Persistent Systems (PERSISTENT) Q4 09/10 earnings summary

Executive summary

• FY10 marked 20 consecutive years of revenue growth despite a difficult first half; business improved in H2 after customer budgets tightened and discounts were offered.

• Consolidated revenue was Rs. 6,011.56 million, flat at USD 127.31 million; net profit after tax and exceptional items rose to Rs. 1,150.24 million.

• The IPO was the year’s major milestone; shares listed on NSE and BSE on April 6, 2010, following subscription of 93.58 times the issue size.

Financial highlights

• Consolidated revenue increased from Rs. 5,938.31 million in FY09 to Rs. 6,011.56 million in FY10; USD revenue was USD 127.31 million versus USD 127.84 million.

• Consolidated EBITDA rose 60.48% to Rs. 1,575.98 million; EBITDA margin was 26.22% versus 16.54% in FY09.

• Consolidated net profit after tax and exceptional items increased 74.04% to Rs. 1,150.24 million; net profit margin was 18.78% versus 11.00%.

• Total income was Rs. 6,123.89 million; other income increased to Rs. 112.33 million, including net foreign-exchange gains and write-backs of prior provisions.

• Personnel expenses rose 10.92% to Rs. 3,687.42 million; operating and other expenses fell 49.40% to Rs. 860.49 million, reflecting the prior-year derivative loss and FY10 FX gain.

Outlook and guidance

• Outlook remained strong, with cloud computing, analytics, enterprise mobility and enterprise collaboration identified as growth priorities; partnerships with prominent vendors were expected to support expansion.

• Continued focus on outsourced software product development, end-of-life opportunities with existing customers, stronger sales coverage and expansion in Europe and Canada.

• The annual report cited an industry forecast of ~14% CAGR for R&D and product engineering services over the next five years.