MPS Limited (MPSLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the MPS Limited Q3 FY '22 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Arora, Chairman, CEO and Managing Director. Thank you, and over to you, sir.

Thank you. Good morning, everyone, from wintry New York. I hope everyone is staying positive and testing negative. As we all deal with yet another wave of the pandemic, let us hope that the opinions that this will now transition into an endemic play out that way. In our opening segment today, I will discuss our consolidated performance in Q3 FY '22. Then Robin Blakely, Chief Operating Officer at MPS North America, will update us on what's new and relevant at the educational practice. Next, Rajesh Jumani, Chief Revenue Officer, MPS Interactive, will discuss the key drivers to our strong recovery in our eLearning business. And finally, I will provide updates on the platform business before we open the call to questions. Let's get going. MPS has recorded robust EPS growth in Q3 FY '22. At INR 12.18 per share, we achieved over 23% growth in EPS against the same quarter last year. And while Q3 was modest in revenue, this was expected due to the continued decline in the HighWire business as we approach a consolidation phase in our Platform business. All other lines of business grew in Q3 and had excellent margins. Our eLearning business continues to build momentum and margins continue to expand due to the high operating leverage available. The educational practice continued its expansionary cycle, which began in FY '21 and led the growth in the Content Solutions business. I would now like to hand over to Robin to discuss this expansion in educational practice.

Thanks, Rahul. As Rahul noted, the education practice continues to enjoy a growth cycle. The first 2 quarters of this fiscal year has been very strong for the education practice and Q3 is following suit with revenue growth of 8% over the same quarter last year. While demand for print production is declining, it's being replaced with an aggressive trend of more digitally driven products, a higher value service. To take advantage of the surge, we're excited to be building out our education-focused India-based digital studio as part of MPS North America, which is set to launch with the new fiscal year. The team combines the expertise of our digital eLearning team and our education team to focus exclusively on the unique needs of our educational publishing partners. The pandemic has resulted in an increased commitment to accessibility, diversity and inclusion with our customers. We have a strong global accessibility team that has seen impressive growth over the last year. Additionally, our staff is undergoing diversity and inclusion certification and training by certified trainers. We continue to gain momentum with key K-12 customers with significant opportunities on the horizon with upcoming state adoptions, and we're seeing record growth in our higher education content development team. That growth is occurring in both our standard broad offering of subject matter expertise and a concentrated demand for allied health and nursing content, which has resulted in the addition of an allied health and nursing specialists to our team, who brings an extensive network of subject matter experts and client relationships. Our commitment to a global delivery model with strong day-to-day communication and knowledge transfer between onshore and offshore teams has enabled us to maintain a competitive advantage. Over to you, Jums, to discuss what's new and relevant in e-learning.

Thanks, Robin. FY '22 is turning to be a recovery year for our eLearning business, and we're confident FY '23 will be step-up for us. The recent growth is higher revenue across various lenses, including diversity of customers, profitability and most importantly, customer impact. All growth metrics are at unprecedented levels, including an order book and pipeline, which is 25% above the 3-year median. The eLearning market is looking very positive and moving in the right direction. Specifically, after COVID has hit us all, digitization of learning and training has gained more steam, and we've seen significant increases in L&D budgets across all verticals and all geographies that we operate. One obvious need for all companies today is virtual and digital onboarding of new hires. Employee retention will continue to be a big focus, and companies need more digital solutions for that too. To enhance learner engagement, experiential learning formats such as games, simulations, AR, VR, gamification, et cetera, are becoming more and more popular. We have leveraged our strength and competitive edge in this zone by creating a new technology offering called XR Optimus. XR Optimus will help organizations distribute and track their extended reality learning content in an easy, effective and efficient manner. We've seen increased demand and spending from our education customers to create high-quality instructional video-based content. Revenue from our education customers have grown by 200% in the current year. In the corporate space, we have acquired new marquee logos and significantly increased our revenues from existing customers. A great example is PepsiCo, which we were servicing in North America, and now we've become one of the key preferred partners for the EMESA region and are implementing large projects with them in South Africa, Europe and the Middle East. MPSi has also acquired several prominent logos in the APAC region, including one of the largest insurance companies in Australia. With reduced classroom interventions, leadership training has taken a setback. And our business simulation product, TOP SIM, helps bridge that gap to increase and create a pipeline of leaders in organizations by enabling simulated business environments and help learning by doing. That's all on the eLearning side. Back to you, Rahul.

Thanks, Jums. We are all elated with the progress in the eLearning business and are looking forward to a full year and seamless expansion in 2022 for all our eLearning business interests. Thanks, Robin, for sharing your valuable insights on how our educational business has shaped into its new scale and most importantly, is embracing digital in the next growth phase. Moving on to our Platform business. Platform revenue declined in Q3 compared to last year due to expected and continued customer off-boarding in HighWire as I described earlier. And while the absolute numbers reduced, margins were better than expected and ahead of last year. We expect this trend to continue into Q4 and for us to arrive at a more stable revenue base in Q1 of FY '23. Let us take a moment though to examine this from the overall perspective of our acquisition playbook. Our first step in our acquisition playbook is to acquire distressed businesses at distressed prices. Given that we expect the payback period for HighWire to be less than 3 years, and over 80% of the purchase price will be recovered by the end of this financial year, this is possibly our most successful acquisition since ADI acquired MPS. Our next step in any acquisition then is to stop the bleeding in the distressed asset as soon as possible. It used to take us a year or 18 months. With HighWire, we completed this during the diligence phase by insisting on certain closing conditions, and we were profitable from the first month itself. Our third step is to stabilize teams and client deliveries in any acquisition. This typically takes us 18 to 24 months. With a high proportion of newly setup teams working from home, we will be within this range, though we could have been even at the lower end of the spectrum without the pandemic constraints. Our fourth step in an acquisition is to achieve previous revenue peaks for the acquired assets by unlocking synergies with the other business units for core MPS customers. The typical time period for something like this is 36 to 48 months. Several growth initiatives are underway at HighWire, and we are hopeful that we'll be in the low end of this range. Our fifth and final step then is to grow the business to an unprecedented scale, which tends to happen from the fifth year onward. We will reassess this timeline and report back in our third year of the acquisition. And while our acquisition playbook will see some modifications from '22 onwards as we look to acquire healthier businesses rather than distressed assets, our latest acquisition of HighWire Press is on track to perfectly fit and exceed all milestones of the current version of our acquisition strategy. Let's now open the call to some questions that can help us be better at what we do.

[Operator Instructions] The first question is from the line of [ Rishitosh Garg ], an investor. Mr. [ Garg ], your line is unmuted. [Operator Instructions] Please unmute the line from your side and proceed. As there's no response, we take the next question from the line of Abhishek Jain from Arihant Capital.

I would like to know how -- do you believe now that HighWire on the platform side, the margins have bottomed out and are we going to see recovery from Q4 onwards?

Could you repeat your question and come across very clearly?

So on the Platform business, what exactly your outlook is there? Are we seeing a bottoming out of margin and revenue growth? And from next quarter onwards, or maybe we are going to see a recovery going forward?

Yes. So as I was explaining in the opening remarks -- thank you for the question. As I was explaining in the opening remarks, our -- the revenue decline will continue into Q4, and we expect the revenue to stabilize somewhat into Q1 of next financial year. As you'll see, our margins actually are expanding. We're now -- at an aggregate platform level, we are now operating at 35%. And we will be more satisfied with 40% to 45% type of margins for the Platform business.

[Operator Instructions] We take the question from the line of Abhishek Jain from Arihant Capital.

Sir, how you see next 2 years down the line, what will be the segment wise, if you can throw some light on this thing? And how the -- what is your outlook on education business?

Yes. So I'll cover this from 2 different lenses. One, based on our segment, which are Content, eLearning and Platforms. And the second piece, I'll cover more market in, which is how we are approaching the marketplace, which is corporate customers, educational customers and scholarly customers. So looking at the segment, I think we expect -- moving segment by segment, we expect the Content business to continue to grow at double digits over the next couple of years. In Q3 of this financial year, we've seen a bit of a slowdown because we have had 2 large customers on our journal side of our business, which is a highly profitable side of our business, delay the transition of certain volumes that will -- expected to come into us in Q1 and Q2 of next financial year. But despite that bump, we expect on the content side for us to grow in double digits for the next couple of years and especially, with the movement of this revenue in the near term, possibly even higher. On the eLearning side of our business, we do have a small base effect. So we are targeting anything between 15% and 20% growth for the next couple of years. And once we reach the old levels of the Tata Interactive Group as they were, we expect that growth to be more in the 10% to 12% range. So for the next 2 to 3 years, expecting 15% to 20% type of growth in eLearning and then to moderate after a 3-year period when it comes to organic growth. Of course, we are also looking at inorganic growth, but my -- all my commentary right now is more on the organic side. Moving on to the Platform business. We expect basically to have a stable FY '23. We will be in another new year for the HighWire acquisition. So the goal for us will be to maintain our level of scale. So we're not expecting much growth within the Platform segment for FY '23. But FY '24 and FY '25 onwards, we expect 10% to 15% type of growth on the platform side as well. So to summarize, again, across the segments, 10% to 15% growth in the content business, 15% to 20% growth in the eLearning business, and after FY '23, 10% to 15% growth in the Platform business. Now, looking at ourselves more market in versus segment out, we are basically working with 3 types of customers. On the education side, we've had a new -- we've achieved a new level of scale over the last 2.5 years. And we expect to continue that type of growth until we achieve a certain scale of revenue, and we have good visibility for the next couple of years. With respect to our corporate customers, again, because of the small base effect, we expect to be in the 15% to 20% range, simply because we are trying to build back the business that we acquired from the Tata Group. And finally, on the scholarly side of our business, while we expect revenue to grow at 7%, 8%, we expect margins to grow at a much higher clip because this is -- this business has the highest operating leverage. So that's how we see the visibility over the next 2 or 3 years. I hope that answers your question.

Sir, on the HighWire side, if you can throw some more light on this, what the -- we have done in last 2 years and how typically you see going forward, if you -- what will be the strategy to growth from next year onwards?

Yes. So I think again, like we've seen with past acquisitions, this tends to follow a cycle. So we acquired HighWire in July of 2020. We complete 2 years in July of 2022. So we're steadily approaching the 2-year mark. By this time, what our typical expectation is that the business is profitable, customers are happy, so that when we pursue new customers, we are able to reference existing customers. And then, after the 2-year period, we enter into a phase where our existing MPS customers start to consume the newly acquired businesses capabilities. So that's the next phase that we're expecting, that we will now have some of our core MPS customers who've been working with us for over 2 decades start to consume HighWire platforms and HighWire capabilities. And then, the next phase for us will be about how do we expand our reach into the overall market and increase our market share. In order to do that, there are -- obviously, there's a lot of marketing effort that's going in to revive the HighWire brand and to really use the HighWire brand as the umbrella brand for our Platform business. But most importantly, we are also looking to launch new products as well as refresh some existing products. To give you an example, we are looking at our entire submission, peer review and workflow cycle, and we are planning to launch a new product for that in 2022. And then, we are looking to refresh our offerings on the hosting side as well as the analytics side. So between new product development, mining MPS customers in the short term, as well as enhancing some of the existing product line to exceed market expectations, we expect that all these efforts will play out in terms of revenue in FY '24. Of course, there's a lot of activity already taking place. We are highly visible both in the form of our own branding and marketing exercises but also partnering with industry bodies and associations.

Sir, if you can throw some light on -- because as per our discussion earlier on the -- earlier, you said you were looking for an acquisition in the range of $10 million to $15 million. What kind of acquisitions you are looking at? And in which segment you are looking at?

Yes. So, so far, all my commentary was pure organic. So when I said -- when I was giving you all the numbers on growth, that was organic growth. It was not inorganic. On the inorganic side, on the acquisition side, we continue to be very active. And we're looking at, currently, opportunities in the eLearning space. We are looking at certain opportunities in the Platform space. But we are also -- and we're also looking at new opportunities in new verticals. So specifically, IT services as well as marketing communications. Those are 2 new opportunities that we've identified in terms of expansion of verticals. And so we're looking at opportunities there. And we're looking at -- we're looking to acquire businesses more in the range of upwards of $20 million in revenue. Of course, we are also getting opportunities sub $20 million. So we will absolutely not go below $10 million, but we will be more comfortable in looking at businesses that are more than $20 million in revenue. And the thinking behind that is fairly straightforward. Over the last 7, 8 years, what we've learned is that the effort that it takes to integrate a small company versus a medium-sized company is pretty much the same. So might as well go for the higher return. In terms of the quality of assets, we are modifying our acquisition playbook. We are hoping that we've achieved a certain level of scale now by acquiring the small, medium-sized companies that have been distressed and we've turned them around over a 5-year period. But we feel that in our next phase, we don't want to lose momentum and continue to achieve scale. So we're looking at healthier businesses, businesses that have some inherent financial strength, so not necessarily loss-making businesses, as well as businesses that have some inherent growth momentum versus businesses that are declining. So that is an edit in our acquisition playbook. But looking at both market adjacencies, looking at existing market scale development, and looking at businesses that are ideally above $20 million in revenue and have some inherent financial strength.

Sir, if no one else is there, can I have 1 or 2 questions more?

Why don't you go back in the queue and then you're probably going to turn back again.

The next question is from the line of [ CA Arun Maroti ], an individual investor.

Am I audible?

[ Maroti ], your line is unmuted. Please unmute the line from your side and proceed.

Yes. Am I audible?

Yes. Now we can hear you.

Yes, we can hear you.

Sir, I have a question related to the eLearning segment, sir. What is our vision down the line for this 3 to 5 years for this particular segment? We see that this is a very growing business and this can make the MPS a different entity in the future. So what is your thought about it?

Yes. And I'll request Rajesh Jumani also to -- who is the Chief Revenue Officer of this business to also come in and weigh in here, but I'll get us going. So from my perspective, the eLearning business is definitely the fastest-growing part of our business. We want to make sure that we continue to build on the momentum that we have. I think the big vision, from our perspective, is how do we take a business that is a project-based business? And how do we make it more recurring and predictable in its nature like we have with some other lines of business. So one key trend for us is going to be, instead of just looking at project-based and services-based revenue, how do we introduce products into our eLearning portfolio? We already have existing products like TOP SIM Jums touched upon, XR Optimus that recently won a gold medal at Brandon Hall, et cetera. So how do we increase our proportion of product revenue versus services revenue? So that's one key engine for recurring type of growth. The second piece for us is on the education side, how do we start working with educational institutions more directly in helping them create online learning programs versus having to go through an intermediary. That has been a tremendous focus point for us over the last couple of years, and we've seen some significant progress over the last 6 months with some of the new revenue coming from educational customers. And thirdly, when we look at our corporate customer base, rather than working with them on piecemeal projects, how do we take over their entire outsourcing on learning and development? So we're looking at more managed services. So I think, 3-pronged approach really. How do we create more product revenue? And what -- and how do we get there? Second piece, working with educational institutions more directly rather than working through intermediaries. And then finally, rather than looking at project-based revenue for eLearning, looking at more managed service programs like we have on the publishing side. We believe we've achieved this in other facets of our business. Our relationships run very deep. Tata Interactive was the first eLearning company to be founded in India. So there's a strong pedigree here. We believe we have the brand equity in the marketplace to be able to take that leap. And today, eLearning is less than 20% of our revenue. My expectation is as we grow, it's closer to 40% of our revenue over the next 5 years. Jums, please weigh in with your thoughts on the vision.

Sure. Rahul has covered most of the things. But the one thing I would add is, I mentioned this in my initial commentary as well. A lot of organizations and vertical -- industry verticals that was slightly lethargic adopting to eLearning have now forcefully had to get into it because the pandemic has forced everyone to look at digital as the way to move. Certainly, we're seeing a huge influx of money being flowed into L&D budgets that were slightly lower till last year. This also enables us to look at higher value experiential learning solutions. Rahul touched upon XR Optimus, but things like games and simulations and gamification, which are high value, more impactful, are becoming more and more popular in the space. So Rahul touched upon those 3-pronged approach, and I would add a fourth one and say, high value, high tech, emerging technology, products and solutions will help us go to the next level.

Okay. And one more question which is eLearning [indiscernible] whether we are planning to do something like royalty for that eLearning -- you said something about that you are looking for some IT businesses to acquire. So what is that thing? I would like to know that.

No, could you -- so is the question on royalties or -- I'm sorry, I didn't quite catch your whole question.

Yes. When an earlier speaker asked about the uses and that we have a good cash in hand in our book that's around [ INR 271 crores and after giving the INR 85 crores ] for the buyback. Also, we will have ample cash in our balance sheet. So when you talk about the acquisition, you said something that [indiscernible]. So I would like to know something more about that deal as to what you are looking for in that particular, whether it be eLearning or...

Got it. Got it. So I'll explain where this is coming from, and then just -- so I'll quickly touch upon the acquisition playbook really quick. So again, we're looking to acquire businesses in excess of $20 million in revenue. So that's a big change. We're looking at the eLearning business segment as a strong segment within that, as well as looking at the Platform segment. So those are sort of the subsegments within which we are looking at acquisitions. Additionally, we are looking at 2 new verticals. One is marketing communications, which is a spin-off from our eLearning business. And the other is IT services, which is a spin-off from the Platform business. Now, the reason we're looking at IT services specifically is because we are seeing a surge in demand from some of our existing customers as they deal with the great resignation and also issues with technical talent for them to outsource activities related to IT services from their businesses. So currently, we service over 500 customers, and we are seeing an increase in such trend. We believe that we should not mix this up with our Platform business because the product-based business is structured in a certain way and works in a certain way. So to address this need, we are currently exploring the possibility of setting up a new IT services business that can service this problem that our customers are facing. So we believe it is a significant problem. We believe it will continue to exist. And given the diversity in footprint that we have, we are operating across 7 cities in India, 3 in Europe, 5 in the U.S., we believe that we can take advantage of that diversity, and then, possibly set up this new vertical. But again, in order for this to be meaningful, we will probably address this as a starting point through an acquisition rather than just trying to set it up slowly and organically.

Okay, sir. That really helps. And could you say something about the timeline that you are looking for, probably at this time we need to close the addition of the company involved?

So I think timelines, of course, have to be worked across us and the potential seller. It has to be matching of both minds. So from our perspective, we are active. We have a very efficient corporate development team. We have more than a dozen conversations that are in progress right now. And the run rate that we've had used to be about one acquisition a year, and we like to sustain that run rate. Our last acquisition was in 2020, which was of HighWire Press. The one before that was Tata Interactive, it was 2018. So we would be very interested in getting something done in 2022 just given the fact that we are behind our run rate of one acquisition a year.

The next question is from the line of [ Rishikesh Kale ], an investor.

Yes. Earlier, like 4, 5 years back before we started the acquisition process, our operating margins have touched up to 35%. Since you have mentioned a lot of operating leverage and right now, it's around 29%, do you think that we would someday, in the near future, touch that 35% benchmark of operating margins?

Absolutely. And I think that's really -- we've been moving steadily towards that goal. What typically held us back is some one business unit or some one business line has faltered and then suddenly, we are not able to achieve that goal. But now that all 3 lines of business, Content, eLearning and Platforms, are moving in harmony in terms of operating margin, we are hopeful that either in FY '22 or latest by FY '24, we're able to achieve that goal again.

Okay. Sure. So we could look at around 12% growth rate for next year, a bit near 35% approaching operating margins?

Yes. So what I would suggest is Content would be somewhere around 10% to 12%. eLearning would be around 15% to 20%. But for FY '23 Platform is probably going to be flattish because we're trying to revive the HighWire business. And then from FY '24 onwards, you can expect HighWire also to be between 10% and 15%.

[Operator Instructions] The next question is from the line of Naveen Bothra from Subh Labh Research.

Yes. My question is regarding in the earlier couple of calls, you talked about nonstrategic properties monetization, couple of more properties...

Sir, I'm sorry to interrupt, your voice is breaking. So may we request you to come in the coverage area, please?

Yes. I think the question was on nonstrategic properties. Could you just complete your question and I can answer?

Yes. Nonstrategic property monetization, if you can throw some more light on.

Sure. So we do have -- MPS does own real estate in Bangalore. We have a property on Brigade Road. We also have excess square footage available with us on Residency Road in Bangalore. We are in the market for monetizing those properties, so any leads are most welcome. So we do not have any active interest in those properties as we speak, but we are working with some professional services firms to help us out. In addition to that, that properties that we own, we are reducing, over a period of time, our -- I know this is not the question, but I'm just bringing up a sort of a loose related topic. We are looking to reduce our onshore on non-India based footprint in terms of square footage. So we can see some G&A cost reducing from next year onward, as well as we are reducing our square footage -- rented square footage footprint in FY '23 as well. So we do not expect, post-pandemic, 100% of our employees to come back into offices. We expect a much lesser ratio, possibly 70% working from office, 30%. And of course, these are average numbers. In some cities, they may be more exaggerated. Cities like Mumbai, for example, where things are more congested and the commute times are much greater. So yes. So on the nonstrategic properties in Bangalore, looking to divest. Any leads are welcome. And on the rented square footage, we are looking to drastically reduce whatever we do have over the next couple of years starting FY '23.

Okay. And another question about the capital allocation policy. Overall, even after the buyback, we will be having healthy cash flow. And this year and next year we will be generating good cash also. So there will be inorganic acquisition -- shareholders like buyback or dividend. I would like to know about, say 50 or whatever ratio might be and the ROE and all these things, calculation. So if you can throw more light on the capital allocation policy. Because whenever we interact with these employees and all these things. I don't think buyback, if you can throw more light on the dividend side [indiscernible].

Yes, I think if you observe the last 3 years, we've had a fairly generous redistribution policy. We had a big dividend in our 50th year, which was marking our 50th year anniversary. After that, we had a buyback that was oversubscribed by 5x, and we're now in our second buyback. So I think, from the way we look at this is from an inorganic perspective, I already laid out the parameters. We're looking at businesses upwards of $20 million in revenue. We are no longer looking at declining or distressed businesses. So they will require a certain amount of capital. So our first sort of variable that we look at is how do we reinvest in the business and how do we grow the business. And then, once we've concluded that, we then, as a Board, will assess what is the amount that we want to distribute. We have a strong track record that speaks for itself. We expect to maintain that track record and whatever excess cash available in the business is going to be redistributed. Now, dividend versus buyback, that's something that will be discussed at the Board level at an appropriate time and venue. But really, we will be looking to basically redistribute profits in the most efficient way possible for our shareholders.

Okay. Taking on some year onwards if you want to set up an IT services division through [indiscernible] most probably. So this will require quite a good sum of [indiscernible]. So are we taking some measures for this type of acquisition? Because IT services business will be quite high these days. What are your thought about the [indiscernible] own money versus the some bad pricing for the acquisitions come in the IT service set up, which you want to set up?

Yes. So like I said, we're looking at 3 types of acquisitions. Acquisitions in the existing business, eLearning and Platforms, acquisition in marketing communications and acquisitions on the IT services. It all depends on what lines up most efficiently and depending on what -- where we see the highest amount of growth possible. We will approach that particular path. And from an investment standpoint, we believe that the business has sufficient cash for us to deploy in terms of any land. Really, IT services is very capital light. We are looking to approach it through, like I said, inorganic routes for an acquisition, not necessarily setting up facilities. So yes, we don't expect any additional capital raising requirement at this point in time. Of course, if a meaty acquisition presents itself, we're open to looking at options. We have a very strong balance sheet.

The next question is from the line of Sachit Motwani from Param Capital.

Am I audible?

Yes, Sachit.

Rahul, first question is what has changed in terms of Platform business? Because I think, until about last or last quarter, we were like 2 quarters back, we were like Platform business should stabilize by this year end itself, financial year '22 and then FY '23 should be a growth year. So anything in particular that has happened, particularly in the HighWire business? So if you can elaborate on that. I believe, HighWire, when you acquired, it was somewhere around $14 million, $15 million revenue. So at what level do you think that will bottom out? Third question is on the eLearning front. You mentioned that the order book of your eLearning business is 25% more than the 3-year median order book. So can you throw some qualitative color on that order book? What kind of deals -- like what kind of deal sizes typically are there? Yes, these will be my...

Okay. So Sachit, I'll answer the first 2 questions. And then again, I'll bring Jums, who's the Chief Revenue Officer of our eLearning business, to answer more on the qualitative aspect of where is our order book and how is our order book suddenly growing on the eLearning side. So on the Platform business, nothing has changed. I think what has happened is we acquired a business that had a run rate of $16 million. And between -- within the first 6 months, that business has contracted to a run rate of $11 million, and I'm talking more annualized revenue. And of course, our first step is to make sure that the $11 million that we do have is stable. And the next step would be to grow the $11 million back to the $16 million. So basically, that's what we're dealing with here. And all the customers that had to exit have informed us. But typically, it takes 12 to 18 months for a customer to exit, and that's what's playing out here, that with every quarter, customers are off-boarding. And we expect that all the off-boarding to be complete by the end of next quarter. And then when we project that out for next year, we are not seeing a recovery and some growth entirely. And because of that, because the base has the customers that have left. So the guidance is more specifically for FY '23, which is flattish. In my view, it will be an achievement given that we've lost so much revenue.

Okay. Okay. Understood. And -- so $11 million is the minimum fees, right?

Yes, $11 million -- yes, again, I'm being very conservative in my estimation of the $11 million, yes.

Understood. Yes, the second -- the other question on the eLearning business?

Yes. Over to you, Jums.

Thank you, Rahul. A great question. I think one of the things we're obviously seeing is that the deal sizes are much larger now where companies are willing to commit larger numbers. I mentioned this earlier also that L&D budgets are growing. And a lot of people who thought this was good to have, now understanding that this is a must have. So the deal sizes are growing. What we're also seeing is from a project-based business, this is getting into a lot of customers are moving into annuity contracts with us, where they're willing to come at much larger numbers, defining rate cards at the beginning of the year and showing us volumes for the entire year, which obviously is becoming larger deals for us again in the corporate space. One quick thing I touched upon in my commentary on the education side. Historically, we've seen the education business is always much larger because that's a business where education institutes then get money from the students. So they are happy to spend, initially, on much larger deals. The education business has grown and is growing faster than previous years. We're currently at 200% growth in the current year from the last year, and that continues to be the trend moving forward. So some of these factors have suddenly helped us look at this business in a much more positive way. And like I said, the spends have continued to grow in the future.

One more point I'd like to add, Sachit, is that the concentration of revenue has also reduced in the business. For a moment, there -- suddenly, our top 10 accounts were -- in the eLearning business, were at 70%, which is -- it is not a good sign. You normally want it to be less than 50% or somewhere around 50%. So we're back there. We're back in that sweet spot again. So I think, also that the other thing that's playing out is that the big concentration we had on the eLearning side with a few customers, that's become more diversified as we onboarded some of the new logos that Jums described.

Also, one more question was on the decline in the employee cost. When we look at other IT companies, services or products, we see a rising employee costs, here we are seeing a decline. So was it again driven by your Platforms in HighWire business, so that's where the margin jump is very significant?

Yes. I think so. So I would say, bulk of that is HighWire because you basically have a country-based weight arbitrage that's taking place. Most of the resources were in the U.S. and U.K., nowadays, the engineering resources are now based in India. So a large chunk of it is that. But also within the balance, even though it appears to be a smaller number for us, it's a lever that we believe that we uniquely possess is a combination of 2 things. One, we take on projects every year to automate parts of our workflow and to reduce the manual touch points in our workflow. This past year, we've seen some of those benefits to be more exaggerated than -- typically because these are projects that were launched 2 or 3 years ago, and suddenly, the tools are giving a great automation yield. So that's one lever. The second is, fortunately, we are structured in a very unique way that within India, we're spread across 7 cities. So there's a lot of arbitrage play within India itself that we possess. And that's why we're different, sort of uniquely positioned because most companies of our size, our scale, both in terms of revenue as well as in terms of headcount, would tend to be into maximum 3 cities in India. And of course, while we are in this position because we've grown through acquisitions, we sustained it because we believe it to be a long-term competitive advantage, which is now playing out during this massive talent war that's taking place right now in the marketplace.

Okay. Okay. Got it. But in certain verticals like eLearning and all, you also invest a lot in like SNM as well as employee addition. So these costs will come back, right, eventually, like as scale grew?

Yes. So -- Again, so arbitrage, we saw an arbitrage opportunity as we were seeing churn in cities like Mumbai, where the wage costs are much higher. We've backfilled a lot of those positions in cities like Chennai, Dehradun and Noida. So we've taken advantage of the situation and improved the overall leverage available and operating leverage available in the business by basically creating a tiered resource base that unlocks the arbitrage opportunity available because of the diversity that we have. So if anything, margins will continue to improve, not decline because our proportion of resources based in lower-cost cities like Dehradun and Chennai will only increase.

The next question is from the line of Gaurav, an Investor.

Am I inaudible? Sir, my question is regarding the client iteration. I see -- if I see your presentation, there is no client addition. Is it more of a HighWire effect or what it is? And second question is if you are projecting 15% to 20% growth, is it due to -- it will come from cross selling or we will add more clients? That's my question.

Yes. So yes, I think on the client side, what is happening is we have certain lines of business like HighWire where customers are exiting and other lines of business like MPS Interactive and our eLearning business, where customers are entering. So that's why we're not seeing any big movement there. Because of that, we're ending up in the same 600 level. But overall, for a company of our size, having a customer base of over 600 customers, we're very satisfied with that level. Our customer concentration, also, if you look at it, has -- is now -- our top 5 is 35%. That -- and our top 10 is 48%. It used to be -- our top 10, 5 years ago, used to be 90%. So we're very satisfied with our total level of customer base as well as how our revenue is concentrated with less customers -- spread across customers. In terms of the 15%, 20% growth, that was specifically my guidance and direction for the eLearning vertical, not for the business as a whole. And in the eLearning vertical, we expect about 70% to 75% of our growth to come from existing customers and the balance to come from new logos.

The next question is from the line of Rahul Jain from Dolat Capital.

I just have a couple of questions. Firstly, on the eLearning business, how you would rate -- you have articulated that 5-year acquisition thought process, so how -- what are the hits and miss you would have said on the 5-year journey for your eLearning or TIS acquisition?

Good question, Rahul. So I think basically, we were steadily progressing on the Tata Interactive Systems -- the group acquisition in terms of a 5-year playbook, we were making steady progress. But in March 2020, we hit a big road block, which was unlike a lot of our competitors, our eLearning business actually started to decline at 20%, 30%. And the primary reason for that was we had a very high customer concentration risk, which ended up playing out because we had at least 4 out of our top 10 customers whose own businesses were affected by the pandemic. These were energy companies, a cruise line company and aviation company, basically the businesses that suffered during the pandemic. And because they were suffering as businesses, we ended up suffering as well. Even though we were adding new customers, the loss of customers were so significant. The loss of business with these customers were significant, it took us all of 2020 to really recover that. So the way I look at it, I think the 2020, 2021, FY '21 really was an aberration. We -- but on a 5-year basis, we are back on track. And FY '22, which is the current financial year, is a recovery year where we will see an expansion of margins as well as reasonable revenue growth. And then next year, we will start to see significant revenue expansion and margin expansion. So I would say, on average, on the 5-year timeline, we are still par for the course despite the bump we had in the middle -- in 2021 -- 2020, 2021 because of that huge customer concentration risk that played out the way it shouldn't have played out. So we put that behind us. We are very happy with how our revenue is now more diversified. We're seeing new customers come in. And also, we are seeing some of those businesses that we were working with for 20, 30 years, their business is also bouncing back. And we actually -- in the run rate that you are seeing, there's not much revenue from those customers. So we're hopeful that next financial year, some of those customers will also start to wake up.

Okay. Okay. Sir, secondly, from the IT services kind of an acquisition target. So my question is, of course, it's a related business. It's more like an agency. But if you want to step into a new area, why you would like to go into a business, which on a very sustainable basis, cannot deliver more than 10%, 12% growth, forget about this 1- or 2-year kind of an optimism that most of us have. Why not getting into a more new area if you want to step into a new territory completely? Any thoughts on that?

So I'm not -- Rahul, I'm not thinking of this as a new territory. And the reason for that is there is an active -- one of the things that we are very proud about is that we approach our customers, and we solve -- all our acquisitions have also been problems that we've solved for our customers. So our 3 U.S.-based acquisitions have been between 2013 and '15, we were actively solving for a customer problem, which was that they wanted to work with global suppliers that have U.S. operations and India operations. What we are seeing with our current base of 600 customers, we are seeing that they are facing a problem that is not -- that the CTOs of their companies do not believe is going to go away. It's going to be a perennial problem for them. They want to work with partners that they can trust and have relationships built with them. Some of our relationships go back 3 decades. So it's really about working backwards from a customer problem and which has been defined to us as a significant problem and less about trying to create a new market. It's more about trying to create a new capability that can service our existing customer base and an existing customer problem. Having said that, this is only one of the avenues of growth that we're exploring. And one of the other strategic areas that we're looking at, as I was describing to the gentleman earlier who asked this question, was how can we get into some higher value opportunities such as marketing. Through our e-learning business, we are supporting some of the world's largest FMCG companies, as well as some of the world's largest conglomerates in the sales training as well as in the marketing communications already. So we have a very good starting point. Looking at -- Jums was talking about expanding learning and development budgets. Marketing budgets are, of course, a multiple of that. So we are also looking at adjacent opportunities that are higher value in nature. My comment on IT services was just about solving a customer problem that is being presented to us by our customer base of 600 customers.

Okay. That's helpful. And finally, on the Content side. I mean, I appreciate your optimism, but given the past, what gives you that significant comfort that you could guide us for a 10% to 15% kind of a growth on a sustainable basis in that business? What is driving that confidence?

Yes, I think -- yes. So I can -- that's a good question. I can definitely answer that. What we're seeing is the last 2 years, whatever growth we've seen in our Content business has pretty much come from the educational customer base. So if our Content business has 3 types of customers: educational publishers, that's K-12 and higher ed; we have academic and STM publishers; and we have professional publishers as well. So those are 3 types of customers that we have in publishing or any growth that we've seen in the past 2 years has come from the educational business line. The academic and STM business line has not grown, in some cases, in fact, declined and same for the professional side. We expect the educational line of our business to continue to [indiscernible]. As Robin was discussing in the opening remarks, a lot of that is going to be digital based, which is also a higher-margin play. So we expect that momentum to continue. What is giving us confidence is 2 things. One, on the journal side of our business, which is academic and STM. We have 1 existing customer, which is one of the world's largest STM publishers, that has confirmed a significant expansion with us over the next 2 years. So we're expecting that expansion to play out, and that is a European-based STM publisher. We also have another existing customer that is a U.S.-based academic publisher that has also confirmed to us a significant expansion plan over the next 12 to 18 months. And these are not -- in the journals business, you can, in fact, predict volume to a 95% confidence interval, unlike education eLearning businesses where you have to build up the order book every quarter. So based on the visibility that these customers have shared, we are getting the confidence, and these are large volumes, large contracts. And another reason, of course, is we are also seeing a lot of content conversion as well as accessibility solutions request from the HighWire customer base, which is, again, more academic and STM. So really, what's giving us the confidence is 1/3 of -- about 40% of our Content business was growing, rest was not growing. And despite that, we were growing at -- we've been growing at 10%, 11%. And now that all 3 lines are beginning to roll, we believe that, that will only lead to a compounded effect, and that's why that's giving us confidence.

Okay. Okay. So it's backed by orders. So that's the color I want.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Rahul Arora for closing comments.

Thank you, everyone, for all your wonderful questions. This always gives us, the senior management team the opportunity to introspect and also to get feedback on how we're doing. So again, a warm thank you to everybody for all your thoughtful questions and look forward to participating in these calls going forward as well. And again, I hope everyone is staying positive and staying healthy and testing negative. Hopefully, this last wave is the last wave, and we can get back to a normal life during the year. Thank you so much.

Thank you very much, sir. Ladies and gentlemen, on behalf of MPS Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.