Thank you, Srini. Participants who wish to ask a question, kindly click the raise hand icon at the bottom of your screen. We will wait for the questions to assemble. We take the first question from the line of Manik Taneja of Axis Capital. Manik, your line has been unmuted

Thank you for the opportunity, and congratulations for a great performance in the current quarter. I just wanted to get your sense on two things. Given that the BroadPath business also is largely linked to the open enrolment business, do you think the reve nue seasonality will probably be much higher this year compared to what we've been accustomed to in the prior years? And similarly, from a margin standpoint, if you could call out the different percentage on margins for second quarter FY '26. And once again, given some of the growth leverage that you will enjoy in the third quarter. How should we be thinking about the margins playing out in the near term? And while you've increased year outlook for margins for FY '26, it would be great to understand how are you thinking about margins over the medium term? Those would be my questions. Thank you.

Hi, Manik. Thanks for your questions. First, on BroadPath, yes. Like we mentioned, when we acquired BroadPath, a substantial part of the business is towards helping clients acquire newer members during the AEP for Medicare, right? So and that seasonality for them is more pronounced in Q3. Whereas our open enrolment traditionally was a little more pronounced in Q4, right? So to that extent, yes. Q3, is likely to be a bigger quarter for us. And, like I said, the AEP season has kicked off from the 15th of October, and there's a lot of action going on as we speak. So, yes, the contribution of BroadPath or the seasonality. If I just look at BroadPath's revenues, their seasonality is heavily skewed in Q3, and their revenues actually dropped in Q4. Whereas, the traditional Sagility's revenues are both, high both in Q3 and Q4. But Q4, traditionally, is a slightly better quarter for us than Q2, right? So that both those effects will basically mean Q3 and Q4 are both likely to be good quarters for us as a whole. Your second question on margins. Like I said, we've kind of given the momentum we are seeing. We've increased our adjusted EBITDA margin to closer to 25%. However, look Q3 while the contribution from BroadPath will be higher as a percentage of our overall revenue. And as you know, while it is seasonal and likely to generate better margins for BroadPath than other quarters. As a whole BroadPath margins, as we've discussed in the past are much lower than Sagility's margins, right? So the higher proportion of BroadPath revenue might dampen the margins a little bit in Q3. That's why we are guiding more of a 25%, for the full year. Otherwise, if you look at our Q1 and Q2 performance and look at a traditional Q3, Q4 performance, it could have been even higher, right? But BroadPath's outsize contribution in Q3 will dampen margins a little bit. And then the medium term question that you asked. Look we broadly maintain that our margins will be in the 24% to 25% range. When we are acquired BroadPath, given that the margins were lower, we did say that it'll dilute our EBITDA margins anywhere between 120 and 150 basis points, which is happening as we speak. It is not reflecting the overall margin because the underlying the traditional business is being more robust. Some of the cost initiatives, like we mentioned are playing out. Some of the transformation that we are doing, like I've historically said, while a large part of the savings from those transformation we pass it back to the clients. We also manage to retain some part of those savings. And that's also helping us improve our margins. So overall, I would continue to be bullish on margins. We'll guide closer to the start of every fiscal year. But I would think the 24% to 25% range would be at least our baseline goal, even in the medium term.

Sure. Thank you, Ramesh, and wish you all the best.

Thanks, Manik.

Thank you. We take the next question from the line of Ruchi Mukhija from ICICI Securities. Ruchi, your line has been unmuted.

Thank you for the opportunity, and congratulations on good set of number. I truly appreciate your disclosures on AI. I have couple of questions here. In the AI case studies that you disclosed, from existing client you promised 20% saving. For a regional client they were 25% to 40% saving now committed. Is that a secular trend that you see more savings in new account versus existing? Is this some trend we see?

Thanks Ruchi for your question, right. So in this case, I mean, first, I might not have been very clear. All these case studies are with existing clients, right? So it's, even case two, is for an existing client. The nature of savings depends on the kind of work that we are doing, and also on the scope of work, right? So this is, the second client, the savings are much greater. Because the use case for GenAI there, we believe is likely to generate a much greater cost savings than in case one. Secondly, in the second case, while the bulk of it is GenAI, when we look at the overall scope, there is also some re-shoring that might happen. So we might be able to also provide the client some saving by moving both from higher cost to low cost geographies as well. But bulk of those savings come from GenAI. And GenAI based savings are likely to be different depending on the use case where we deployed.

Okay. You talked about difference in pricing between AI agents and FTE. Could you now help us understand, quantum of the difference even qualitatively?

That's a good question, right? So if in engagements, for example, I'm just on the flight trying to give you numbers. It depends on where the human agent is currently working from, right? So if you take a traditional offshore geography, the broad math woul d be an AI agent could probably be anywhere between 25% to 35% of a human agent. Whereas the same AI agent, if the human were to be based onshore, could be as low as 10% to 15% or 10% to 12% of the human agent, right? So it depends on, what base you're comparing with whether the human agent is onshore or offshore.

Okay. The last question is for Srini. Could you quantify how much was the currency led tailwind in the current quarter to our operating margins?

The average FX rates in Q2 was much higher than the Q1. The impact was almost 1.1% improvement in adjusted EBITDA close to about 6 million.

Thank you. All the best for the future.

Thank you.

Thank you, Ruchi. We take the next question from the line of Chirag Kachhadiya from Motilal Oswal. Chirag, your line has been unmuted. You can go ahead.

Yeah. Hello. Congrats on a good set of numbers. Just one question. You mentioned, during the quarter, we have benefit of AI into our margins. So if you can quantify like, what benefit in terms of this point we have due to Generative AI or other efficiency led measures. And also, if you can clarify like, what pass on from this benefit we have given to the clients. That's all.

That'd be very difficult to give a specific number saying how much did AI help in improving the margin, right? So the overall reason why I gave some case studies is also to help all of you understand how GenAI, not only how are we using GenAI in deal constructs, but how commercially it also plays up, right? If you look at my three case studies, case study one also used GenAI, but it'll be very difficult for me to say what revenue did they generate purely from GenAI, because it's not a completely automated transaction. It is assisting humans improve their prod uctivity, right? So it's very difficult to kind of attribute specific numbers. In case two, yes, some portion of the revenue could be attributed directly to GenAI, because I'm charging separately for a GenAI based transaction where there are no human involvement, right? So in our business, it's not very easy to very specifically quan tify that this is the revenue that GenAI is either generating or this is the savings that I'm making purely because of GenAI.

Thank you. We take the next question from the line of Abhishek Kumar of JM Financial. Abhishek, your line has been unmuted.

Good evening, and congratulations on a good quarter. My first question is on the ACV number that you have started disclosing for last two quarters. I just want to understand what to make of this, because what you were disclosing is, $32 million to $34 million ACV per quarter, while our quarterly revenue run rate is now close to $190 million. So, is it just the net new and this will result in incremental revenue, as we move forward, or I mean, just a definition of ACV will be helpful.

Yeah. So thanks, Abhishek, for your question. Yeah. So, essentially, ACV is annual contract value, right? So and what we are disclosing is additional revenue, right? As you know, in our business, bulk or almost all the revenues is recurring revenues. So we don't include any renewal of contracts in this number. So all of these wins are essentially incremental revenues. And in the normal course of business, $32 million ACV should generate $32 million over a period of four quarters, and it should be recurring year-on-year, right? However, one caveat to that is in our business, I mean, ACV is a little indicative, right? So client might commit to giving us a certain proportion of their business, which could mean certain volumes. But these volumes are not cast in stone, right. So the volumes can go up, volumes can come down. So it's not a very hard coded ACV number. So this is the directional ACV number based on the scope of work that the client has committed. But, it could go up or come down. But broadly, yes. This is the revenue that these new deals will generate over the course of the year. And then, it's likely to continue to recur in future years.

Sure. And given there is, ask from your client to pass on productivity, AI, or otherwise. As you've indicated earlier, some part of this. So, I mean, it's not as simple as $120 million gets added next year, and so your revenue will be higher by $120 million. There will be some deflation on the base business.

Yes. That is also true. And also, look, what I want in Q1, I will start generating some of that revenue in Q2, Q3, and Q4, right? So it's not going to be directly additive only in the next year. Part of it will flow through in the current year's growth as well.

Okay. One last question. I think last quarter, Ramesh, you mentioned that, when you talk about low -to-mid teens growth, you also build in 1.5 odd percent of AI led deflation every year. That's big then. And now, since you have started using AI to get more business from the three use cases that we saw today. Do you think that calculation, needs a rethink, and now we can actually at least that 1.5% will go away? Any thoughts on those lines? Thank you.

Yeah. It's a good question, Abhishek. Again, look, it's a mix of things, right? Even in the use cases that I spoke about, I'm taking a certain portion of the work that I'm already doing. The scope is being increased by either adding upstream processes to that or adding more volumes to what I already handle, which is basically means clients giving me some of the work that they are already doing. On the whole portfolio, I'm committing a savings, which means a portion of the work that I'm already doing, I'll be cannibalising a part of that revenue. But I'm replacing it with additional work that the client is giving, right? So it's always going to be a mix of that when I'm dealing with existing clients. Of course, when I go to a new client and I pitch a completely new service and I bundle the upfront cost commitment, then I will reflect it in the ACP values that I recognise. And so that is not going to be considered a cannibalisation. But with existing clients, there's going to be a mix of cannibalisation plus additional work that I get. So, I don't know if that's what you are hinting at, but so the cannibalisation will still continue to be there. What percentage, it's going to be is ob viously we'll have to wait and see how it plays out. But even this year, there is cannibalization one, because of all of these technologies transformation. But in our business, there's also cannibalisation when we don't lose work, but the client suddenly asks us to move certain piece of work that we're doing for them from an onshore geography to an offshore geography, right. We retain the same business. We re tain the same SOW. We retain the same volumes. But now I'm delivering the same piece of business rather than which I was delivering at $100. Now I might be delivering it at $60, right? So there are various forms of cannibalisations that happen in our busin ess. And so the growth that we ultimately put out is net of all of those cannibalisations.

Sure. That's very insightful. Thank you and good luck.

Thank you. We take the next question from Raj Vyas of Motilal Oswal. Raj, your line has been unmuted.

Yeah. Hi. So, first of all congratulations on a very good set of numbers. And, in terms of your slide with respect to the excise, this 25%, this tax. So wanted to understand if it gets implemented or something, we will definitely have a margin compression. So, if we can give some numbers, if it gets implemented, then how much of the if it gets affected on the margins for Sagility?

Look, it's not that something we will absorb completely, right? So this is going to play out. First of all, I mean, upfront, I want to say the likelihood of, something like this getting implemented is low. But, yeah, nothing can be ruled out. This is not s pecific to, firms like us. It's going to impact every outsourcing business, including IT services and firms like us. And thirdly, we deliver from multiple geographies. Is this going to play out? Is it going to be the same level for all geographies? Is it going to be different? We don't know, that also. And, fourthly, to your point that all of these costs will be absorbed by us is also untrue. So we will have to sit down and negotiate with each client. Obviously, there'll be some amount that we may have to absorb and some we may be able to pass on to clients. So it's going to be a mix of all of that. So at this point, I don't have a specific number. But, if it looks like, this is something that'll pass, we will come back with a more definitive number.

Okay. Secondly, as we have mentioned in the previous concalls as well that, Q3 and Q4 are the seasonally typically the best, at the strongest quarter due to this U.S. open enrolment cycle and Medicare advantage sales. So how we are looking forward for the next H2 FY 2026 and also I've missed the revenue guidance that you have mentioned. So could you please share that as well?

Yeah. So let me give the guidance, right? Previously, we are guided to see the organic constant currency growth of low to mid -teens is a range that we are still committing to. That's the same numbers we had given earlier as well. But combined with BroadPath, we had said, we'll be north of, we we'll do 20%, is what we had guided. Now we are saying we'll probably do 21% plus. So we are increasing that by 100 basis points or more.

And the question with respect to, the seasonality as Q3 and Q4 are typically, seasonally good. So how we are looking for the H2 FY 2026? Can you throw some light on that?

Yeah. We discussed that, right? So BroadPath will have a seasonally strong quarter in Q3. And, Sagility also will have a better H2 compared to H1. So if you look at historically our business, if you look at the revenue split, it's roughly 53% to 54% in H2 compared to a 46% to 47% in H1, right. So that's the typical split of our revenue. So that will continue for us, and that's pretty much, what will be the case for BroadPath as well. But in BroadPath's case, it might be even a little more sk ewed. I don't have the exact numbers, but the 53 47 or 54:46 that I'm talking about for Sagility. For BroadPath, the skew might be even a little more.

Okay. So thank you. And, that is from my side.

Thank you.

Thank you, Raj. We'll take the next question from the line of Rishi Jhunjhunwala from IIFL. Rishi, your line has been unmuted.

Yes. Thank you so much. So firstly, in your past experience of years when there has been significant INR depreciations, in the following years, how have clients reacted to it? Have you been asked to pass on the benefits of currency to them in any formal ma nner, or do you think they generally do not interfere with currency movements, when it comes to year end or year beginning pricing for the next year? How have various cycles of, and our depreciation played out for us?

Hi, Rishi. Yeah. Good question, right? So in our business, two things I will comment, right. One, clients all of our contracts are negotiated in U.S. dollars. And as a rule, I can't think of any client where we have a COLA clause for any of our offshore de livery, right? So clients don't pay a COLA. So, essentially the cost is, their cost is spent in dollars. And so they do understand that given the inflationary impact in some of our delivery geographies, currency movement is a lever that we need to use to tackle those inflationary impacts, right? So typically, most clients deal in U.S. dollars. But then given like we've discussed, given all of the transformation levers in play, they're constantly looking to a cost reduction from their current dollar pricing. So they always deal in dollars, and they also don't get involved in cost of living adjustments in offshore geographies.

So, sir is it fair to assume that, the fact that most of the companies across IT services and BPO services are incrementally facing pressure on AI productivity to be passed on to the customers. This rupee depreciation will help offset some of those pressures. And as a result, the impact on absolute EBITDA on that in future years may not be as accentuated if rupee remains stable?

Look, the rupee depreciation is not a new thing, right? So the rupee depreciation has been happening over the years. And like I said, some part of it helps us overcome the cost increases especially in our business, salary increases every year has to come out of that. But to a large extent, we rely also on efficiencies that we generate in our operations to fund the rest of the gap. We don't just rely on currency movements to retain stable margins. We also focus a lot on efficiencies, right? And like you said, AI helps us is another lever for us, right? Rather than just, operational efficiencies, which is more staffing efficiencies and other productivity improvements. Today, I can use AI to also generate additional efficiencies. Granted, I can't keep all of it to myself. My clients want a large part of it. But I still can't retain a part of it to offset the cost increases, right? So and remember, I operate from multiple geographies. We always think of depreciation from a rupee point of view. We've had several years where the Philippines pesos appreciated with respect to the dollar, right? And we still have to manage that and still try and keep our margin stable, right? So yeah, I mean it's a play involving a number of currencies that we have, Jamaica and so on. Yes. In some years, it benefits us. In some years, it cannot benefit us much. But our constant endeavour is, is not just to rely on currency, but also on our own internal efficiencies.

Right, sir. Thank you. The other question is on capital allocation. So now you've announced an interim dividend. How do we think about capital allocation slightly from a medium term perspective? Do you think that the quantum of dividend is going to sequent ially improve? And is there a particular payout that we should expect, say, one year, two years, three years down the line?

We haven't specifically pegged a percentage of our earnings or cash flows, right? So first of all, we want to just directionally give the message that, we want to start paying dividends. But as you know, we still have debt on our books. We still are keen on doing M&As. So we want to make sure that we have cash left to be able to do all of that. So directionally, yes. We will pay dividends. And as we extinguish debt on our books, the quantum of dividends is likely to go up.

Understood. And one last question in terms of demand, we are one of the few companies which are effectively have increased our revenue growth guidance now versus where we were at the beginning of the year. How much of that do you attribute to the underlyin g demand being better in the areas where we operate versus us potentially executing better either from a wallet share gain perspective or from a client addition perspective?

Good question, right? So look, wallet share, like I said in our business doesn't happen, that often. So, I would say our growth isn't coming from taking mainly taking wallet chat from others. The biggest thing is and we've said this many times. The market is going through a lot of change, right? Our specific clients in the health care industry, especially payers, a lot of them are going through profitability pressures. So today, the focus is how can you help me take out more cost from my operations, right? And so we are seeing clients more open to talking to us on larger deals, right? So if you're willing to give me a commitment, like the examples we gave, if you're will ing to take out 20% cost or 30% cost, I'm willing to give you a larger portion of the pie. I mean, in fact, in some of the processes, I'm willing to give you the full pie. And most of the time, the full pie basically means work that they are currently still doing, internally, right? And so that's what we think is playing out that improves our re venue growth, right? So and obviously, we're adding more clients as well. But as you know, in our business, initial years, the revenue contribution from newer clients is very small. So I wouldn't say a large part of the growth is coming from the new clients that we're adding, but they'll of course help us grow in the subsequent years. But a large part is also coming from clients willing to look at larger deal constructs, because they're under pressure to take pass out.

Understood. Thank you so much, sir. All the best.

Thank you, Rishi.

Thank you. We'll take the next question from Vams hi Krishna of Kotak Securities. Your line has been unmuted.

Congrats for the strong quarter. So just, Ramesh, just wanted your thoughts on the examples that you have given. Say, some of the larger mature outsourcers you have committed slightly lower of course, material savings. Whereas for some of the regional players, the savings seems to be slightly higher. So is there a flavour in terms of, say, the size of or the scale of clients to where the savings will be different? Or is it, across various service lines, the extent of savings will be different? And then I have follow-up.

Yeah. So, yeah, I mean, Ruchi asked the same question, right? So I mean, see, mature you're right. In a certain sense that mature clients have exhausted a lot of the traditional levers available to them in terms of cost takeout, right, both in terms of sending the work to the best geog raphy where they'll get the most cost advantage, using traditional tools like RPA, and other forms of automation. So all of that is exhausted. So anything incremental that we generate is through things like AI and so on. So the overall quantum may be slightly lower. But the answer is still it depends on the current process that we're looking at and whether some processes are amenable to complete automation, right? So if you can, if in a given process, if you can even take 20% of the transactions and 20% or 25% and completely automate them and then generate a productivity increase of 15%, 20% of the balance 75%, 80%. Then you get to the 30%, 35% cost saving number, right? So ultimately, it depends on the process that you're looking at, what percentage can be completely automated, what level of efficiencies can you generate in a human centred interaction. And also the level of maturity, right? When you do a combined deal to your point, there might still be other traditional tools that you could employ, that you could deploy to generate additional savings. There could still be some incremental shoring gains that you could get. So those may be possible in slightly less, mature cases. Whereas in more mature clients, the opportunities for those traditional funds may not exist.

Just please say so, the processes, what I understand is that maybe claims processing or say, network management, there can be a little higher disruption. So is that the right understanding, or, do you think there are other process or which are the process that you think will be relatively more resilient to others?

Look, yeah, see even in claims, right? So, for example, even in the traditional claims, the productivity of how many claims I can do varies greatly from client to client, right? It all depends on the kind of systems, claims platforms that they use, how the y've configured those platforms, what are the processes, right? What are some of the unique processing guidelines they may have, right? So all of that depends, influences what the existing productivity is, right? And so when you may look at a scenario like that and you say, I want to implement AI, then the question becomes, given all of those complexities for this specific client, what is the level of efficiency that you can generate, right? So even within claims across two clients, the cost savings that you could generate could be very different.

Got that. And maybe one for Srini. Say, what is the reason for the increase in other financial liabilities? What does this involve?

Yes. Give me a minute.

So, Srini, can you answer the question?

Yeah, yeah.

Other financial liabilities, which has increased from about ₹300 crores to ₹390 crores, so.

Yeah. Vamshi, I'll get back to you. I'll get the details and get back to you.

Okay. Thanks.

Thank you, Vamsi. We take the next question from the line of Bhavik Mehta from JP Morgan. Your line has been unmuted.

Hi, thank you. So couple of questions. Firstly, obviously, we have been growing at around low to mid-teens from an organic perspective, and margins have been going up in the organic business. And we have seen some of your peers over the past couple of year s do some growth margin trade off where they want to accelerate growth and invest in the business, which comes at a cost of margin. So given at the scale where you are, is there a thought process in terms of, maybe accelerating the growth fro m mid -teens to maybe high 10% or 20% plus and maybe dilute the margins to an extent because that will help you scale faster, win more wallet share at a faster pace. I'm just curious to know how are you thinking about growth versus margins?

Yeah. I get your question, Bhavik. Look, I don't think we're losing deals, because of our pricing and so on, right? So how much trade off do we really need to do on margins to grow? That's, I'm not fully convinced, right? But, I mean, to the question that people have asked me in the past with AI being able to generate more efficiencies that you can retain, are you going to constantly guide to a higher margin year-on-year? And our answer has always been no. We're happy staying in the 24% to 25% range. We'd rather use that to grow our business than be focused on improving margins, right? So the improvement that you're seeing in the last couple of quarters is not a conscious e ffort of sacrificing growth and improving margins. It just so happens that, whatever we've been able to retain has helped us improve margins. But, to your point, yes. We are happy being in the 24% to 25% range, but we will take all of the gains either in investing more in our capabilities or in aggressively growing revenues.

Okay. Got it. This second question is, on dividend and good to see dividend announcement coming through. If I take like a three to five year view, is there a certain payout percentage which is there in mind which you'll be comfortable with given your M&A ambitions as well? Because typically, we see mid cap IT companies give a 40%, 50% as payouts as a percent of net profits every year. So is that something we should assume for Sagility as well based on that?

At this point at the board level, we haven't narrowed it down to a specific number. But like I said, we just wanted to make a start and give a directional view that we will start paying dividends. But we'll come back to you in a subsequent quarter, Bhavik.

Okay. Got it, thank you.

Thank you, Bhavik. We take that as the last question. Thank you, members of the management. On behalf of Sagility Limited, that concludes our call for today. You may now log off the event.

Thank you, everyone.

Thank you, everyone.

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