Systems Limited (SST) Earnings Call Transcript & Summary

On behalf of Insight Securities, I would like to welcome you to the Corporate Briefing Session -- or rather Investor Briefing section of Systems Limited. This is the first half result of Systems Limited. And without any further delays, I would hand over the mic to the management. The presentation format would be that, firstly, they will run you through the first presentation. [Operator Instructions] So Asif, over to you.

Good morning, good afternoon, good evening, everyone. So welcome to the analyst briefing session. And I would love to -- as Zubair just shared that we will keep the presentation short and sweet, and we will answer as many questions that you have. And that will be a more interactive session. And I think my team will do response, and I'll try to respond as much as I can over -- during the meeting as well. Zubair will be moderating it and curating the questions and combining the questions, so we -- there will be less repetition and we can get more content out from us, right? So -- so please ask anything that is pertinent and relevant, which is bothering or which has some -- you want to know about it, would love to answer anything, okay? Next. So I think first will be the -- first will be, of course, you guys, whoever is new to the company. We have been doing business in all these verticals and industry focus, very focused on business practices from a technology perspective, the business process outsourcing perspective and the technology perspective. AI and data in these days is a core pillar of our offerings. Of course, we are combining with digital and cloud. That's our core, and that's what we have been truly focusing on. I will shed the lights during the presentation as well. Next. So I will hand over my colleague, Roohi, to take us through the financial slides. She has a few slides to cover, and then she will hand it over to me, and then we will go to the Q&A. Roohi, over to you.

Thank you, Asif. Good morning, good afternoon, everyone. So on this slide, we are just sharing the key highlights. So it's like a fact sheet. This is showing our annual revenue trajectory. 2024, we closed at $242 million. And for half year, we are standing at $130.97 million. And similarly on EBITDA, we have closed our 6 months account at $21 million. So our dividend distribution has been consistent. We distribute 20% of our earnings as dividends. The market cap, the company has -- is currently at $700 million plus market cap, which is the highest. We have 7,500-plus employees globally, and we have 250-plus active clients. And this slide shows some of the key recognitions that we have received. We have been recognized again, consistently recognized by Forbes Asia as best under $1 billion for 4 years consecutively. Microsoft has been recognized as key delivery partner, and we are -- we have been recognized by Microsoft as the -- we have received the Inner Circle Award. PSX has been recognizing us constantly. So these are some of the key recognitions and some of the big logos of big technology, major technology partners like Microsoft, AWS, SAP, Temenos. I would like to focus on the financial performance. And this one is showing our half yearly performance trajectory with a revenue CAGR of 33%. So this one is the USD slide. The next one is the PKR slide. And you can see that our operating profit is also consistently growing at 70% -- 17% CAGR. And this quarter -- last quarter has the highest absolute operating profit. The EBITDA is also growing at 13% CAGR and net profit CAGR is also 18% even in USD terms. So this does not have any currency exchange gain loss impact. Then even if you look at the PKR, which has the currency fluctuation impact as well, the revenue CAGR is 54%. Operating profit is growing at 35% CAGR with half year, we closed at PKR 5 billion. EBITDA CAGR has been 37% with PKR 6 billion per half year number and net profit CAGR is 31% with PKR 4.6 billion. This is the quarterly performance, if you can -- so Q2, as I said, in -- for revenue, we closed at PKR 18.6 billion, $66 million, and the EBITDA is PKR 3 billion, which is $10.8 million. Our revenue contracts, most of our revenue contracts are in foreign currency, even if the domestic contracts are in USD. So 93% of the contracts are in foreign currency and only 7% contracts are in PKR. On the cost side, 58% of our cost is in PKR, which is predominantly the Pakistan cost and 42% cost that comes from our subsidiary is in foreign currency. This is an important slide to show our headcount, our professional services employees headcount dispersion. So majority Pakistan is our key delivery center, which has 83%, 83.4% of our headcount. Then UAE is the second biggest because of the regulations and customer requirement. We have about 11% of our resources based in the UAE. Egypt is our growing second development center with 2.5% of our headcount dispersion. On the left side, you can see the revenue chart with 57% of our revenue coming from Middle East, Africa region. The second biggest region is North America with 20% revenue contribution. Pakistan stays stable around 15% revenue contribution and then Europe and AsiaPac are at 5% and 3%. This is -- so BFS continues to be our biggest vertical with 30% revenue share and 25% comes from telco and then 12% from technology, 11% from retail. And this other sector, which is 23% of the pie is public sector, health care, manufacturing and other small segments. So with the based -- referring to the commitment that we made last year that we continue to grow our accounts, we have -- if you can see as compared to 2024, we have grown our customers from 5 million to 10 million category from 3 customers is 9 customers now. And our biggest customer is actually bringing in is a $25-plus million client. And top 20 customers contribute about 51% of our revenue. So we are well diversified geographically, vertically and in terms of customers as well. So now this is all about finance, and I will hand over to Asif for to cover the business side.

Okay. Thank you, Roohi. Thanks for sharing. So can you move to the next slide?

Can you see my screen?

Yes, I can see your screen. So basically, this is a new start that we have revamped global shared services powered by business and AI transformation. That's what you have seen the announcement as well recently. This today's world, AI is disrupting a lot of shared services. And with -- we have in Pakistan unfair advantage of labor arbitrage and as well as AI, we are able to create a lot of impact by automating the processes, transforming the processes and assigning people where it is required. So it's a lot of disruption happening and a lot of new opportunities has been created. As I said, like we have unfair advantage you need to -- in today's world, it's a fusion of how the AI and human can work together and how you can increase the productivity and let -- it's not AI is replacing people. It's AI is augmenting people and, of course, replacing those who don't use AI. So AI is not replacing people just for the sake of it. AI is replacing those people who are not using AI. So with this approach, we have designed various processes, automated various processes as well. So making sure when we go to the customer, we are just going from a transformation perspective and not just a cost-saving perspective. So while we are, of course, saving the cost, we are also enhancing the business values. And we just want to be from like the concept in today's world, whoever wants to win in this today's world, it's you need to be -- move away from cost center to value creator. And that's what our GTM approach is that we are moving away from cost center to value creator, and that's what is defining and redefining the world. Next. So definitely, as you can see, we are not putting AI evolution by -- or AI word just by an accident. I think the entire company, and I think most of whoever is in this world, I think I'm so excited. I can't tell you that I have never seen my 30 years of career. I think this is the most exciting advancement in technology so far, the AI and Gen AI. I think I don't think so that I'll be able to see another evolution of this -- in 30 years, I have not seen a lot of transformation happened, but this is bigger and better than any other opportunity that has been ever created through technology advancement. So this is such a phenomenal opportunity for everyone who want -- who knows how to take an advantage of this. And as I said, like it's not just AI can do a lot of things, but you still need a human in the loop. And that's where our unfair advantage of labor arbitrage come into play with the technology and AI that how we are going to kill this space and create more opportunities. And we are seeing humongous opportunities in the pipeline that is coming in this -- in our existing and new customers. So really excited to -- I think this is the most exciting time in our career. So next. So investment opportunities, as you can see, which I've been saying that we are investing a hell out of it in this transforming the culture, organization because this is AI, Gen AI, cloud, digital, everything, if you can do better service and create the value to a customer instead of just pitching the labor arbitrage and cost center, I think that's rethinking operation model to unlock creativity is the key. And I think, as I said, like our objective is not to reduce the workforce. I think we just want to have people spend more time creatively and productivity, so they will be happier. So that's the pitch that we take to our customers. It's not like replacing people. It's about how we can create the value. And so a lot of investment is going on upskilling our talent because it's a change management, it's a cultural transformation. So as I said, like whoever will not do it today, you will definitely be wipe out from this space, right? So there is no doubt about it. And while we are doing it, of course, we need to keep growing the talent. So merger and acquisition is not just for adding revenue. When we are in the mix, you need a lot of senior leadership who can drive this change and run this wave and swim in this wave and the disruption that is happening. So we are really very focused on M&A from not just revenue, revenue perspective. Revenue is, of course, important. Profit is very important. But of course, in today's world, the talent defines everything and experience is everything, right? So that's where -- where we are really focusing right now from our M&A strategy perspective as well. Current geographies, of course, we -- whatever geographies we are working, everything has a lot of opportunities. And with the current geopolitics improving in Pakistan's favor, we are seeing a huge opportunity where our brand is improving from a country perspective, and that's really helping at least we are neutral to positive versus any negativities. I think this is a huge moment and opportunity for our industry, not Systems only, but our industry and for our country as well, where we can take a lot of leverage and a lot of advantage. So of course, to keep growing and keep growing at the rate, we need to introduce new service offerings, new innovation, new ideas that needs to come. So all of these things are top of our head because we have a very strong growth mindset, and we just want to keep continuing that way, and we need to keep investing on our growth opportunities to keep growing and keep scaling the business, keep generating employment. While as everybody thinks that AI will reduce people, we will keep generating employment. Next. We will have AI-enabled people. So that's what I would say. So I will hand over this -- for ESG to my colleague. She's Roohi, she will explain, but I think that's what we are very focused as well as a part of ESG initiative. And now a lot of our customers -- investors were asking, investors are still asking, but a lot of our customers asked, so we have inducted consultants and did the proper work and doing all of these things, which make sure that we have an ESG guideline and a sustainability score as well from this organization. Roohi, you want to add anything to it? Okay. Next. So I think, as I said, that I'll keep presentation sweet and short. And I know there is a lot of questions people have since the market -- our market especially has been evolving very rapidly. And as we are excited, you need to do a lot of change management and you need to be top of a lot of things to make things happen. So while excitement is there, opportunity is there, but opportunities don't wait for anyone, right? So everybody has to move at the speed of light to make sure that we can avail this opportunity. But I think it's a really exciting time. So I'll be really excited to answer any questions.

Okay. Thank you, Asif. Moving forward, I think we have a few questions here and a few questions that Insights Research team has been regularly receiving from clients. So I'll keep it towards the end, and start off with the first question we have from Matthew. He says well done on the first half results. Thank you for prior disclosure of USD versus PKR cost. Could you please update the approximate split and explain what this proportion split for COGS and selling and general and admin expenses overhead. So basically, he's asking that you disclose the revenue split in dollar terms. He's asking that can you disclose it in the COGS in dollar terms and selling and general and admin expenses in dollar terms?

I think Rui has shared overall cost, like if you -- if I recall the percentages, I think our cost percentage is about 30%, 35%, 37% in dollar terms and then rest is in PKR terms. So that is already disclosed in the currency mix slide, which we have uploaded, but we have not disclosed yet the -- like the breakup of selling, administration as well. We can do that as well. We have no issues.

Can you privately reply on this...

Sure, sure. That's not -- definitely.

Okay. The next question is update on your partnership with universities. Do these help you to generate sufficient qualified new employees for your desired rate of expansion?

I think, yes, they do. And I think now since we are in the limelight and we provide a lot of input to universities on the course curriculum and building the HR resources and all of it. So they definitely help and we definitely help universities to provide the internship and guidance as well. So we get from Tier 1 universities, we are getting good talent. From Tier 2, 3 universities, we typically don't have the need right now. So far, our need is fulfilled by Tier 1. But I'm sure this is what I've been discussing at a broader level from Pakistan perspective that we should take all as an initiative, Tier 2 and Tier 3 university students and train them so they can come to a workforce and they also become exportable talent. So I think that's a discussion that's going on. And I think we all -- we are doing at our level. But of course, if we can do at a country level, I think it will be a massive impact. If you can see, I think if you might be following like recently, Punjab government, which is the largest province of Pakistan for addressing this, what I just said, that Tier 2 and Tier 3 universities, they have offered internship program for 5 months free of cost, like giving salary to intern by government and also giving companies training money so they can train at an official level. This is a huge government spending that's going on only just for IT. So that is a very encouraging step by one province, and I'm sure the others will follow. And once they do that, I think that's what I've been saying that on-job training is the key. And if we can train them and most of the good graduates, I think this will be a game changer in Pakistan. I think it's already happened in one province. I'm sure it's a sequential effect.

Okay. Percentage of headcount, you've already mentioned in Egypt and UAE. Secondly, the growth in top line [indiscernible] growth in top line in USD terms has been suboptimal that we expect from Systems. It went from 32% Y-on-Y last year during first half to 17% in first half. So Systems is still a small company compared to [PAM] available to witness such slowdown. Would you please care to comment on this and what to expect going forward?

No, it's not a slowdown. I would say. We are growing, and we have a healthy backlog and healthy pipeline to support that growth as well. So of course, the first half is always like two Eid holidays -- 2 weeks for Eid holiday in our region. So these are the shortest because we are in the services business. So we -- if there are a lot of holidays, religious holidays comes in 1 quarter or 2 quarters, of course, it impacts the billing and it impacts the revenue growth as well. So -- but from a growth perspective, you -- while you have to look at it, of course, from percentage terms, of course, you're looking at it. But in absolute terms, there will be more growth for sure year-over-year because as we keep growing, it's not like 30% the same as 30% at $100 million, 30% at $300 million. So it's not similar, right? So it's definitely -- it's easy to say 30%, but it's in a real -- I think if you look at in absolute term, it will be definitely higher.

So this is something that I also wanted to ask, how will the acquisition of British American Tobacco SAA Services drive growth for Systems Limited and foster synergies with its existing business operations? I think there has been a limited disclosure on this in the quarterly report as well. So if you could basically...

Yes. I think whatever we could share, we will share and I will answer your question as well. I think I've put one slide for reason for the global shared services slide with AI, Agentic AI and AI and a transformation that what we are going. This is definitely a new line of business, rebirth of business transformation with technology transformation that the work that has been written in the notice as well that we -- they are doing high-end marketing, branding, consumer insight, customer engagement, high-end BPO and shared service finance, not just typical payable receivable type of finance, but commercial finance, corporate finance, consumer finance. So it's a very high-end type of work. which we have gotten ready made, like Systems has a history to start from 0 everything and build upon it, all the new practices. But here, we're getting the ready made offering and the people, very talented people, extremely talented individuals from a management capability and leadership capability. I think it's a huge growth opportunity, not just the growth, but huge growth opportunity for us to nail this and grow this eventually in the future. And of course, with our partnership, I think I'm really excited to -- this is just a beginning and very humble beginning, I would say, but it's a lot to offer in today's AI age with this transformation, what we are learning. I think it will be -- you can like -- you can...

Asif, can you share some numbers on this transaction, expected revenue and expected cost that you guys will incur on this transaction and the...

No, we are under MSA and NDA that we can't disclose the values explicitly. But as I said, like this partnership is a game changer for the company. And for us as well, individually, we will learn and we have a huge new growth avenue that we have not experienced before. And as I said, like whatever you have seen in the last 10 years, we have reinvented and rebuilt all these offerings from 0. And once we get the launching pad, I think our momentum will be much better and higher and faster.

And one more thing, if you can't disclose the details at this point. This is one such transaction of British American Tobacco that was already operating in a data center or a center in Pakistan. Are there any other companies that are operating similar centers in Pakistan? And is Systems looking to acquire or maybe look out for that kind of a growth opportunity or pitching to...

That's no-brainer. That's no-brainer, right Zubair? That's like the first thing before closing the deal, we thought that this is a no-brainer, right? This we have to -- there is no...

Now you have a model in place, so you can say that this is what we are doing, and we can do it for you like that.

Not -- yes, only I mean, but this is -- that's why I think we have a new GTM approach. We have the new angle. And once you do it once and prove it and every business, first reference is very difficult, right? So once you have the established reference of MNC, I think repeating and CPG especially because CPG is CPG, right, whether you're selling cigarettes or you're selling consumer product, you are selling consumer to consumer, right? So it's a very -- it's a unique scale. And once you get that scale, I think it's a lot of CPG companies out there in the world. And a lot of CPG MNCs are in Pakistan as well, you rightly said.

Okay. One more thing from your basic presentation. This is the first time I've seen you very focused on merger and acquisitions. You mentioned it quite a few times in this presentation. So this is one thing that we have seen. Are we about to witness more in the pipeline?

We have written in our director report as well or in probably in the result. I'm not sure whether it's -- you guys have read it or not yet. But yes, obviously, as I shared very clearly, this is a new world, right? It's not an old world where you can keep doing, you have to have a talent. You don't need M&A just for revenue and bottom line anymore. You need entrepreneurs to join you, and you need those bright leaders because with the Systems brand power, and Systems capability and regional presence and global presence, right? We can give them a platform to have a multiplier effect. So we don't look at merger and acquisition as 1 plus 1 equal to 3. We look -- it sits in a multiplier fashion.

The next question is, how does the AI affect the current business portfolio vertical, which is the most vulnerable?

I think it's not vulnerable. It's a lot of opportunities. As I said, this is an exciting time. AI is not -- AI is just I think it's a very different -- when you're sitting outside and you are using just ChatGPT, you think everything ChatGPT is able to do it. But on an enterprise data, if you're running a large CPG company or a large financial institution or large banking institutions, you have to apply this GPT 5 for GPT techniques and even just to make sure that it runs on your own data. It's on your enterprise and it have a guardrails for security and everything. So that's a lot of work that somebody has to do it. It doesn't happen like switch on and off. And yes, you can ask a general question, but if you want to apply this to your own data, it requires work. It requires a lot of data engineering work, a lot of AI work and also still the traditional AI we all are exposed to Gen AI, of course, behind the scene, there is a lot of machine learning, a lot of AI work that needs to be done and a lot of data engineering and cloud work that is going to be emerged from this. That's why I'm saying -- and also only that's where I'm like general basic stuff, like basic BPO stuff, not specialized, are definitely disrupted and you need to have AI-assisted financials and so on and so forth, right? On top of it, like our custom application development or bespoke, you must have heard so many times, the website will be automatic created and blah, blah, blah, right? But when you talk about it, from the perspective of rapid application development, we call vibe coding, right? This wipe coding is very, very critical that how we are increasing the developers' productivity using the tools of this vibe coding technique, which are available. So now our estimates are very aggressive. When we are going for a project for custom or bespoke development, we are passing on that productivity gain to our customer to be very cost competitive, right? So that's what we are doing right now. So we are adopting AI into our business in every moment, whether I'm doing something or whether anybody else is doing. So it's a limitless opportunity right now for this in our space.

Okay. The next question is from Rob. He says, can you talk quantitatively about the outlook? How do you see the revenue growth prospects into year-end and FY '26?

As we don't give the exact number, but I'm very positive that what I can say from the growth perspective, we don't believe any reason to see there is any decline because of opportunities that we are receiving from our existing and new customers and the strategy we are following. We are very confident, but I can't give you exact percentages. But yes, we are -- as a company, as a leadership and as my team, we are all trying our best to achieve the best numbers in the growth percentage because in our world, there is one thing I know grow or die, right? Like I say AI or die or grow or die, right? So growth is the only answer, whether it's AI or non-AI, doesn't matter, but you have to keep growing. And you have to have a sustainable growth, not just a one-off growth. So that's why you have seen us quarter-over-quarter. We look at everything quarter-over-quarter to half yearly year-over-year, last year, quarter this year, we make sure that we are showing a consistent and sustainable growth, not one of the growth only.

Okay. This is the most asked question that we have received these days. Actually, most people are asking that these Indian companies that mainly the likes of Tata and Wipro and I was about to ask their revenue growth has slowed down. So the key question everybody has in mind is -- and I think definitely, there should be, if you can provide some kind of guidance on the revenue growth number because if you look at those companies, the revenue of most of these Indian companies have flattened out. So -- maybe I don't know -- I know you guys don't give a guidance on growth numbers, but a ballpark of something in such a rapid environment, maybe it would be helpful, consider it...

I think you have to look at it very differently. You talk about all the big names like TCS and Accenture and Wipros and all of them, right? They do $40 billion, $50 billion revenue, right? So for them to maintain the momentum, even it's like $4 billion, $5 billion revenue a month, right? So for us, it's -- we are a very small company, as you started saying in the global stage. So -- and we have unfair advantage of labor arbitrage on top of that, right? So we -- I don't compare us because we -- when you become large, of course, you have different kind of issues and you have -- you need different kind of customers and you have a different kind of profile, right? But for small to midsized companies, if you do right things, there is still a huge growth opportunity. So I think whatever you guys are used to see it, I don't feel that so far with the backlog and the opportunity in the pipeline, I think we will continue that growth momentum. That's what we are at least trying. I can't commit -- or I can't commit something in numbers. But while from a strategy and the backlog and the opportunities that what I see, we are very excited, and we see this growth momentum should continue unless and until something else which is uncontrollable happen, which is not in our hand.

So basically, we should expect the kind of growth that you have seen without any number...

You can assume whatever you want to assume that's fine. But I'm just saying...

I'm trying to be of some help for the people that are asking the question, and you are trying your best not to divulge anything. The next question is from [indiscernible], he says it would be great to hear how you are experiencing the competitive environment in different markets and how if it has changed over the last year?

Competitiveness is definitely now in the different field, right? If you really want to be competitive, then definitely, if you don't be in this AI space, you can't be competing in any of this opportunity, whether it's a bespoke or whether it's a packaged application deployment and so on and so forth. So competitiveness is there. But with the regional brand, what we have created, I think in the region, that's why you see more regional growth in systems because we have built a solid brand, which comes with the credibility of a delivery and the value creator, right? So we create the value and solve customers' problem in a different and unique way and nimble and agile way and still be cost effective as well using our Pakistan advantage. And of course, we have Egypt center as well for the region. So it's -- with our brand, I think with the competitiveness is there. But with the principal support, as Roohi was mentioning that we are inner circle of Microsoft, what it means is that we are top -- one of top 100 partners of Microsoft globally, not just the region, globally. So when you are in that kind of a cadre, you get a lot of opportunities from the principals as well because they know that, that you have their skills because every principle in today's world, whether it's SAP, Microsoft, they want their license revenue to be increased and their license revenue is only going to increase if the partner is going to do a good job in the delivery and create the value for their customers. So I think while another question that -- just I want to shed some light because everybody says that AI will do this in this and this -- when these packaged applications like platforms like Microsoft, SAP, Salesforce, Adobe, the big players, ServiceNow, they are spending billions of dollars in innovating and reinnovating and putting AI into their tools -- into their tools. So we, as a partner -- they don't do implementation. We, as partners only need to be enabler and learn how to configure that for the customer because customer is -- customer is not able to roll out on their own, that's why they need partner. It's not like when we do a complex implementation, yes, simple ERP application, plug and play, you can. But when you're talking about enterprise scale, you have a lot of moving parts, a lot of integrations, a lot of things needs to happen at the same time. There are a lot of legacy environments, a lot of legacy code, a lot of on-prem stuff. It requires a massive transformational project. It's not a small transformational effort. So since now like we are pushed as a service provider to use and leverage AI, every customer, every customer, every right-minded customer who is not a monopoly customer, they are thinking that if we don't use the technology and if we don't move away from what we are and if we don't leverage AI and other latest technology, we will be out of business and somebody else will disrupt us. So now customers are forced to invest into the technology, right? When they are forced to invest, we are -- we get an opportunity, right? So customers are forced to invest with this innovation. As I said, this is one of the advancements that I can see in my life. I think this is 30 years, I've never seen it, and I'm never excited before that kind of an opportunity. I don't know whether it will come again or not.

Going by your optimism, I think we should reach previous revenue growth numbers that we have seen in the...

I can't say that the growth numbers, but I think what I say is where I say is it's a very, very good opportunity for the country, good opportunity for a lot of players who wants to stay corrected into their strategy. If your strategy is not aligned, then you're out of business as well. You're done. dusted.

Okay. I will keep trying. In which AI-related area do you see your offering being the strongest? And how much revenue is that generating?

It's -- to be honest, everything is AI now. So if you ask me what's my budget and where is it -- it's everywhere. AI is everywhere, right? So if you don't use AI, you're done, right? So whether it's a BPO, whether it's developers, whether it's -- you just use for the sake of a ChatGPT, it's an AI, right? Basic form of AI, but you use AI, right? So I think AI is everywhere. So I think that portion is now -- very difficult to answer.

Have you noticed pricing pressures when you bid for new projects?

Yes, definitely. And we have to -- as I said, like we have to use these technologies and AI to bid it aggressively and pass on that price advantage to our customer. If we don't, then we will be out of the race, right? And that's why how we can win more, and that's why I'm saying with the labor arbitrage and with AI, we have a unique deadly combination, right? So that's what we are trying. And that is given if you don't pass that AI advantage to your customer, then you're done because AI has a cost as well. AI doesn't come automatically in a customer environment. When you talk about AI, then you need -- and if I use technology term, GPUs and a lot of processing power, compute and cloud and technology, it's licensing and this copilot it's not free, right? Everything has a cost. So it's -- AI is not free. AI has a lot of cost associated with it. So when customer ROI. So if I don't give them the benefit of this, then they will not work with me because they are investing a lot of money on their basic building blocks.

Okay. What is your outlook on hiring needs for the coming year? Also, are you happy with your current utilization?

I will never be happy for sure, never satisfied. Of course, we have room for improvement. Utilization can be better, for sure, 100%. So we'll keep improving and sharpening our utilization. But definitely, there is a lot of requirements now. Actually, with AI, I think one thing very interesting happened that you don't really only need computer science graduates, right? What it used to be like 10 years ago or 5 years ago, you need a C++ coder and Java coders and -- now you need different kind of skills, if you're math, if you're stats, if you are -- if you have good creativity, critical thinking, IQ, EQ, ChatGPT can also train you how to code, right, how to write a software, right? And -- but you need to have this. So we really -- our pool of resources become more than what it used to be. So that's where the excitement comes from. Now we are not limited to just 4-year degree program. If somebody has even like done the diploma and a very good IQ and EQ, I think you can easily learn. Even if you are Tier 2 universities, that's what I'm saying, we can train them if you have some attitude to learn, right? That is very important, right? In today's world, it's Gen Zs, if you have attitude to learn, there are enough tools, enough material, enough literature, enough GPT available that can train you, right, as an individual or as a person or an executive as well. It's not AI is for -- as I said, AI is for everyone and AI is for everywhere and AI is everything now.

Okay. Have you noticed a change in the customers' demand to move from an our billable contract to fixed price contract? If yes, how that's affecting you?

It's not -- like customer works both ways. It's an outcome-based. We don't call it fixed price anymore. It's an outcome-based, as I said, value creation is a key. So outcome-based project only work when you know -- when as a customer, you know what you're asking, what you need, right? -- then yes. And it's beneficial for us that if it is an outcome-based project, I can deploy junior resources as well with AI assistant and my cost is really low, and I can do more with less because when I'm in a staff augmentation business, everyone needs 3 to 5 years type of people and how many 3 to 5, then for the growth, I think this is an amazing opportunity. That's what I said, outcome-based projects where you can leverage and train more people, and that's what is happening, and we are excited about that.

A few questions from [indiscernible]. It's what percentage of new revenue can be attributed to? You mentioned almost everything is now integrated. With respect to order book, it's still focused towards smaller tickets with only one $25 million [indiscernible]. What initiatives has the company taken to secure bigger contract sizes? Any big names hired?

No, if you look at it, like it's not like smaller tickets. Like if you look at it, there's $25 million, there's $10 million, there are many entering into $5 million customers. There are many doing $1 million to $5 million. So...

He is saying just one $25 million ticket, he wants more of them...

But if you have more of them, then you will say there is more dependency on one, right? So we have to be bigger as well. Our revenue needs to support that as well. So yes, we will have more customers as the revenue grows, as the revenue profile keeps increasing, these -- because nobody can grow without growing existing customers. That's absolutely the clear strategy. Right now, existing customers are not gold mine, platinum mine, whatever you say. Whoever is customer is the king because you can sell these new technologies, you need AI initiatives and you are on top of their customers. So existing customer growth is our top priority because it's -- right now, it's a gold mine because, as I said, every customer has to be pushed or is pushed to transform themselves. So we are like laser-focused and making sure that we keep moving the tiers within the existing customers, right? So that is absolute priority for us while we open new accounts as well because we need to keep adding, as you said, a smaller ticket customer. But our approach is very different now. What it used to be 5, 10 years ago, we were spray painting and we were signing any account with any value, right? Now, we sign a smaller ticket customers, but we sign only those customers who have a potential to go up to that value chain. We are not signing a smaller customer or a smaller ticket size customers anymore who does not have a future potential to grow. So like what I say we hire for the future, we also hire -- like we also choose customers based on their strength in spending money consistently with us because that is the key, consistent, sustainable revenue, not one-off transactions. So next, there are also exceptions to that rule. If it is strategic, if it is very innovative and if it is small and we are going to learn something, we will always go for it, but those are exceptions to the rule.

Okay. We know that there's a question from Osama. We know Saudi has scaled back the size and the pace of projects such as NEOM. Given this, does the company foresee any need to diversify its regional exposure? Or are there any plans to focus on other geographies to offset the potential slowdown in the Saudi projects?

I think we always look for it. If you look at our strategy slides as well, we said the new service offering, new geographies, double down. But I think Saudi, we are very small. Like yes, he's right that there are a few government slowdown, but this slowdown is cyclical in Saudi as well. It will -- they are the largest spender in GCC by far. So it will come back again for sure. I'm very confident. But yes, we are also looking at other geographies as well, wherever we think there is an opportunity, we will double down on that as well in the future, and we will keep sharing the news with shareholders.

Okay. Where do you see Systems in the next 3 to 5 years after incorporating AI? How would you tackle the technical debt that comes with AI when incorporated in development? I think I'm not too what sure actually -- I was -- first, let me ask this question. The company has developed AI use cases to drive growth in the banking and financial services, telcos and retail verticals. What is the strategic plan for investing in the scaling -- in scaling these initiatives? And what key performance indicators are being used to measure the return on these investments and their contribution to overall revenue growth and profitability. I would also like to augment personally a question on this. I've seen -- I was reading to a few articles that globally, the BFSI vertical, which accounts for more than 30% of systems revenue, it's not witnessed the kind of slowdown that other verticals have witnessed. So if you can basically answer it jointly.

No, sure. I think BFSI vertical has not shown, even telco has not shown the decline as well. So these verticals as they are -- as I said, banking has to innovate for Gen Zs and for the new offerings and everybody wants to capture the market share, the hyper-personalization, AI, all of these things are kicking in. So these sectors, I have not seen a slowdown, and I don't see any reason to be slowed down as well because these financial institutions are making money. And if they want to keep making money and don't be disrupted by these digital fintech because they have the biggest threat for -- with fintechs and other things that is revolving around them, right? So they need to be continuously innovating and coming up with the product. So they are also -- have an agility, nimbleness to compete with these fintechs and the disruptors in this space, and they need to be collaborating with them. So -- so I think that is definitely, I think, be there. And I don't see any -- I don't see at least from my discussion with customers, don't see any slowdown in this type of a discussion.

You basically is also asking, are you making a return on these investments and the...

Yes, of course, of course, all the use cases that goes because it's a FOMO, right? So all the use cases don't get productionized, all the use cases don't get scaled, right? So once we develop the use cases, there are a few use cases that just remain at POC, but few definitely go to the production level and we scale and we measure the ROI as well because that's how customer sees the benefit because in AI space, it's not about doing just the use cases. It's about value realization model. That's the concept that it is being used that if you don't have value realization model and if you can't assist then you can't predict the behavior. And if you can't predict, then you won't be able to ask for more investments for new management. So this is the key crux and that's the pitch we give it to our customers. Don't just say that I want to do 10 use cases. Let's look at it first for value realization that if it happens, will you be able to scale first? The first question is that, is it scalable? Will you be able to have a change management in your organization? Will you be able to measure it and how you are going to monitor it? So these are the very basic consulting questions we ask every day.

Okay. Now this question is the most asked question these days from any IT company. And I also had planned to ask this one. Do you see the automation of code generation programming through AI a risk to your business? Globally, a lot of technology servicing companies like Accenture have seen a decline in their growth stock price due to this trend. How do you see it impacting Systems? Now a few of our clients also asking this, they're saying ChatGPT can do many things. So the coders, jobs are being replaced. And a lot of clients are most concerned about this. So if you could deliberate it on.

Yes, I would definitely -- I think it's not a new concept, like low code, no-code environment when it came up with -- this was the same theory that it's a drag and drop, you can design any workflow, you can do RPA and everything will be replaced and you won't need any human being to do it. But what I would say now with these tools that GPT5 and this -- like you're saying, that's what I use a vibe -- vibe means this, vibe coding is this. That's what we call it vibe coding, which is what you just asked the question, if you have to Google, you will find it more collateral on it. So we are using it to optimize and bringing the efficiency and productivity into our developers, but you still need a seasonal developer because we are not implementing websites, right? We are not implementing like a very small size ticketed application, which can be done by this. We are doing only enterprise work and very complicated enterprise work, right? So yes, you can increase your productivity by 10%, 20%, 30%, but it's not like AI can't even just go into your shoes and think, okay, financial trading system can be entirely developed by code generation button you write and -- yes, you can get the skeleton of trading system if you are a trader, but still you need to do a lot of plumbing, a lot of integrations a lot of data, a lot of guardrails, a lot of code and security. So yes, your productivity is much increased by these tools. And that's what I said, we are reflecting that in our pricing as well. We are not saying that what I used to do like $100 work in $100, we are going to do that work in $80 because of these tools and the technologies that is supporting our people. And that's what the name of the game is. If I say that I was still going to charge you $100, which I used to charge without AI, I will be out of market. So that's why we are pushing our people to be trained in that. And I think that has created a lot of new opportunities because of that because it's without -- simple stuff, you are right. But the complex work and the packaged application deployment, if I say core banking application Temenos, AI won't be able to deploy core banking on a one button ChatGPT, right? It's not possible, right? Core banking is core banking, your complex ERP. There isn't -- of course, there will be productivity gains, but you still need domain experts. You still need a lot. So there are new people and new roles are emerging. You need a good plumbers. You need a good plumbing. You need a good integrator. You need to have a good thinker who can understand the generated code and put 2 plus 2 together. So it's a lot of new jobs being created while easy job website creation, the content creation is being replaced or displaced. So that happens before as well when Internet came in, everybody was doubting about e-commerce and all the stuff. When cloud happens, everybody was doubting about the security. We still doubt in Pakistan about the cloud, right, where people -- so there will be always doubt, right? You are on mute, Zubair. Zubair, you're on mute?

I think to put things into perspective, this is the real reason where everybody is concerned on the kind of revenue growth you see because underlying at the back of everybody's mind is that this disruption, how -- what kind of the scale and what would be the impact of on revenue. So let's move forward on it. I think this is...

Customers are gold mine right now. So every customer is asking for more, not less. It's very, very obvious.

Understand. Are you confident income tax regime will be extended in the next budget?

Sorry, what?

Are you confident income tax regime, basically...

I think so far, it has been told that it will be, but -- and it should be because that's the only sector that is we all have hope and I think we still are in very infancy stage. The numbers are not as per our population and as per our talent in the country. So we have to make sure we reach the true potential before we try to change anything which can disrupt further.

It's still 10 months from now to the next budget. So we -- a lot of time. With AI and freelancing continuously growing, how is the company mitigating the risk of losing their employees?

It has not changed. I think it was before as well. It's the same. I think we keep training more people. And we have accepted this as a challenge, and we have built the mechanism to take care of that because it's going to be the same and similar, and it will happen. But there is -- in freelancing world, now people are realizing as well, it's not a consistent growth as well because you get one project and then you after 6 months, you're free, right? So I think it's a lot of realization happening. And I think we keep training people. I think there is no solution for it. If you ask me today, will anyone have a solution other than mentoring and training more people and having a constant strategy for recruiting the best people. I think that's the only way. You can't stop everyone. But our numbers -- our attrition numbers are low, lower than last year, which shows me that less people are moving.

Okay. Recently, Systems launched AI-powered assistant AI Hami, how much this new development will contribute in revenues? Are there any other projects like Hami AI assistance going around?

I think these projects are not for -- I think these products, we are not like -- we are one of -- this idea was by 3 other co-founders. So we are one of the -- we are the engineering company in that rest. We are not counting those ideas for revenue. It's for valuations, largely and also showcasing the world that what kind of work we do and what are the capabilities that systems has in the AI space. So this is more of like an innovation hub that we can show to the world that these type of disruptions and innovation can happen in Pakistan and systems is at the forefront, right? So that is a message. And these are start-ups, yes, it's -- honestly, this is what the purpose is that if there is 1 or 2 good ideas, we are doing this kind of work. And if it clicks, it will be a huge upside, but we don't count it in our projections of revenue. It's just an upside when it happens, it will be an upside.

Great job on the health care AI partnership with Boston. I would like to know if Systems management is actively planning to transition from service provider to launch its own product same as OpenAI. Let's move on. Can you talk more about -- okay, there is a question from Matthew. He says, what is the approximate cost advantage for a newly qualified employee and a senior employee, say, 10 years experience versus Indian market?

Generally, we are 30% cheaper generally. 30% -- in every category, generally. Maybe sometimes 50, but less than 30%, no; 30% to 50%.

Okay. Why cash generated from operating activities have declined Y-o-Y.

Operating, sorry?

Operating cash flow from operating activities have declined year-on-year.

Yes, we -- our DSO is higher. Like if you look at it, it is a little bit higher, and we are working on it. You will see a great improvement in the next half.

Why can't Systems develop a core banking system for banks in Pakistan?

If somebody sponsors it, definitely not on our own.

Okay. A follow-up on efficiency and pricing. What kind of ROIs are you seeking your customers are getting? And how is that distribution looking? What kind of ROIs are you seeing, your customers are getting and how that distribution looking.

ROI -- 10% -- 20% savings from AI tools that what you can say customers are seeing. Generally, again, it's not a rule of thumb.

Systems has consistently maintained healthy dividend payout ratio, which is attractive. At the same time, you've emphasized reinvestment in AI, talent and M&A activities. How do you strike the right balance between rewarding shareholders in the short term and investing aggressively in the future?

I think we have a pretty consistent policy or not the policy, policy may be the wrong word, but the guidance that you can see what is happening from the last 10 years. We at least distribute -- at least distribute 20% of our profits to shareholders and 80% we reinvest in our growth. So that's a general guideline, I would say, that -- and past is a reflection of current and future. So I don't see any reason that we can't afford that much either because I think shareholders are very generous enough that allowed us to invest 80% in our growth. So I don't see any reason. It may be 10% here and there, may increase, decrease, depending on whatever we do, depending on...

On who are your main competitors regionally or locally for contracts that are awarded or lost by Systems?

Lost?

He's asking who is generally your main competitor in the region and locally also.

Locally, we do lot of business. So locally, there is no one competition. There are many competitors who are doing different, different things and compete with us in a different area. I think in the region, you should be happy that now we are really like working on the Tier 1, TCS, competition, Wipro, HCL, Tech Mahindra, all of them, we are head-to-head in every proposal. If they are in Cognizant, we are in as well. We lose or win, that's different, but we compete with them generally. Now all the big SIs, Indian SIs, we're competing head-to-head, and we won many as well, and we lost many as well. So Infosys, now Accenture, even PwC, I think EY, we are in that race. We have built that scale in the region, not the global, not the North America and Europe part -- but in the region, yes.

In the region, you mean Middle East?

Middle East, yes.

Okay. There's one question that I wanted to ask. From a foreign policy perspective, we have seen that a lot of tariffs have been imposed on export of Indian goods. Now the biggest -- one of the biggest things that Indian exports is the services export. They do about $100 billion. So although there is no tariff on services exports per se, but that's a change in foreign policy from the U.S. towards India. So previously, their H1, N1 visas for skilled IT workers. So if once that has changed on the goods side, though there are no upfront tariffs now on the services side, is that anything that you think that people sitting in the U.S., if I were to acquire new services, I would like to diversify my procurement of services. So can you -- or are you experiencing some new queries that people looking to maybe a slight bit of diversify their procurement pool?

I would answer this in a different way. I think it's too soon to judge that. It's just recent development, and you know these development changes as well as things move along in the foreign policies. So this is too soon to judge. But what I can say, the trend that has changed is that Pakistan positioning as a country has been from negative to neutral to positive, right? And that's what is the -- that's a game changer, right? Because we were getting -- not getting a lot of work even as a disaster recovery BCP center, like if somebody wants to outsource their 90% of the work to one country and then 10% to Pakistan, even Pakistan was not considered to be 10%. So now I think with this kind of positioning, region definitely better, but from West side as well, I don't see any reason that we can't increase our share from foreign policy perspective, right? Whether tariff comes or not doesn't matter, to be honest. Yes, if there is -- I don't think so tariff will be because nobody can judge what's going to happen in U.S. and what the policy is. But if it happens, of course, we will be the huge beneficiary. But if it doesn't happen, even if we continue to do the soft diplomacy, that is what we are doing, I think it will be a game changer.

Asif, we are like at the moment, we are exporting around $300 million monthly of export of IT service. And India does about $8 billion alone or monthly to the U.S. So we are this tiny. And if we get a small spillover, the question is, do you think that we can get a smallest of the spillover...

Definitely, I'm very confident, very confident. [indiscernible] reason it should not happen.

Okay. Okay. And I think now we are already running ahead of time. So last 1 or 2 questions, let me get it.

Zubair Is asking too many questions of his own created, right?

I think mostly I've asked -- and this I think was quite important, the H1 [indiscernible] going forward, the company sees further exchange gains, I think that's not relevant Systems portfolio...

I hope so.

Systems portfolio is beyond the technology regardless of the specific vendor or technology or we have only specific technologies where we deal only.

We have diverse portfolio, everything. So we are not all eggs in one basket strategy.

Okay. I think mostly it's done. Until -- okay. I think most of it has been attended. Apologies if anything else has been left out. Thank you, everyone, for joining it. Thank you, Asif. Thank you, Roohi. Thank you, Tahir. And thank you, everyone. If you have any follow-up questions, you can reach out to Insight Securities and both Systems Limited, and we will be happy to answer any of them. So until the next time, goodbye to all of you. Take care.

Thank you, everyone.

Thank you.