, which is a large physician group market, a true AI-enabled human-in-the-loop system of action that is EHR-agnostic. With that, I will pause, and I will turn it over to Nithya to talk through other aspects of our financials.

Thank you, Sachin. Good morning, everyone, and advance Diwali wishes. So PBT in this quarter came in at INR 273 crores, which represents almost a 20% year-on-year growth. PAT in the quarter was INR 217 crores. Adjusted PAT where we have removed the noncash items, including ESOP as well as amortization of intangibles came in at INR 273 crores, which is about 17% of revenues. Again, representing a very healthy 36% year-on-year.

One comment I just wanted to make, Nithya, if you allow me, is that if you see our EBITDA of INR 442 crores. When we adjust that EBITDA for our ESOP expenses, it actually comes to about INR 459 crores. So there's really about INR 17.5 crores of ESOP expenses in this quarter. One thing I do want to note is, as you can now see, we're nearly $700 million annual run rate company, and we've gone to this number from what were we just 3 years ago in October 2023, prior to our IPO, we were about $150 million run rate company, right? So we grow nearly 5x in 3 years. Of course, a significant part of that has been inorganic. But also remember, we've achieved that inorganic growth with absolutely no dilution of equity. And it's also created post IPO, a pretty large employee base and to execute on the vision of the future, I think it's really important that we align some of our key leaders towards the success of the future financially. So in line with that, as it was approved by the shareholders in the AGM by all of you, you should anticipate that there will be about an ESOP grant to about the top 60, 65 leaders of the company that amounts to, give or take, 4% of the total equity of the company. And so as that gets granted, we will give you specific model to impact -- to specific impact to model on the noncash part of the EBITDA, and hence, that adjusted EBITDA number will continue to become more and more relevant. And we'll give you the specifics, but I did want to say that, that 4% ESOP grant is going to obviously impact this adjustment of expenses in arriving at the adjusted EBITDA number. By the way, I do want to say, sorry, one more thing that on the ESOP, nearly 80% of our ESOP is attached to performance targets that are linked to our $320 million or INR 3,000 crores our EBITDA true North target. So the ESOP grant is essentially geared towards aligning the entire organization to achieve and beat our true North by FY '30. Thank you.

Thank you. Talking about cash flow. Cash generation continues to remain very, very strong. I do want to call out 2 items that are appearing in OCF and FCF this quarter. If you look at the adjusted OCF that came in at INR 393 crores, which represents a very healthy conversion of up to 90% of EBITDA. The numbers you will see reported in the cash flow are about INR 96 crores lower. And this INR 96 crores went towards TruBridge's acquisition expense. Of course, we got commensurate cash as well when we acquired the company. But since the payment was made after the cutoff for consolidation, the INR 96 crores appears in my operating cash flow. As you can imagine, this is fully covered by the cash that we got, which is sitting in my financing activities, and this is, of course, a nonrecurring item. If you look at FCS, other than the items that I already mentioned, we also ended up paying slightly higher tax to the tune of about INR 50 crores this quarter. Again, this is only a timing issue. When we acquired TruBridge, we took a rather conservative view on tax. We paid slightly higher tax than what's necessary. And this additional tax that we pay will anyway be consumed towards the tax that is owed in the rest of the 2 quarters in the year, and therefore, this also is a onetime impact this quarter. Adjusting for both of these items, cash inversion remains at 90%, and this we hope will only keep going up in the future as well. If you look at net debt, we had assumed a gross debt of about $611 million at the time of TruBridge acquisition. The net debt number at the end of the quarter stands at INR 5,280 crores or approximately $550 million. And with continued extraction of synergies and cash generation, we hope to be able to continue to pay this down in the future quarters. EPS came in at INR 13 in the quarter, and growth was in line with the PAT growth that was discussed earlier at about 20% year-on-year. I do want to call out that this deal, as discussed in the last quarter, is EPS accretive. You will find that the PAT growth quarter-on-quarter is stronger than the underlying IKS revenue growth. And this is PAT accretive this quarter and will continue to remain so as we continue to work and improve on the TruBridge business model. Return on equity was at 27%. Again, continues to remain healthy, and we hope to remain around these levels. A lot of these numbers have been discussed. I'll just call out a few highlights. Employee benefit expense, other expense, all these numbers on the slide do include 82 days worth of TruBridge expenses and revenue as well. The underlying employee count for IKS remains rather flattish quarter-on-quarter, and the increased number of total employees that you see are the new employees that we inherited as we close the transaction. EBITDA came at INR 442 crores or almost 28%. The finance cost of INR 101 crores in the quarter includes about $9 million of interest expense, which is only for the period that was accounted for. You should expect about $10 million of interest expense every quarter going forward at the current interest rates. Of course, as our leverage goes down, which we hope it will, our interest expense will be coming down. Depreciation and amortization is again higher because, again, looking at the balance sheet, you will find that we have booked about $123 million in intangibles and about $15 million in technology. And this amount on the balance sheet will continue to get amortized over a period of time. And you should again assume a proportionate number for the next quarter as well. Tax came in at INR 60 crores. The ETR for the quarter was 22.1%. For the combined TruBridge and IKS entity, EPR should remain in the 22% to 23% range in Q3 and Q4 as well. There were also losses that are attributable to minority shareholders of the WWMG MSO, which is about INR 4 crores that you see on the face of the P&L. Net of that, our profit came in at INR 217 crores. The MSO is loss-making. However, the losses continue to shrink as we scale up our implementation of the platform and the productivity of the doctors continue to Adjusted EBITDA per employee is now a very healthy INR 1.29 million in the quarter. This represents the incremental revenue and the additional employees that we are now inherited from TruBridge. Revenue from top 10, revenue top 5, all of this obviously now includes TruBridge revenue in the base as well. Our vintage with top 10 and top 5 continues to remain very, very well. Sachin, back to you.

Yes. Thank you, Nithya. So again, just to round it off, you can see this. The business model continues to be solid. And I think in the process, we've built this really unique care enablement platform for the U.S. health care market that transcends the ambulatory in the acute setting and has the right optimized mix of global human-in-the-loop execution in an AI-first model that we are building based on proprietary data and proprietary models that we are creating based on our data and all that to bring to a relatively sticky customer base across both our traditional market of large physician groups as well as the rural and community hospital market. So on and all excited about where we are and look forward to everybody's questions.

[Operator Instructions] The first question is from the line of Ruchi Mukhija from ICICI Securities.

Congratulation [indiscernible] Two questions [indiscernible] you mentioned examination of TruBridge you see...

Ruchi, I'm sorry to interrupt, you're not coming through clearly.

Yes. So on TruBridge, when you called that -- the scope for margin improvement looks better. Could you help us what are the labor and the cost area we are thinking for margin improvement in TruBridge?

Yes. Obviously, so there's several areas. But I would say that there are areas within operating costs and obviously, there's been areas within the overhead cost, the SG&A. On operating costs, the 2 prime levers are to leverage our technology first human-in-the-loop model within their financial health customer base. As you know, that's nearly 2/3 of the TruBridge book. And one of the challenges and opportunities of TruBridge execution was that they were not necessarily being totally successful in optimizing the use of the global model and driving the technology intervention. So I think that continues to be the biggest area of opportunity across both traditional back office web cycle as well as medical coding related execution. And then, of course, as you know, TruBridge has very significant technology footprint. And so there continues to be opportunity to sort of rightsize and more than rightsize, right locate that technology investment in a manner where we can get more bang for the buck. So we don't intend to necessarily reduce the technology investments, but we will cost optimize how they are spent in a way that we can get more bang for the buck on that front. And then just purely on the SG&A, one, of course, with the public company expenses that are now already gone, but there's a whole bunch of other SG&A synergies that we are working through as well, as we integrate the 2 organizations holistically. There was obviously some redundancy in leadership, which is why of their top 5 executive leaders, 3 have actually made it into the integrated organization. So that -- and then there's redundancies like that in SG&A across several levels that have been channeled as well.

Got it. Second, on growth, organic growth. Now this is a third quarter where we are very early teens or very close to the industry growth versus our target to be ahead -- materially ahead of industry growth of 12%, so how should we think about organic growth going ahead? Now the base also becomes or for a few quarters the base was, I would say, high, so going forward, how should we think about the organic growth trajectory for IKS native business?

Yes. So like I said, I think I tried to lay that out in my original commentary. I think we continue to feel confident that we will drive better-than-industry growth in the legacy IKS book, which we have done consistently over the last 8 quarters of being a public company. Outside of that, as it relates to the legacy TruBridge book, I was saying earlier that this fiscal year is a year of integration and consolidation. So I would not model any significant net growth in the TruBridge book this year. We will -- as we go into FY '28, we're starting to expect some growth coming from the system of action within the TruBridge customer base. You saw the 3 features that we are rolling out first into the TruBridge customer base, integrating them into the EHR. There's obviously the traditional RCM offering that still has white space in the EHR installed base. So we'll start to see early signs of growth in the TruBridge customer base in FY '28. And then towards the end of FY '28, our ambition would be that, that $300 million book, of which $200 million is system of action and $100 million is a system of record, that $200 million starts to go towards industry-leading growth, right? So that same sort of in the rural market that 12% is maybe 10-odd percent. So somewhere in that 10% to 12% would be our ambition starting towards the end of FY '28 and then going into FY '29 and beyond. And again, on the EHR book, which is about the $100 million, we don't have an ambition of trying to grow that. That is the platinum mine that we continue to mine. And -- but once we rolled out the new integrated AI-first operating system, perhaps going into FY '29 and beyond, there might be some moderate growth in the EHR business. So those are the 3 ways to think about growth. Again, this is not a guidance, but this is an ambition that we think if we execute well, we should be able to achieve.

Next question is from the line of Mayank Babla from Carnelian Capital.

Congratulations on a good set of numbers and a successful integration of TruBridge to the team. My first question is towards Nithya. I'm not sure if you've given a split. If you have already earlier then apologies, but if you could give us a split between IKS and TruBridge for the quarter on the revenue front. So how much is from IKS and TruBridge in this INR 1,592.5 crores? And on the EBITDA front, if you could give us a split for the same.

The revenue, Sachin did talk about this earlier. So we had guided that TruBridge is at a run rate of $75 million for the full quarter. However, we have only 82 days this quarter, so that represents about $68 million in TruBridge. And the rest is, of course, from IKS and that represents a little more than 13% organic growth for IKS year-on-year. In terms of EBITDA, again, we came right alongside what we had guided, which is TruBridge's EBITDA run rate is at about $68 million for the year and that's what you will see proportionately reflected in the numbers as well. And IKS' underlying margins remains at very similar healthy levels as you saw in Q1 around the 34.5%, 35% mark. The EBITDA does have onetime integration expenses of INR 25 crores, which you should adjust for.

Okay. Got it. And second question is towards Sachin. Sachin, you did mention in the opening remarks about the transactional database and how you want to stack up the system of intelligence over that. So if you could just double-click on that and give us a little more detail on what you intend to do over here, please?

Yes. So I think the way to think about it -- that's a great question, I think, that's Mayank, appreciate it. So the best way to illustrate it is through an example. And I'll try not to get too technical, I'll keep it simple. So think about it, if there is an orthopedic injury that a patient has, right? And there is prior -- the orthopedist orders an MRI to investigate that orthopedic injury as a precursor to the surgery from the payer, what will happen is you have to apply for a prior auth from the insurance company to be able to do the MRI to make sure that they will actually pay for the MRI. Now what you'll do is, you will go to the rules in the payer prior auth and you will understand that the rules are that the payer says, you should have gone through 6 weeks of some conservative treatment before you go down a surgical intervention path. So they will not pay for the MRI unless there's been some conservative treatment. Conservative treatment is physical therapy. And so now the physician orders physical therapy, the patient starts the physical therapy, 8 weeks later, the pain still hasn't subsided, so you would think that 8 weeks later, if it says pain hasn't subsided, you -- the patient has gone through the therapy, you've got to a point where you are able to now apply for the prior auth for the MRI and get it successfully. Now the reality is all of these data points, some of them are lying in the EHR in disconnected encounters. Some would be available. A very simple pitfall could be that the patient did start physical therapy, but after 2 sessions, the patient fell off. They didn't go for the other physical therapy sessions. And the attendance tables for the physical therapy are not available in the EHR. And so if you've not built that AI the system of intelligence layer that truly interprets which all data sources to tap, to get a comprehensive view of what is needed as evidence to pass the payer's prior auth request, you might have a system that tries to take what's in the EHR, submit it thinking that it will get a highly confident authorization, but you'll actually get a rejection because the attendance log was not factored in. So this is a very simple example of the type of relationships that the system of intelligence builds for tasks like prior auth, which will never be available in the EHR or in just in the -- if you just built an agentic system of action. And it's those type of relationships between the data entities by task that are called knowledge graphs that bring the context and drive. So again, it comes back to the EHR captures what happens, what actually happened, the system of intelligence makes sense of it, interprets it and prioritize this what needs to do, what needs to happen and in the system of action actually orchestrates it. I don't know, hopefully, this illustrated better, Mayank.

No, that was amazing and insightful. Best of luck for the future. Great set of numbers.

Thank you.

Next question is from the line of from Motilal Oswal.

Yes. I just want to know what's the debt repayment trajectory on quarter-on-quarter and annually? As we stated that we want to reach to a December '25 in terms of so just can you share that road map, yes?

Sorry, [ Chirag ], you'll have to repeat it. You didn't come through clearly.

So I'm asking what is the debt repayment plan annually and quarterly, if you can throw some light on that part?

So what we have in the facility agreement is it's a 5-year loan. Interest payments, as I mentioned earlier, at the current prevailing interest rate levels are likely to be around $10 million per quarter. We have an 18-month moratorium on the principal repayment so that should start end of next calendar year. And the current interest rate at the existing leverage levels is SOFR plus 2.75%, which will slide down to support plus as my leverage comes down to 1.7x levels.

Okay. And second, you mentioned about performance link, I mean, to reach the target of INR 3,000 crores EBITDA. So from which quarter the impact is -- would be there in P&L?

Second half of this quarter. Second half of Q3 and maybe a disclosure will come out when the grant is actually approved.

Okay. And third question, in this integration of TruBridge, I mean, for about 82 days, just want to know what immediate synergy in terms of margin has played out since we took the charge of the entity?

So [ Chirag ], honestly, other than the removal of the public company cost that was actually already factored into the $68 million run rate, our ambition was to not touch anything for the first at least 3 months. So to be honest, our idea was, first, let's absorb. Now there might have been some nonmaterial synergies that have gotten realized as a result of some natural rationalization of staff that left in the SG&A side or in the operating side that might be slightly higher than anticipated, some reduction in costs associated with advisers that were being used, but nothing material has been realized yet. The bulk of the synergies lie ahead of us. That is design.

Should we expect that in Q3 and Q4, we see gradual improvement in that -- this acquired asset?

Absolutely, [ Chirag ]. Absolutely.

Okay. Okay. And the near-term it could be like ample cost rationalization, right?

Near-term figures will be around restructuring their operating model on the financial health RCM business to the right operating model of global execution plus the technology interventions that we have, the interventions on the medical coding side. And then obviously, as we integrate the 2 G&A organizations, there will be some synergies realized for that. So all those 3 vectors will start playing out second half of Q3 onwards.

Next question is from the line of Vibhor from Nuvama Equities.

Congrats for Sachin, Nithya and the team for a very successful integration and solid performance. So 2 questions from my side. On the growth part, Sachin, you mentioned that we should look at the growth as basically our legacy IKS business which are pulling out, to continue to grow at higher than the industry average. When industry grows at 12%, so we'll probably grow at 13% to 14% is what we can look at. And the TruBridge is used to be kind of flattish till, let's say, next year end, and thereafter, we'll probably try to pick up growth in that business. Is that the right way to look at it?

I think you're right on the legacy IKS business. On the TruBridge business, flattish till the end of this fiscal. Next fiscal onwards, start to see moderate growth and by the end of next fiscal and going into FY '29 get to a point where we are starting to hopefully drive industry-leading growth in that. In the system of action part of the book, not in the system of record. So remember, it's 1/3 system of record, 2/3 system of action. In the system of action book going into late FY '28, early FY '29 start to edge towards industry-leading growth there.

Got it. So in FY '29, we can probably expect the TruBridge business, though it will be very much integrated, TruBridge business to close to the legacy IKS business?

Yes, but only 2/3 of it. Because remember, 1/3 of it is -- and that we don't tend to that all the way even towards FY '30, maybe late FY '29.

Got it. Got it. Yes, I think that's very clear. Just 1 more question for Nithya. Nithya, if I just look at our numbers that we mentioned, $16 million of revenue from TruBridge in this quarter and around 34.5% EBITDA margins for the legacy IKS business. If that calculate the margin for the business in this quarter comes out to be around 17.5% EBITDA margins. And I'm talking about adjusted EBITDA, removing the ESOP costs. So how to look at this number? I think when we acquired, you were probably looking at 14% margins, it's already at 17.5%. Do we expect a gradual ramp-up in these margins going forward in the next coming quarters or it's going to be slightly long tailed and maybe flattish at these levels for the next few quarters and then probably come from this?

Actually, the number is even better.