R Systems International Limited (RSYSTEMS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to R Systems' Q4 and Year 2021 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kumar. Thank you. And over to you, sir.

Thank you, Nirav. Good morning to all. On behalf of R Systems, I welcome all participants to quarter 4 and year 2021 earning conference call. We hope all of you are doing well, staying safe and healthy. We have senior management of R Systems with us in this call. We will start the call with opening remarks on the performance of the company by Dr. Rekhi, followed by financial overview by Mr. Nand and business overview by Mr. Avirag. Thereafter, we will have a closing statement by Dr. Rekhi. Subsequently, we will open up for a Q&A session. Before I hand over, let me read out the customary disclaimer statement on behalf of the company. Investors are cautioned that this presentation contains certain forward-looking statement that involve risks and uncertainties. Company undertakes no obligation to update or revise any such statements. These statements may undertake revision because of new information, future event or otherwise. Actual results, performance, achievement could differ from those expressed or implied in such forward-looking statement. With this, I am handing over to Dr. Rekhi for his opening [ comment ]. Thank you. Over to you, sir.

Thank you, Kumar. Good morning, everybody, and thank you for being part of this investor call. I trust all of you and your loved ones are safe and keeping well. The company has done well for vaccination for employees and their families. Safety and well-being of our employees is paramount to us in evaluating our options for working from office or hybrid working in a phased manner. The technology companies are continuing to be benefited by renewed focus towards adaptation of digital technologies post this pandemic. The businesses have accepted this new normal; and started exploring new products, business models to convert these challenges into opportunities. I'm extremely proud of R Systems' team for delivering another outstanding performance for the year 2021. With this, I would like to present an overview of R Systems for the benefit of all those who are joining us in this conference for the first time. R Systems was established in 1993 in California as a software engineering company and is now spread across 3 continents with 18 development and service centers worldwide. R Systems delivers digital transformation services with new types of innovation and creativity to businesses in various industries, technology, telecom, digital media, health care, life sciences, finance and insurance, retail and e-commerce. Our deep industry domain knowledge, combined with our expertise in big data, advanced analytics, AI, mobility, IoT, RPA and cloud, help in transformation of businesses in this digital age. Being the year-end, we'll emphasize more on the yearly performance. During last year, we have reported record revenue of INR 1,156 crores, which is USD 156 million. The year-on-year growth was 31%. This robust performance is on the back of good traction towards our product engineering and digital offerings, deepened relationships with our existing customers, along with the decent flow of sizable deals. We have also improved our yearly EBITDA margins to 14% compared to 13.3% last year. In absolute terms, it has increased by more than 38% against last year. I believe there is still scope of improving our margins, as utilization was just modest this year -- last year. We kept higher talent pool to cater to growth along with handling accretion challenges. We are still to reap the full benefits of our investment in sales, presales and newer technologies. These investments will help to generate high-margin growth in coming periods. Profit after tax was INR 141 crores, as against INR 82 crores last year, the year-on-year growth of more than 70%. For the quarter 4 2021, we reported revenues of INR 328 crores with 13.7% EBITDA. The year-on-year revenue growth was 39%. During Q4, our margins were impacted by salary raises and comparatively lower offshore utilization, but it lays down a good foundation for a strong financial year 2022. We have a robust balance sheet with shareholder funds of INR 460 crores and net cash balances of INR 277 crores to support liquidity and growth. We have served [ $40 million-plus ] customers, including 6 customers contributing USD 3 million-plus revenues. We added 30 key customers, including 8 customers having potential to be in the [ USD 1 million ] league. We added net 850-plus technical associates during the year. I will now hand over to our CFO, Nand Sardana, to provide a detailed financial analysis.

Thank you, Dr. Rekhi. Good morning to all. Thank you, everybody, for attending this call. The presentation, which has already been shared, gives detail of both quarter 4 and year 2021 performance. I'll quickly cover quarter 4 and then move to yearly numbers. Revenue for the quarter was INR 328.6 crores or $44 million, quarter-on-quarter increase of 7.5%. It is mainly due to volume growth. The gross margin was 34.8%, which was lesser by 285 basis points compared to last quarter mainly due to impact of salary increases which are effective October 2021, lesser utilization as we kept certain talent pool to offset attrition and to take care of growth opportunities. Also there were 2 less billable days in quarter 4. SG&A expenses also increased in absolute terms due higher spend on recruitment, sales and marketing initiatives, although it was lesser in percentage terms by 60 basis points. Resultant EBITDA was 13.7% compared to 16% last quarter, which is as a result of gross margin reduction and increase in SG&As. Net profit after tax was INR 32.8 crores or $4.4 million compared to INR 37.6 crores or $5 million last quarter. Now I'll give detailed overview of yearly numbers. As Dr. Rekhi said, revenue for the year was record INR 1,155.6 crores or $156.5 million compared to INR 880.6 crores or $119.2 million last year. The revenue grew at 31% year-on-year. This was an all-round growth that each business unit and geography have contributed, especially the robust performance by technology and digital practice in U.S. and Canada. We added 30 key accounts during the year, along with further deepening our relationship with existing customers. At quarter 4 run rate, we are at USD 176 million annualized run rate now. Our present sales pipeline is encouraging. We are strengthening our delivery team and infrastructure to cater to growth opportunities and hybrid working from office in near future. Getting down to gross margin. It was at 35.7% in the current year compared to 36.6% last year, a reduction of 90 basis points. Reduction in gross margin is mainly due to impact of salary raises and lesser utilization. Average rupee against USD was stable, so did not get any major benefit from rupee depreciation this year, 2021. Getting down to SG&As expense line. SG&A expenses have increased by INR 45.2 crores. It was INR 251 crores in 2021, as against 2,005.8 crores (sic) [ INR 205.8 crores ] last year. In percentage terms, the SG&As were 21.7% this year compared to 23.4% last year, so we got the advantage of higher growth in reducing SG&As in percentage terms. However, the main reason for [ absolute reduce in the ] SG&A was due to addition of new sales and presales staff, increased digital marketing spend and recruitment expenses. We have optimized this saving on account of lesser [ sales travel ] and office maintenance, et cetera, towards digital marketing and recruitment initiatives to fuel the future growth. EBITDA in 2021 was, again record, INR 161.5 crores or $21.9 million compared to INR 116.8 crores or $15.8 million last year. As a percentage of revenue, EBITDA was 13.97% in 2021 compared to 13.27% last year. We were able to get some margin improvement last year despite handling the challenges for attrition and muted utilization. With continued growth momentum, we are optimistic of further improving margin in coming quarters. Getting down to depreciation. The total expense was INR 27.7 crores compared to INR 25.6 crores last year. Interest expense is INR 4.9 crores in 2021 compared to INR 5.7 crores last year. Other income in 2021 was INR 41.2 crores compared to INR 12.5 crores last year. This year, we had an exchange gain of INR 8.7 crores compared to INR 3.3 crores last year. Further, the other income comprises of interest income of INR 7.1 crores this year compared to INR 6.6 crores last year. Exchange gains are due to mark-to-market gains on restatement of outstanding [ forward crores ]. Other income also includes INR 22.4 crores as a result of forgiveness of COVID stimulus loan received in U.S.A. last year. During the year 2021, the average rates for USD and euro were INR 73.83 and INR 87.32, respectively, as against closing rates for USD and euro of INR 74.3 crores and INR 84.21 crores, respectively. These are the 2 main currencies for R Systems. As at year-end, we have total forward cover of $32.7 million with average rate of INR 77.22 and euro cover of 2.10 million with average rate of INR 91.47, which have already been marked to market at closing rate of 31st December. Our tax expense was INR 28.6 crores in 2021, as against tax of INR 14.4 crores last year. Effective consolidated tax percentage for 2021 is 17%, as against 15% during last year. Our effective tax rate has increased, as one of our [ SEZ units ] has completed first 5 years of full tax benefit and moved into 50% tax benefit category. Net profit after tax was INR 141.4 crores or $19.1 million compared to INR 81.8 crores or $11 million last year. EPS for the year was INR 11.85 compared to INR 6.84 last year. Getting down to the asset side in the balance sheet. Total receivable at the end of December 31, 2021, were INR 178 crores compared to INR 131.3 crores at the end of last year. The receivable in terms of DSO was 50 days compared to 53 days last year. Our net cash and bank balance as at December 31, 2021, is INR 277.4 crores compared to INR 303.1 crores at the end of December last year. We have been constantly generating cash from the business. During the year, R Systems has done shareholder distribution in the form of dividend and buyback, which has impacted the cash. R Systems shareholder funds were INR 460.3 crores at the end of December 21 (sic) [ December 31 ] compared to INR 426.8 crores at the end of last year. We have a strong balance sheet to support liquidity and growth. With that, let me hand over to Avirag Jain for a review of operations.

Thank you, Nand [indiscernible]. Thanks, everyone, for being on the call. I hope everybody is doing good. We continue to focus on digital technology and digital transformation. This strategy has helped us to get our momentum. We'll give you a brief flavor of our global operations. So digital transformation continues to be the focus for us on select key vertical like technology, telecom, finance, insurance, health care, life science, retail and e-commerce. Our digital transformation offerings include cloud, analytics, machine learning, artificial intelligence, data and speech analytics, [ so ] robotics process automation, IoT [ sales. So ] these continue to be arrowheads for growth. On cloud, we work for all the leading platforms such as Amazon, Microsoft and Google. We're an advance partner with Amazon, [ gold partner with Salesforce ]. We see significant traction in cloud space and with the high growth coming from this area from existing clients as well as new prospects that we talk to. On analytics, we'll -- we see high growth in ML, AI, data and speech analytics. We are currently serving many key clients in this space. We had 8 key wins during this year. The brief key wins are: Under product life cycle, a Canadian leading platform provider of media and entertainment industry has engaged R Systems to cloudify to Amazon cloud its -- and enhance its product to improve efficiency and user experience. Another is a U.S.-based public security solution provider. They have partnered with R Systems to provide, to digital transform and re-architect their products to address enhanced market needs. Another win is a global automobile company subsidiary in U.S., their leading supply chain integration partner. They have engaged R Systems to digitally transfer its flagship product and enhance its functionality. Another one on the product life cycle is one of the global leader in cruise line has partnered with R Systems to modernize and -- their enterprise integration, along with digital transformation initiatives for their order management application. In Southeast Asia, one of the largest aluminum extrusion manufacturers in Asia has engaged R Systems to implement Infor cloud suite for industrial ERP SyteLine; and other solutions to automate their finance, sales and distribution operation for the APAC region. In terms of our head count, we have increased from 3,103 in year 2020 to 4,035 in year '21, added 850-plus technical associates to support the strong sales funnel. Utilization decreased from 77.5% in Q3 to 77.1% in Q4 '21, as we are still keeping some bandwidth to handle near-term attrition and growth in the business. On a yearly basis, geography basis, North America contributes 68.9%, Europe 13.5%, Southeast Asia 14.5% and rest of the world 3.1%. On yearly basis client concentration, top 10 client contribution is 24.2%, with our largest client 7.1%. With the brief overview, I will hand over back to Dr. Rekhi for his closing comment. Over to you, sir. [indiscernible] over to you.

Thank you, Avirag. Let me sum up. Our performance during the financial year 2021 was remarkable. It has laid a robust foundation for years to come as we are moving towards unleashing next-gen digital revolution. We continue to invest in sales, presales and digital marketing, expertise in newer technologies. These are helping us to bring large digital transformation projects. The business outlook continues to be positive with a strong demand. We are further expanding our infrastructure in SEZ in line with our sales funnel. We endeavor to utilize our balance sheet to support operations and future growth. Further, we are committed to expanding our margins by improving the realization rates; targeting bigger deal sizes, efficient operations, coupled with revenue growth. That brings us to the end of our presentation today, and we will hand you back to the organizers for your -- questions and answers.

[Operator Instructions] The first question is from the line of [ Namita Saida ], an individual investor.

I'm [ Namita Saida ]; and I'm an individual investor, like he just mentioned. So I want to congratulate you and your team for the revenues, amazing revenues. And from an investor perspective, yes, I have been investing since the stock price was around [ 85 to 90 ]. And I've seen good returns, going straight up to [ 350, 354 ], where I kind of exited a bit but still holding onto the stock. I strongly believe in the organization. And I want -- like these last 5 years have been phenomenal for the company. And yes, the revenues have doubled, so when -- my first question is when can we expect to double the current revenue. Keeping in mind the current geopolitical situation, are we seeing some serious pressure from European markets? And then what geography will you be focusing next year for the [ growth ]?

Thank you, [ Namita ]. Good to see a happy investor like you. So yes, you're right. In last [ 4 ] years, we have doubled our revenue. Now when we will double: Presently we are -- we have done $156.5 million this year. And on a quarterly run rate basis, [indiscernible] Q4 we did $44 million, so we are on a run rate basis close to $176 million. I mean that's the run rate, so definitely there will be some growth on that. So we feel good about the 2022, we feel, will be a good year. Now I mean the aim is to double this, be a $300 million company next -- if not 2 or 3 years time, but you see we don't know. So if the demand environment and the supply constraints continues -- I mean supply is there. I mean we can double in next 3 years, hopefully. Coming now to your next question, on this geopolitical situation. You see, our Eastern Europe office are in Romania, Poland and Moldova. I mean, as of now, we don't see -- it seems that this conflict will be restricted to Ukraine, Russia only, but we don't know. I mean we have to wait and watch, but otherwise, the European business is doing very well. They have grown close to 30% last year. And their pipeline is very strong, and we are quite hopeful of very good growth for this year otherwise. On the geography front, 70% of our revenue comes out of North America, 15% from Europe, around 15% from Singapore -- Southeast Asia, sorry. So North America and European markets are doing well and we want to grow in these market. Especially the -- Canada has done very well. So the plan is to [ expand more ] in North America and Western Europe. And hopefully -- I think there is a good demand environment. [ Rekhi ], do you want to add anything?

I want to add a little bit here. [ Namita ], your question is very good, yes. On the geopolitical situation, one is looking at the positive side of it. I think this will end very soon. Wars cannot last for too long, and -- but there's a sizable movement of population from Ukraine to Romania and those countries. And as you probably know, today there's a talent shortage. And Ukraine has a fair amount of software engineers. We are hoping that some amount -- I am looking for some positive in all of this, that some amount of software engineers will also be moving to Romania and Moldova, where we have our own offices. And that will supply us more talent that is really needed. And if that happens, we will be benefiting from that, but we do hope that this war ends soon.

[Operator Instructions] The next question is from the line of Sonal Minhas from Prescient Capital.

Sir, Sonal Minhas, [ Prescient ]. I have 2 questions. First one is more around the macro. I hope I'm audible. So the question is around, as you see the economies open and the lockdowns going away, you see -- do you see any sign of slowdown or tapering in general digital adoption? Or on the contrary, your company is relatively too small to actually be affected by that at all if it is happening. So just wanted a bit of a subjective commentary on that. And I have a follow-on question [ but doing this first ].

Sonal, that's a good question. The demand for digital is going to stay. Nowadays, there's a huge demand. I mean we are not able to -- I think I'll ask [ Avirag Jain ] to maybe touch upon the demand environment and the supply situation. Avirag, [ I'll give to you ].

Sure, Nand [indiscernible]. Thank you. Sonal, like as we see, [ 2020 ] was a year where businesses go down. [ 2020 ], they started recovering. And a lot of -- there is a global shortfall of IT professionals. There is a demand surge. And I see, at least for next couple of years, it is not going to go down. Like now the only [indiscernible] IT industry [indiscernible] good, experienced manpower. I think -- so demand, I think, is not a problem now. And we do not see demand [indiscernible]. Right now companies, including us, are choosing order -- what order to take, which customer to give priority. Right now -- I mean that time has never been there in the industry where we have to select which customer to serve, which order to pick, which we can deny. So we are into that mode. So demand is going to stay for some time. Now we do not see anything going down in near future...

So based on whatever you see in the market, you see this kind of a demand scenario to persist for the next 2, 3 years at least. Is that what your broader assumption will be basically?

Yes, I do. I think so, yes.

Okay. Second question, sir, just wanted to understand like a target for next year, if there is one of -- if you can share. And the third question is I think you -- as you mentioned, that you've done some senior leadership hiring in Q3 and Q4 just to ramp up and support the growth. So wanted to understand. Which vertical have you [ attribute ] people largely? Is this to fill some gap in a vertical where you were not strong? Or just [ a subjective ] commentary around that will help.

Sonal, we do not give any guidance. I mean that has been our stand, but as I was referring to in the previous question's answer, see, we have done $44 million for Q4. Now in Q1, let me tell you, there are 2 lesser number of days, but in Q2 and Q3, there are 3 extra days, [ okay ]? So $44 million into 4 is $176 million. And that's based on existing revenue. Last year, the existing clients have grown. I mean out of that 30% growth we have, close to 15%, 16% have come from existing customers. 15%, 16% have come from new customers. So I mean you can calculate, but we feel quite positive about this year. I mean I don't want to say, but $200 million doesn't seem to be difficult, but I don't want to give any guidance there. So that is one. Secondly, on the margin also is one of the area where we want some improvement. We have been 14% here. And we plan to -- I mean there are synergies. I mean, when growth happens, we will get a lot of synergies. This -- last year, utilization has not been very good because of attrition challenges and the hiring issues, but we see at least 150 -- 100 to 200 basis point improvement. So that should kick in [ as SG&A subtract ] and all that. Coming on to the senior. I think we have hired several domain specialists during last year. And we have utilized whatever savings were coming to travel and all that; enhancing our domain specialties; hiring more sales talent, and marketing; more marketing initiatives. We have used that to fuel the growth for the future. And that's the result you have seen in 2021 and, hopefully, in 2022 as well.

Got it. So the recruitment is pretty much like across the board. There is no vertical gap to be plugged...

No, no. It's across the board our chosen verticals. We are -- 60% of business comes out of [ ISG ], out of which 30% is in telecom, around 10% health care, banking, finance, retail and -- I think all have grown well. This year, there has been add-on growth 1%, 2% plus, minus, something like that, but otherwise, all verticals have grown well.

Sure, sure. So just if I could ask another question, if I'm allowed to...

Yes, please.

Sure. Sir, again a subjective one [indiscernible] -- sorry. So if we take, let's say, last -- if we take, let's say, [ large orders -- or rather large ] customers, we would have lost to competition in the last 1 to 2 years. I just want to understand. Like what will be the top 3 reasons why we would have lost certain customers or certain new customers to competition? And what has been the reason from a capability or from an internal working perspective? I just want to understand that.

So [indiscernible]...

Yes, yes, yes. Please go ahead, Avirag [ Jain ].

So I can take on existing client. Our customer retention or repeat order is almost 90% plus. I mean we do not lose a customer generally. 2 reasons prominently we lose a customer. One -- maybe one is, generally if there is M&A, the customers are acquired or merging with the entity of some company [indiscernible] vendor or [indiscernible] that remains a reason we [ lose work ]. And second is there is a customer with a financial issue, and then obviously we lose -- so these 2 [ remain prominent. It's always ] quality, delivery, service. I don't think we'll ever -- we have lost any customer. Maybe [ one odd ]. Maybe they are small ones, but we do not lose there.

We have not lost any major customer in last 20 years. Small [ plus, minuses ] may happen, but I don't think we have lost any -- there may be some ramp-downs and all that, but we had not lost any major customer last year.

Got it. And sir, any new customer, like, where -- that you were bidding for where you lost to competition? Just to understand the capability of the company vis-à-vis competition there, if there is anything on that side actually.

[ So yes. You see you ] -- sometimes, you lose orders. That is always a case with a customer who is looking for [ RFP and this ]. We actually do not try to sell short. Sometime, on price, you do not want to win your order. And sometimes, companies try to under-bid and do a low bid. We do not do under-bid. So on that point, you lose. Other times, if we find that we are not -- the order or any deal is not in our domain, we try to pass. And I mean our winning ratio is very high. [ And we will lose the order on price ] sometimes because we try to maintain our rate intact. Otherwise, when we are bidding customers, we -- generally we win. So that is what I will say. And obviously there are competition [indiscernible], let's say, [ embedded side ] [indiscernible], [ but in the meantime ], we lose because of those. [ And we set orderly pathway actually ]. We do not spend a lot of time on where we do not have capabilities.

Okay, so you don't bid at all. [ Very well then ]...

Yes. You do not have capability. There is no point in wasting a lot of time and effort. And you lose, so no point putting efforts.

[Operator Instructions] The next [ question is ] from the line of [ Abhay Jain from R Systems ].

Yes. Congratulations for completing a fabulous year. So I bought the shares of the company in 2019, when the share price was around [ 50 or so ]. And it is [ sticking out ] somewhere between [ 220 now ], so congratulations to the team for giving shareholders great value to their investments. So can you please explain and give views? What -- where do you see our share price in the near future? Will it stay here for a while? Or it will be better. To add one more question: The company has improved the EBITDA margin significantly in these recent years. Can you please explain how the company has managed it? And can it be improved further?

Thank you, [ Mr. Abhay ]. On the share price, we have no control. I mean it reached around [ 350 ], I think, 2 months before. I mean, as of yesterday, it was closer [ 220 ]. I think all IT companies have fallen maybe due to a general kind of -- but I feel that the stock market is something we cannot comment, and the -- where the share price will be. Our job is to do performance. We feel that we have done well last year, and we will be doing well this year as well. I mean that is our conviction. So that is the answer. On the EBITDA front, yes: I think our EBITDA, 4 years before, used to be like 7%, 8%. Today, we are at 14%. And I was referring in a previous answer that we have a plan. I mean we feel quite positive that we can improve it by another 100 to 200 basis point. In fact, 200 basis point is also not difficult, but under this is quite easy, based on the volume growth. You see, last year, what has happened is that rupee has remained almost flat. So we have not got the advantage of rupee depreciation last year. Utilization was almost same or a little less because of that -- hiring issues. Growth helped us. [ 30% ] growth helped us. And the industry, you know that, last year, the increment have been higher percentage. We had even an additional increment in October. So to answer your question: We feel that, when we spoke to improve by another 100 to 200 basis points -- and we also feel good that we have now doubled our EBITDA percentage compared to last 4 years. So I think we feel good about and quite positive about the future. Thank you.

[ Abhay Jain ], do you have any follow-up question?

No.

[Operator Instructions] The next question is from the line of [ Anuval Mukulji from Preston Capital ].

Am I audible?

Yes.

Yes, sir...

Sir, what attrition rate did we face in the recent quarter? And how do you see the supply-side situation [ ahead ]?

The attrition at project manager and above level is very less; very, very hardly. I mean [indiscernible], but then the below level is in line with industry. It used to be close to 14%, 15%, but I think it's close to 25% now. So attrition has increased. And we are trying to kind of control it through better salaries, better incentive schemes and better bonus schemes and all that, but that is a challenge, yes. We are working on that.

Okay. And sir, what's like sort of wage hikes did you have to take in the current year? And can you compare it with the -- like historically how [ your wage hikes have reached ]? And next year, also, what sort of hike do you anticipate? Yes.

See, the wage hike we have done, you see -- let me, I mean, go back in the history. When the pandemic started in March '20, there was a lot of uncertainty. So 2 years before, I mean, there was a lot of uncertainty. And kind of [ we've seen ] the increment in March '20; and did not give increment between March '20 to August, September '20. So these 6 months. Normally what happens is -- our increment [ financial ] is every month. The person who joins us in March gets increment in March and all that, but a lot of -- a major [ chunk ] of employees get increment in January. That is our -- the start of the year. So since in 2020, we did not give increments. So in October, we gave good increments compared to -- for those who did not get increment between March '20 to September '20. So that October '20 increment has again come in October '21 and we have given that increment. So now majorly the increment happens in January, which has already happened for January '22. Also, in October '21, we gave. So that -- and percentage-wise, to answer your question, we have given at least 4% to 5% higher increment compared to what we used to give earlier. So to that extent, the increment cost is higher and the impact is comparatively higher, but what happens is that the -- we are pitching for higher bill rates. So we have got -- we are requesting clients [ to delay it ], and the response has been very good. Just to give you a ballpark of -- at least we see that -- we have at least $4 million to $5 million improvement in revenue we see through billing rate increase in 2022. That's our initial estimate, and it can increase more. So we are trying to kind of [ composite that to billing rate. It's -- given ] -- that will also help us in improvement of EBITDA, which [ I was just now noting in ] one of the other question.

Yes, sir. And what was your offshore revenue contribution in the current quarter?

Offshore is very high. I think [ close to ] 70%, 71%, 72% is offshore. And 28%, 29% is [ on site ].

Okay. And has there been a, like, considerable bump-up in the last 7, 8 quarters?

I think it has, more or less, remained stable. I think -- maybe between, I think, 7, 8 quarters, it will have -- it would have increased 3%, 4%. More and more business is being shifted to offshore, where the margins are high. And it helps us in improvement of our profitability and which has been the trend in last 2, 3 years, as you have seen. So I mean while -- I don't have the exact number, but it would have increased at least 4%, 5% in last 7, 8 quarters.

Yes, sir. And do you see any signs of [ that still working ]? And will that be...

No, no, no. I think we are focusing on offshore. And there is a lot of shortage of talent in U.S. and all that. So a lot of work is being shifted, but there a -- the supply constraint in U.S. as well. We feel that offshore will be -- it will -- towards the offshore. And the margins are much better in offshore, as you know.

[Operator Instructions]

You may close if there are no other questions.

Sir, we don't have anyone on the question...

Okay, you may close.

Would you like to make any closing comments?

Yes. Dr. Rekhi...

I want to thank all of you. I want to thank all of you for attending this investor call. And that brings us to the end of our presentation. And keep safe and healthy. Thank you very much. Thank you, everybody...

Thank you very much. On behalf of R Systems, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.