NIIT Limited (500304) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the NIIT Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is recorded. I now hand the conference over to Mr. Vijay Thadani, Vice Chairman and Managing Director of NIIT Limited. Thank you, and over to you, sir.

Thank you. Good afternoon. Actually, good evening, and welcome to NIIT Limited Quarter 1 FY '27 Earnings Call. As usual, thank you for your interest in NIIT Limited as well as the time that you're spending today with us amongst in the middle of diresult season. And for joining the call and giving us your support and suggestions. Today's agenda is to discuss with you the quarter 1 FY '27 performance highlights. Second, what is shaping FY '27 and the actions that we are taking our priorities and outlook. I'm happy to share that you share with you as a start we are starting off FY '27 on a strong note, definitely stronger than the same period last year. And I think it is increasingly becoming stronger as we go forward with both enterprise as well as consumer go-to-market engines showing growth in quarter 1. While technology continued to grow well from AL and investments in skilling, we also have growth from banking, financial services and others. Order intake continued to remain strong, indicating our investments in the new AI programs as well as our go-to-market initiatives. On the profitability front, our EBITDA is moving in the right direction with our operating costs growing slower than our revenue. Just to remind that certain parts of the business, business have been in an investment cycle. And in quarter 1, those investments are normally higher than other quarters. With that, I'll hand you over to Pankaj, Datar, our CEO, to take you through the quarter 1 performance in detail, and then we'll open it up for a question marks.

Thank you, Jay, and good afternoon, everyone. I will cover the Q1 performance first with revenue, order intake and business trends and then step back to talk about our priorities for the rest of FY '27. Do note that our business has seasonality. So we look at year-on-year trends rather than quarter-on-quarter. Revenue for Q1 FY '21 came at INR 957 million which is up 14% year-on-year. is that Enterprise revenue was at INR 618 million which is up 8% year-on-year. This was driven by enterprise tech training which grew 16% year-on-year to INR 498 million, which was as an outcome of our strategy focus on upskilling and reskilling as well so roads, even as pressure onboarding and training remains volatile. On the consumer side, the consumer revenue was at INR 339 million, which was up 27% year-on-year. Within that, consumer tech continued to see momentum, growing 15% year-on-year to INR 182 million. Our direct to college strategy is creating a pipeline of job-ready talent with university clients are increasingly value. The recovery that we see in consumer business from BFSI and others in Q4 saw a further pickup in volumes in Q1 as pressure having picked up pace at partner banks. The strong growth in the consumer business has led to a shift in the enterprise to consumer revenue mix from 68 to 32 in the same period last year to 65 to 25% in Q1 this year. Used from a product lens, technology continued to grow well, stocking revenue of INR 680 million, up 16% year-on-year. Revenue from BFSI and other programs was at INR 277 million, which is up 9% year-on-year, driven by strong pressure hiring, even as lateral training continued to be under pressure. Order intake in Q1 was at INR 953 million. I'll now invite Sanjeev, our Chief Financial Officer, to provide an update on the financials. Over to you, sir.

Thanks, Markus. I will take you through the financial results. EBITDA for Q1 was negative at INR 14 million. This is a significant improvement from the negative INR 63 million in Q1 of last year. This is driven by improved productivity and operating leverage, while we continue to invest in GTM capacity and new AI offers. As Vijay mentioned in his opening remarks, while our new top line grew by our operating expenses grew 7%, putting us back on the path to positive EBITDA margin. Below EBITDA, depreciation was at INR 26 million. Net other income was $180 million. This is primarily comprising of treasury income of INR 175 million and other miscaneous income of INR 24 million. That is offset by net finance cost of INR 3 million, and there are some exceptional expenses of INR15 million, primarily because of the legacy tax matter that has now been concluded in NITs, and some part of the cost is putting into the scheme of arrangement for amalgamation of RPS and IFP into NIIT Limited. This resulted in a part of the quarter, which is up 85% Y-o-Y and EPS of INR 60, that is up 84% on Y-o-Y basis. Now coming to balance sheet and cash flows. Cash and cash equivalents remained strong at INR 7,231 million, underpinning our ability to invest through the cycle. CapEx was INR 68 million for the quarter, we are past the peak on capital investment in platform in the current investment cycle, and we expect capital expenditure to moderate from me. DSOs at 53 days in Q1, which is same as last quarter. An account at the end of Q1 was INR 866 million, which is 65% on a Q-on-Q basis and 19 number of people on Y-o-Y basis. Now back to Pankaj.

Thank you, Sanjeev. Let me talk about what we are doing right now and through the rest of FY '27. We will be accelerating what is working, right? On the tech trading front, AI and new logos is working. We are continuing to scale AI programs and workflow offerings, which showed strong growth in FY '26, and that's where we see demand signals being the healthiest. We are continuing to expand coverage of GCC and India enterprise companies. and positioning reskilling around role evolution, particularly AI-enabled roll redesign through outcome-led programs. On the BFSI side, we have been recovering, that's the plan. Our strategy of diversifying beyond the top 4 private banks to a broader set of financial service players, including NBFCs and insurance companies, it's progressing well. In Q1 FY '27, NIIT moved beyond its banking anchor to activate 4 new solution lines across insurance, NBFC wells and GenAI. These are live commercial engagements with more than 15 clients outside of traditional bank induction kind of programs, which is generating new revenue for us. As we accelerate this transformation, we hope to further reduce concentration risk and drive growth through the cycles. In terms of the road ahead, our investment thesis is showing up in new logos, digital engagement, order intake and a pipeline that's been -- we are seeing improved consumption of our differentiated out-oriented offerings across the technology landscape with working professionals and job seekers, both contributing to growth. In BFSI, the picture is 2 speed right now. Onboarding demand showing early signs of recovery, while upskilling and LN budgets at large private banks remain constrained. We are positioned to capture the onboarding recovery and are actively broadening the customer base and shipping with Olam mix to be less dependent on LME cycles of any individual customer. With merger of RPS consulting an ISBI into NIIT, we have strengthened our offerings to address the reskilling and retooling agenda including deep transformative programs for the existing talent, the AI opportunity. AI represents 1 of the most significant demand opportunities in front of us, and it is happening now, not at some point in the future. AI is now embedded across a larger share of our portfolio and revenue from AI programs has grown 9% of total revenue. Our OI story is becoming sharply defined and nowhere is this more visible than in our work with GSIs and GCCs. AI augmented engineering teams are already running 40% to 70% smaller than the conventional equivalents, 1 engagement we are aware of compressed a planned 150% team down to 42. Across GSIs broadly, analysis suggests that more than half of current task content rolls displacement over the next 36 months in ways that have already begun. GSIs and GCCs are positioning themselves as the change agents or their clients' AI transformation. The transformation they are driving externally will need to be mirrored internally. A number of current roles are becoming redundant and must transition into new AI era wells, and that creates a 3-part talent opportunity for us. Reskilling existing employees whose roles are evolving, retooling staff displayed by productivity gains into new AI LR roles and onboarding new early career talent into roles that require accelerated outcome-based programs rather than traditional induction. In-house LND teams will struggle to scale at the pace this transformation demand and the existing response internal AI academies built around cost completion and certification is structurally inadequate. Training is moving from skilling capability orchestration. Completion rates not to judgment under uncertainty, AI output verification or agent workflow design. That is precisely the opportunity for NIIT. During the quarter, we deepened our AI curriculum with the launch of training programs for forward-deployed engineers, site reliability engineers, AI auditors and also the AI prism. These complement our established offerings in AI engineering and agency AI. And together, they address the full life cycle of enterprise AI adoption, building, deploying, operating and governing AI solutions at scale. What distinguishes these programs is the design philosophy, applied, use case led, learning journeys built around higher value, AI-augmented roles that enterprises are actively hiring and upskilling for. Beyond broad AI fluency and GenAI capability building, we are now winning specific need-based client engagements covering AI economics, CapEx planning, token optimization and AI audit areas where the demand signal is sharp and client willingness to invest is high. Our structurally similar dynamic is playing out across BFSI and India enterprise companies, and our AI programs are well positioned to serve that opportunity. On the early career side, I directly addresses the onboarding opportunities. Through its university partnerships and comes to corporate Bridge and new enables early career talent to take on roles that previously required years of experience. Our synthetic work platform and the architect on gladuation product, our purpose built for exactly this transition. Let me quickly take you through the guidance for Q2 FY '27. We expect double-digit revenue growth year-on-year in Q2 FY '27. On margins, we expect breakeven even at -- we expect near breakeven at the EBITDA level in positioning us for positive margins in the second half of the year. We expect stronger revenue growth, improving margins and continued order intake momentum for FY '27 as compared to FY '26. Medium to long term, the structural opportunity in skilling remains substantial, and we are fully committed to our strategic objectives. With that, Vijay, I hand it back to you.

Thank you, Pankaj. Just summarizing, we have started the FY '27 with a robust growth, strong order books, broader customer base and a clear sense of what and where remains. We are responding to the areas of pressure by widening the demand base, accelerating the parts of the portfolio that are working specialty technology and AI and maintaining cost discipline by continuing targeted investments. Our investment cycle continues. However, our focus has more become on AI programs and usage of AI in every program that we have serving our customers with. What gives us confidence is that the portfolio is becoming more resilient, strengthening of our product portfolio for working professionals, rollout of new AI programs, go-to-market expansion and the annual initiative are all showing early results. We remain confident of the longer-term structural growth opportunity and are committed to making the investments needed to capture that opportunity. So in order to -- in addition to investing in new programs and stronger go-to-market initiatives, we continue to follow a disciplined approach to evaluating inorganic opportunities. that enhance capabilities, channels and/or intellectual property and which offer a clear path to return and cash payback. So I want to pause here and open this line for questions, and then we can take the discussion for Operator?

[Operator Instructions] We have the first question from the line of Harsha from Private Limited.

All right. So my first question is basically, in the presentation, you highlighted that I led programs now contribute about 9% of overall revenue. Given that enterprise clients are compressing the traditional team sizes, how are pricing realizations and ARPU trending for AI-led capability building compared to legacy IT training. .

I mean you said first question. So is there another question that you could ask Yes, there are a few more questions I have. The direction you're hinting at is true. I like training does have a higher realized bank traditional training. But batch sizes will tend to be smaller for AI training than the more training especially for some of the advanced concepts like Agentic AI, et cetera, there is a going in retirement knowing how to go going Python, so those centric criteria need to be met -- so the average realization will be higher, but typically, batch sizes would end up being a little smaller.

Okay. My next question is, so consumer posted a robust growth of 27% year-over-year, even though your total enrollment saw a quarter-over-quarter dip by around 150,000. Could you provide some color on the split between early career and GoPro learners this quarter?

So we used to track early career workflow that those lines have become so fuzzy that -- but when we are talking of consumers, consumers also have work mining them. So we are not at this point of time breaking that sufficient to say that the early career part if we were to take IMOs offerings. For example, they service a large number of universities and those in the early career part of the business. And I think that part has done well. And overall, the mix in early the year increasing but not at the level at which we would have expected given that the hiring is very, very muted.

So just a follow-up on that. As we have seen that top 5 IT services firms continue to curtail their fresher hiring. So within consumer has growth primarily being driven by preworking professionals that are upscaling in AI? And also, I just wanted to know how StackRoute and TPaaS are performing in this environment?

Sorry, I heard the first part, which I'll answer the second part, I'll ask you to repeat, if you don't mind. So there is -- so there is a -- now let me pass us some divide early career in our 1 is pressure and the other is 2 to 4 years experience. . Early career actually includes the 2 to 3 years' experience or not for yes, 2 to 3 has experienced. I think that segment because people are reskilling themselves like our Agentic AI programs. For example, the pool for goes is higher because the current people who have been hired are working and organizations need to reskill themselves very quickly to retain their jobs and be to find growth opportunities. So I think that's where the real push is. The pressure is largely driven by the onboarding requirement of corporates, which has not ante -- but there are -- when we look at IT hiring, we look at the top 10 or top 20 IT services companies but there are a large number of start-ups and other companies, which are also in the high and GCCs, where the numbers are not individually at very large level, but there are a very large number of companies. So I think there is a momentum, which is peanut.

Okay. All right, my second part of this question was actually, I just wanted to know how StackRoute and TPaaS are performing in this environment?

Okay. I think as maybe Pankaj would like to talk about all those terminologies have now got changed after we merge RPS and IBI into NIIT. So he is now giving you numbers are still the same, but I think that the businesses have got combined, simplified, and I think that's also reflective in how we have managed our costs. But maybe Pantes, you will talk about bps.

Yes. So we've combined RPS and the acute entities, and we call that enterprise technology learning solutions. And that is the enterprise tech.

We are both housed under tent, and therefore, you don't have those available separate. So .

And we've actually integrated those things. So it's not that we can separate out either. It's actually integrated into 1 team. But to answer your question on how they're performing in this environment, they are performing very well. We are seeing robust growth on the tax numbers that I spoke of as enterprise tech is actually those 2 teams combined together and a few other annual contributions. But that's the number. So that see well. And the other side is where we've combined our banking, TPaaS and service and excellence training all that into BFSI and industry performance solutions. So IPS as acronym. That has also performed well in this quarter. So both these significant components of our business have performed well in the quarter back.

Okay. I just have a very qualitative question. I just wanted to shoot it. So I've been noticing with the advent, so there's an advent of a lot of IIT and IIM offerings with respect to online certification BD program, especially in this AI agent applications, FDE, et cetera. So how do we position ourselves in this environment? And what are we doing to create like an edge in terms of program structure or like an implementation point of view with this upcoming courses and programs from so many different educational institutions within the country and also outside, especially targeted to working professionals?

I will just give me 1 second to pull together exactly what we asked for. So you are right, there is a lot of different programs that are coming in, which makes it difficult for the customer to actually understand what they're getting for right? So you have programs which promise agent training from 10 hours up to 600 hours. And therefore, a customer will find it difficult to compare those 2 things. and understand what they should get into. What we are doing is, of course, trying to provide as much information as we can. -- on the consumer side. And on the corporate side, of course, there are differentiators that we bring to the table, especially outcome orientation, right? One of the things that we talk to customers about on the enterprise side of the business is on delivering outcomes through our training programs. rather than completion, right? So therefore, it's not that we will just track how many ate and how many completed we will work with customers to track outcomes of the programs we deliver. So those are the areas that we are able to differentiate how we provide this training. But you are right, it is becoming a very competitive market. And people are using buzzwords like FD, et cetera, to bring new offerings, and it's up to us to keep educating our customers and providing the differentiation we need to do.

No, I'll let me add 1 line. I think we at least believe that in the new world that we are in, it is the capability which counts rather than the credential. So we are not running after credentials. We are running after building capability and I think that success is very visible in our enterprise enterprise offerings. Our enterprise offerings are showing a clear depreciation because we are able to demonstrate outcomes in terms of capability which leads to productivity and effectiveness of the workforce. So people are preferring that rather than allowing a credential program large adopting a credential-based program. On the consumer side, that awareness is not yet there. But wherever we have access, we would like to focus on that part. Because I think the long term lies not in credentialing, but the capability which can be demonstrated and employers will now hire for capability and not the prevention.

Okay. I agree, actually. So very much -- these were my questions. Thank you very much. .

We will take the next question from the line of Aman Takash an Individual Investor.