Pelatro Plc

Ladies and gentlemen, good day and welcome to Pellato Limited's H1 FY26 earnings conference call. As a reminder, all participants' line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the management's remarks. If you need assistance during the conference, please signal the operator by pressing star, then zero on your touchtone telephone. Please note that this conference is being recorded. Before we begin, I would like to remind you that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the management as on date of this call. These statements do not guarantee future performance and involve risks and uncertainties that are difficult to predict. I would now like to hand over the call to Mr. Rishabh Rathore from Confideli Partners. Thank you and over to you, Rishabh.

Thank you. Good day, ladies and gentlemen. My name is Rishabh Rathore from Confide League Partners. I warmly welcome all the participants joining us today for H1FY26 Earnings Conference Call of Palatro Limited. We are with us Subhash Menon, Chairman and Managing Director, Sharad Hegde, Chief Financial Officer. I now invite Mr. Subhash Menon to share his opening remark on the company's performance for the first half of the financial year. Thank you and over to you, sir. Thank you, Rishabh.

Good afternoon, everybody. It is indeed a pleasure to have all of you join our call today. Thank you very much at the very beginning, and welcome to the call. The idea is to present our deck. The deck is on the website, as well as it's been sent to NSC. It's been uploaded in all the relevant places. So I'm sure you all would have had access to the deck. In case anyone has any doubt on the location still, please go to our website, financial.com, and go to the investor section, presentations, and you will find the latest deck there. That is FY2526, H1, investor presentation. I will now take you through the deck, and at the end of that, that will probably take about 10-odd minutes, and at the end of that, we will throw the floor open for questions. The initial section will be handled by me. I'll just share the financial highlights and some cash flow trend and general highlights about the business, and then I will hand over to my colleague to take you through the depth of, you know, the financial in-depth. Now, if you look at the deck, I mean, the first slide, of course, is a title slide, and the second slide is a safe harbor, and so we start with the third slide. As an introductory remark, I would like to share with you that the business is chugging along exactly in line with the expectation. We are quite excited with the possibilities, and we are quite happy with the way things have been turning out. whether it's with respect to new contracts being won or execution or product capabilities being built, appropriate recruitment happening to support all of that. So on all fronts, I think we are going very well, and we see very interesting times ahead both this year and in the coming years. Now, that is becoming obvious from the highlight, which is slide number three. That's where I am now. The highlights of the revenue and the highlights of the half year, which is basically the revenue, EBITDA, PATH, and EPS, as you will see, revenue went up by 58% as compared to H1 of last year. Now, as you all know, in our business, the sales cycle is very long. Implementation also takes time. Sales cycle is like 10 months plus. Implementation is 6 to 8 months or at least 5 months. So given all of that, you know, a quarter is actually a very short time in our business. It's not a long time at all. So the way to look at our business is to look at it from an annual perspective. That is why the year-on-year growth for any period, whether you get a quarter or a half year or the full year, the year-on-year growth is what you have to be focusing on and not so much the quarter, you know, Q1 to Q2, Q3 to Q4, I mean, sequential growth in the quarters. So that's why we are focused on the year-on-year growth here. So in H1, as compared to H1 of last year, our revenue grew 58%, our EBITDA grew 59%, and our PATS grew 63%. The exact numbers itself, my colleague Sharath will read out later, discuss later. The important aspect that I would like to focus on here is the non-linearity being established further or being demonstrated further by the business. As you can see, while revenue grew 58%, path grew 63%. So this will continue to happen, you know, as the business progresses. That's the non-linearity in the business that we are talking about as in any good product business. The next slide talks about the segmental financials. This is the first time we're giving segmental because segmental We just acquired SL a quarter ago, and the effect of that came into effect on 1st July, so it's just a quarter. So it's only for Q2. So the numbers that you're seeing here, although we talk about H1, the SL division number itself is only one quarter, Q2. That's being explained there. On the revenue front, we had a very, very good, we had excellent revenue on the CVM side, And we spoke about the kind of growth we had earlier and on EBITDA as well. So on the EBITDA side, we are now at 23.8% of EBITDA. This is up from the whole year last year of 23.1%. So EBITDA is also improving. Another very, very important aspect I would like to touch upon is the next slide, which is the cash flow trend. Now, you would have noticed that, you know, as the business has been growing, cash flow has been a bit slow in catching up. That's a reality. Now, that situation is changing. If you look at the last financial year, 24-25, the average quarterly cash flow situation was negative 4 crores. So every quarter, on an average, because we do have a little bit of, you know, if one particular large collection slips by two days, it goes from one quarter to the other quarter. So comparing quarters, once again, here as well, it's a bit difficult for us. So we are looking at an average quarterly number on the cash flow front. It was minus four in last year for the four quarters, minus four each quarter. Now for the last two quarters, it is minus one each quarter. So there's been a tremendous improvement. So the negative cash situation has come down by three quarters. It has come down to one quarter of what it was. And I'm absolutely confident that in the coming quarters, it will swing to the positive side. So the business in the initial years, we were slowly catching up. Profits were low. And, you know, revenue was rising. A lot of investments had to happen. Nonlinearity had not kicked in. Now all those elements are changing. We have a higher profit now, profitability now. Nonlinearity has happened. Revenue is growing very well. It's at a decent level. With all that, the cash flow situation is now starting to turn. So you will see a positive cash flow happening in the coming quarter, and certainly for the next year, we will have, for the full year, we will have positive, we'll have free cash flow from the business. So that's an extremely important aspect that I would like to stress upon. And the next slide that I would like to touch upon is with respect to the general highlights of the business. Now, this is a very, very important slide, as important as the numbers itself. This shows the predictability of the business, the possibilities of the business, and how we are seeing the very quality of the business, I would say. So if you look at that, you will see that as we speak, for the year 2025-2026, our contracted revenue is – what we have contracted is 100% of the target revenue, which means We have an internal target of what we would like to get as revenue for this financial year, 25-26. Whatever that number is, of that number, 100% is in the bag as we speak. All of that has been contracted. We only have to execute and recognize that revenue, which will happen as has happened in the past few quarters. At the end of quarter one, this was at 96%. It has improved further in this quarter. And now, so we are only halfway into the year. And at that point in time, we have full visibility for the full year. Even more interesting is the fact that for the next year, 26-27, we are at 59%. So 59% of all revenue that we are hoping to recognize in the next financial year, 26-27, is already contracted. Now, this number was 49% at the end of quarter one, so that has also improved. So this shows predictability in the business, stability in the business, and all of that. Now, moving to the average revenue per customer, this is a metric that we have been tracking. We were at 2.74 crores per customer at the end of quarter one. It's now 2.77. You will see this improving slowly, but there will be a regular improvement. And finally, we've been talking about the revenue CAGR expected over the next three years, 25% to 30% is what we are expecting. So that's with respect to general highlights. I will not talk about the product specifically because this is a repeat of the last quarter slide. If anybody needs any clarity on that, you can ask during the Q&A session. because for others it will be a replication. For the next two slides, the first one is on the CVM division, and the next one is on the SL division. So as you all know, we operate as two different divisions now, CVM and SL, consequent to the acquisition of the SL business. The next slide is about the revenue model. I would like to hand over at this juncture to my colleague, Sharath, who is the CFO. He will take you through the remaining slides.