KPIT Technologies Ltd
NSE:KPITTECH
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 290.2
1 868.7
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
KPIT Technologies Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the KPIT Technologies FY '23 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you, and over to you, Mr. Rahul.
Thank you, Anju. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technologies Limited for giving us the opportunity to host this earnings call. And now I would like to hand the conference over to Mr. Sunil Phansalkar, who heads IR at KPIT to do the management introductions. Over to you, Sunil.
Thank you, Rahul. Good evening, and a very warm welcome to everybody on the Q1 FY '23 Earnings Call of KPIT Technologies Limited. On the call today, we have Kishor Patil, our CEO and MD. We have Sachin Tikekar, President and Joint MD; Priya Hardikar, CFO; and of course, myself, Sunil Phansalkar from Investor Relations.
So as we always do, we'll have the opening remarks by Mr. Kishor Patil on the performance of KPIT in the last quarter and the way forward. And then we'll have the house open for your questions. So once again, thank you for joining the call, and a very warm welcome to all of you.
And I'll hand this over to Mr. Kishor Patil.
Good evening, everyone. I would like you to take you through salient features for this quarter. To start with, the revenues have grown 23% in constant currency year-on-year during the quarter, and a 6% quarter-on-quarter growth. In terms of reported numbers, revenue in terms of dollar growth, it is 16.4% year-on-year and 3.2% quarter-on-quarter. Because of the currency movement, there has been more gap in terms of constant currency numbers and reported numbers.
It has been generally across the industry. We were a bit impacted because of our higher revenue in terms -- in the euro zone as well as yen currency movement in the last month. But on the account of -- it could get balanced because of the dollar movement, which were favorable during the same time.
The overall revenue growth has come more from the pas car vertical, and large revenue growth was also driven by what we call software-defined vehicles, basically middleware and new architecture. Overall, otherwise, the growth has been broad-based. The good part about this growth is the programs, which are winning, will drive further growth over the years in other parts of the business because middleware is something. In [indiscernible] programs, you start with the middleware and then the other parts of the business follow next.
During this quarter, we had contracted engagements of $155 million, which is quite good. And overall, our order book looks good. In terms of profitability, EBITDA margins, there is increase from -- increase to 19.4% from 18.6% last year. Year-over-year, EBITDA growth is of 35.7% and quarter-on-quarter growth of 9.7%.
Now this has come, 19.4% has come in spite of the promotions, et cetera, which we have made during the year -- during this quarter. And the most -- there is negligible impact of the currency in the improvement of this EBITDA margins. Most of it has come because of the growth in the revenues and operational efficiency.
The quarter -- in the quarter 1, the net profit are at INR 85.4 million, and there is a growth of 41% year-on-year and 8.3% quarter-on-quarter. The cash, we are with a cash of INR 10.6 billion, with the 46 days of receivables, which has been the lowest till now.
Going into the other parts of the business. If you look at on the people side, we have added about 900 people during the quarter. Now with -- overall, we see as -- ease out in the market on the people side. Our attrition has looking to trend downwards. It has substantially come down in terms of what we call top performers bracket, it has come down during the quarter, and we can see that going down in the next quarter. So it has also allowed us to bring more stability in terms of delivery of the programs we are winning. We do believe that attritions may soften over the next few quarters.
We continue to connect with multiple -- we are increasing our range, our reach, both in India and outside India. In India, in setting up new development locations, growing locations outside Pune, Bangalore. We are looking at setting up certain locations outside India in many places. We are tying up with the universities, multiple universities. And that would allow us to really scale and bring the specialist talent we need in relevant to different parts of the world in different time zone and different language enabled.
In the -- for example, we have part with Coventry University for many years. And during this last few -- we work with the universities, et cetera, to change the curriculum, bring it what is more relevant to our current business and how those specializes courses, both for our -- mainly for our current employees, and that really helps us. In recognition of KPIT contribution Coventry, which is a leading automotive, I would say, focused university, very well known in the automotive world. they have given honorary PhD to our Chairman, Ravi Pandit.
On the client side, if I had to say, clients continue to change their business model. Again, from selling vehicles, they are moving towards selling more services. They are trying to see what new services they can bring to the plant. In order to enable that, they are continuing their investment in CASE and the new architecture as we call middleware and new architecture.
And that is where KPIT has really both aged in terms of both competence, domain knowledge -- knowledge across different domains and specifically into middleware area. And being the scale, which is probably the largest in automotive software that is allowing us to get more than 75% of the programs, which are globally happening, KPIT is a significant player in these programs.
So from that perspective, the environment, we remain optimistic about the environment. There are also, on the rate side, if you look at it, we are in a position to increase or get partially, if not fully, compensated for some of the inflation-related payments or increments, which we had to make to our employees. We changed business model with bringing different business models, we are in a portion to increase our realization. And in new technology areas, we are still in a portion to command premium rates. So with all this from that side, it looks very positive.
On the other hand, while it may have a minimal impact in the next few quarters or at least for this year, but cross currency movement is going into a negative way. And that's why there has been change -- there has been gap between the reported currency growth and the constant currency growth or revenues. And that may continue, maybe further increase during the Q2 for sure and maybe in Q3, too. So that's 1 part, which is, if I have to say, volatile as of now.
Overall, we see very positive about the business environment, and we are very positive the way we have build our business and our relationship with the client and the employee base we have and our ability to scale and excel. Thank you.
Should we start the question-and-answer session?
Yes, please.
[Operator Instructions] The first question is from the line of Vimal Gohil from Alchemy Capital.
Many congratulations on sustained very good execution. So my first question is around margins. Given the fact that you are already running ahead as -- versus your guidance in Q1, but you have sort of maintained that band of 18% to 19%. Would it be fair to say that the wage hikes that we are expected to see in Q2, if at all -- I mean, if there is a difference timing, please, let me know. But the way hike that you are offering in Q2 would be far higher or maybe higher than what we have offered historically. That's question #1.
The second question, sir, would be on the deal announcements that you've made for the last couple of quarters have been fairly strong. If you can just highlight the average deal tenure over a period of time, let's say, if we take 3 years, how much has the average deal tenure user buy? Because in the past, we have highlighted that we are running for long-term annuity kind of deals. So if you could just highlight, has the average deal tenure also gone up over the time period?
And lastly, on the integration of our acquisition of FMS, how is that integration going? I do understand that the -- it is -- the 100% acquisition is still some time away, but any small updates on the same will help? Yes, that -- those are my three questions.
So coming on the margin side, I think, first, is our margins were a little ahead of what we had expected also because of the stronger growth during the quarter. However, to your point, our increments are in the quarter 2. It's not -- I mean last few times in the last 3 -- last few times, we have given much better than in the industry increments. And we will try to do it same this year, too. And it will have some impact. But the other part I mentioned about the currency and some of those issues. That's why that -- we cannot completely estimate the impact of some of these changes. But generally, as a practice, once -- I mean, there are many very few people who give outlook. And once we give the outlook, we revised it in quarter 3, if we see the need so. So that has been our practice all over.
Now coming to the -- I will answer one more question and then my colleague [indiscernible] the other one. On the integration of FMS, I think things are going very well, in line with what we have thought about. Our whole idea was to really focus on plant and build significant practice or presence in that plant, which is happening pretty well. There is a lot of interaction, integration, which is happening, which are all positive. As you mentioned, we wanted to let them go certain distance by on their own to maximize the momentum.
And in the next 2, 3 quarters as we acquire additional stake, that's when we will be in a better position to share. But overall, let me say it is going in a positive way, both on terms of strategic intent as well as the numbers.
Right. Sir, just one follow-up there, sir. Sir, FMS and of course, most recent one SOMIT, both these acquisitions seem to be more on-site led what is going to be our thought process? Or what is going to be our strategy to sort of get these -- get the deals there more offshore because there we have been talking about offshoring more. And that has been 1 of the drivers of your margin improvement in recent times.
So once we -- once the full integration of these activities happen, do you expect a transitory impact on your on-site, offshore ratio? I mean, will it temporarily skew towards on-site and then probably we might see some offshoring over there? How will it play out?
So just to put it in the context. We added 900 people during the quarter. The total employees of both 2-together is about 100. So the whole idea, we acquired them is basically for a specific competence and very skilled and very special talent they have in certain areas.
To your point, we will leverage it as we get the larger deals in due course. And that's why actually it met -- that was one of the reasons for the our acquisition and from their side also. So that a lot of growth we can leverage offshore. So -- but anyway, the margins are good on its own for them. Does it answer your question?
Yes, yes, of course, course. I got the broader point, sir. And lastly, on macros, most awaited question. Any impact that you're seeing on the worsening macros in the West?
Sorry.
Impact of macro.
Micro environment on demand and...
From where we stand today, our mid term outlook continues to be positive. This is not to say that -- we are not keeping our ears to the ground to see whether there are any changes that are happening. But right now, I think the demand continues to be fairly robust for us.
Sir, on the average yield, tenure, I mean, I think you missed that.
Yes. Sorry. Sorry, I missed that. The whole rationale behind having that T25 strategy was to go deep and wide in every account. And we are seeing more and more of that over the last couple of years.
And what that also means is whenever there is an engagement, usually the size of the engagement is getting larger and also duration is getting longer. And your question was what is the average duration? So typically, for a program, it's 3-year kind of a duration. And the potential -- when the program -- the production program gets over, there is always ongoing support and maintenance or even the new feature development work that happens after that.
So usually, when we work on any kind of large engagement is at least for 3 years, and there are opportunities to extend it well beyond that. So that's the whole rationale behind having that sharp focus on T25. Does that answer your question?
Absolutely, sir. Absolutely.
Next question is from the line of Karan Uppal from PhillipCapital India.
Congratulations on another strong quarter. Sir, you answered my question on macros. I just want to delve a bit deeper. So in your conversations with your clients, what is the feedback you're getting from both auto OEMs and Tier 1 clients, in terms of if they are pushing for certain projects in the ADAS, electrification of connected space, which might impact our business?
Given our -- as I mentioned earlier, given our recent conversation, more and more of our business is actually coming from their architecture with the middleware. And these programs are essentially an existential kind of programs for most of the OEMs. They are not backing off those programs. We have not seen any signs of that. In fact, for the last couple of years, they've been accelerating all of these programs. And when we believe that given the critical nature from their future perspective, we feel very confident that they'll stick to these programs.
Having said that, every OEM and every Tier 1 is looking to save money because they all want to be competitive and save for the rainy days. But most of the savings are happening in other areas where a company like ours is not impacted. That's how we are reading the market at this point in time.
Sure, sir. Second question is on margins. So gross margins over the last 5, 6 quarters has been very stable despite very, very high supply side pressures and the strong hiring done by you. So is it fair to say that the margins are getting benefited because of the high pricing you are able to charge? And because of that, you are able to mitigate the supply side pressures? That is the main lever you are losing or other levers are also at play which you can explain it?
There are 2, 3 things. One is first, the strong growth, that is a point. The second is the increase in offshoring. And third is, of course commanding a reasonable price and premium in some specific areas. So it's a combination of all 3.
In addition to that, I think -- I mean, it's not that we really tighten things everywhere that we are -- as you rightly mentioned, we are actually paying pretty well. I think we have given the increments pretty well, but we are also tightening our operations. So with all this, we have been in a position to achieve this.
Okay. Okay. Just last two questions. First is, what would be the impact of wage hikes in Q2? And secondly, what would be the cross currency impact for the full year, for full FY '23 based on the currency, which is today as you see it?
I think we cannot answer both the questions, but I can tell you that whatever people are looking at industry -- because I cannot share it in the public domain till my employees now. But it will be a little higher than what the industry is doing, I think, for sure. So right now, it may be anywhere -- it will be a little higher than the last year as the industry, so that is point #1.
Cross-currency impact, we cannot really talk -- I mean we cannot estimate. That is the 1 thing I mentioned. But next quarter, if I look at it, right now, our growth constant currency was -- is 6%, and our reported growth is 3.2%. So roughly, we are at 2.8% impact. It could go as high as 4% for the next quarter. It really depends on the currency movement, but that's our estimate.
Next question is from the line of Mohit Jain from Anand Rathi.
Related question, actually. So last time you spoke about shift to offshore, and it was supposed to be a little slower compared to what we observed last year. So where are we in that?
No, I think we have been increasing our offshore overall. But many of these large programs in the last 2 quarters, specifically last quarter and so -- many of these, again, are very large programs. So initially, it starts on site. So we are at the same level as we have been in the on-site/offshore ratio for about or so, 4 months or so, 4 to 5 months. But I think from -- it will change in a quarter.
Sandeep Shah?
Hello. Can you hear me?
Yes. Please go ahead.
Just the new classification of the revenue where Mr. Sachin has explained that most of the growth is coming through architecture and middleware where you are not seeing spend cuts despite the macro. However, that as a percentage to the total revenue is 14%. So how should we read the nature of the other 2 segments, which are future development and integration and cloud based and connected services. Is it more a sticky business? Or is it more a business, which is project-based, which can have some sensitivity to issues?
So if you look at -- we'll talk about both the feature development as well as the cloud base. Essentially, let me talk about the first part, which is the middleware architecture piece. Yes, it -- today, it forms a smaller percentage of our business, but most of the future projects and programs are from middleware and central architecture. That's point #1.
Point #2, when you -- when we work on central architecture, there is a higher chance that we'll actually get feature development work. So additional feature development and cloud related business also depends on doing a great job with central architecture. So both are interrelated.
So as far as -- and -- as far as the engagements on both are concerned, feature development programs usually go on anywhere between 1 year to 3 years again. The maintenance part can go on for a longer time.
Cloud -- connected and cloud-related programs, some of the connected programs also go on for 3 years and fairly large in size. Cloud is something that we've been working on for the last few years, but it's one of the newer practices for us. And given the base, we'll see a lot more growth coming because it's a smaller base that we are working with.
And our hope is that we will not build any practice unless it has a potential to become a large and bolder in future. So our hope is as we get our entire strategy and execution in place, the cloud business will also be a longer-term stickier business.
Okay. Okay. And just a related question with the higher concentration of revenue coming out of euro, which is based out of Europe, mainly Germany, if I'm not wrong. With more -- most of your peers are talking about macro outlook being much more weaker and could be serious in the Europe versus that of the U.S.
So in that scenario, you believe there could be more caution in terms of the spends from the clients based out of Europe? Or you believe the electric vehicle, as a platform, there are no spend cuts and the sensitivity is much lower to the macro?
As you might have seen during the quarter, our growth in Europe has been pretty strong. And our pipeline in Europe is pretty strong. So while I -- we cannot overlook this, but as Mr. Tikekar mentioned, we are not seeing that yet. And we are actually in multiple discussions on new businesses in that region.
Okay. Helpful. Just a bookkeeping question. Is it fair to assume that some portion of wage hikes could be absorbed through growth delevering and the other margin levers in 2Q? Or you believe 2Q may see some slide in the margin and then there would be a pickup in 3Q and 4Q as to achieve the full year guidance on margins?
So it could be partially. We cannot really give an estimate of that.
Okay. Okay.
It would just...
And what is the contribution of SOMIT Solutions in terms of revenue quarter. And the payout in terms of SOMIT looks lower versus what we have said during the acquisition press release. So what is the difference -- the acquisition, if I'm not wrong, is 65% owned currently and by Q3, it may go to 100%, right?
Yes. So this -- the payout that has happened is only for the first tranche during this quarter. There are no revenues added from SOMIT during the quarter. It will only happen next quarter. So -- and the total payout that you had mentioned in the release when we did the acquisition, will happen, as you rightly said, over a 6-month period. So next quarter, we will go to 100%. But right now, what is reflected is about the 65% payment that we have done.
Next question is from the line of Nitin Padmanabhan from Investec.
Nitin, we are not able to hear you if you are speaking.
Mr. Nitin, please go ahead with the question. Since there is no reply from the line of Mr. Nitin, we'll take the next participant. The next 1 in line is Mr. Dave from Invest Athania.
You have told that you have increased you were able to increase the pricing due to new tech areas or new skills [indiscernible]? So would you like to -- and also the new business models that you have...
No. I think in this case, we are taking the full ownership of the program and managing it. And we are basically charging basically based on that. So the business models -- I basically said that wherever there are -- we are using into specific technologies where we are guaranteeing certain performances, et cetera, where we are in a position to charge higher rates. That's what I mentioned. And the business model is, as we are taking full ownership of the programs wherever we are in a position to again charge premium.
Okay, sir. And sir, what is the contribution of FMS to the revenues?
FMS? 0.
Next question is from the line of Chandramouli Muthiah from Goldman Sachs.
My first question is on the recent leadership change at one of your large clients, Volkswagen. So the outgoing CEO is also the head of CARIAD, which is their in-house software entity, which I'm sure you've been working closely with all the years. So in your long history of working on automotive software contracts, I just wanted to understand what are the sort of changes that a partner like you will need to cycle through in such a leadership change situation?
Okay. This -- if you look at [indiscernible], I think, or Volkswagen, they would have changed at least 3 to 4 leadership change in every position in the last 5 years. So that's how it has happened at the CARIAD and Volkswagen. Generally, this does not impact because the strategy is clear and the clarity is there. Maximum what can change is spent from one pocket to another, if there is any reorganization of the engineering organization. And the only case in this case can happen is from CARIAD to the brand itself. And fortunately for us, we are engaged with both brands as well as the central software organization. So we do not see any change in this.
Got it. That's helpful. My second question is more specific on the pricing commentary that you've given out just with answer you gave to the previous participants. So are you able to give any sense of quantification on what sort of pricing improvements you're able to see in some of the new contracts that you're winning?
Yes. Well, in terms of pricing, there is always an effort to improve it as our positioning in the eyes of the clients go up. So we are not backing up on that. There were some in the past couple of months, I think, with some of our clients where it was overdue, we've been able to get upward revision. And we'll continue to work on it, and we'll see where it goes. Maybe there is an opportunity with another couple of them in the immediate future.
And the second part is, other than that, we just have to make sure that we continue to go up the value chain and demonstrate the right kind of value to the clients to sort of demand premium pricing.
So absolutely. To add to this, basically, if you look at it, wherever there is an engagement more on-site, if I have to say, clients are very cognizant about the high inflation. And they are very considerate to compensate for that, if not more. So that is there. In other cases, I think as Mr. Tikekar mentioned, we are looking to change the business model and make up for -- make up and add to whatever additional expenses we are incurring. But through change of business model asking for higher prices offshoring all these 3 levers.
Got it. That's helpful. And my last question is on the guidance. So the guidance is unchanged despite the margin beat this quarter. I just wanted to understand the top line. You have given the 18% to 21% constant currency growth guidance FY '23 at the end of 4Q. So now you've announced the SOMIT transaction over and above that. So does the SOMIT -- is the SOMIT transaction included in the 18% to 21%, or is it over and above that?
It's a very small part. I mean, you can consider either way, but it's a small part. But the point I had mentioned about it, this is -- and we are happy we started on a stronger profitability. We would wait for our 2 things. One is the increments how it works out. There are a few other factors also, which we are waiting and the currency moment. All these -- there's too much uncertainty on all this come. But overall, as a practice, we -- if we had to revise any numbers, we do it only in the quarter 3.
Next question is from the line of Saurabh Tendulkar from Mitsui O.S.K. Lines.
Conversations for the great set of numbers. Sir, just wanted to ask how much is the revenue contribution from this middleware segment?
So if you look at the metrics that we have given right now, I think we have given it by the 3 business units and the business unit that talks about middleware and architecture, that is the revenue contribution that we have, which is, if you look for the quarter, the absolute number, it's about USD 12.82 million.
Percentage.
And my second question is on the currency impact, which you have said. Actually how much it is? As you mentioned in the presentation, the currency impact from yen and other currencies, so how much it is actually?
So if you look at it, what we mentioned in the opening remarks, is our constant currency growth is 6%, and our reported U.S. dollar revenue growth is 3.2%. So the net impact of these cross currency fluctuations for the quarter has been 2.8%.
And next quarter, you said it will be around 4%.
The currency levels, it could be around that number. If that moves, then of course it will.
Next question is from the line of Nitin Padmanabhan from Investec.
Am I audible?
Yes.
Yes.
Congrats on the strong quarter. I have two questions. The first is on margins. Just wanted your thoughts on -- obviously, there are wage increases next quarter. Just wanted your thoughts on what could be the potential offset that would sort of mitigate some of those wage inflation impact? What are the levers that you see out there?
The second is, has there been any incremental offshore shift we have seen in the last 2-odd quarters from a business perspective?
And finally, I think, historically, we have mentioned about some 4 large deals in the network -- in the software architecture area. And of which, I think, 1 we signed in the prior quarter. How are we on the pipeline there? Has the number of deals sort of increased? Or are you hopeful of closing anything that's come to advanced stages of closures? Any thoughts there would be helpful.
So I will just answer the last question is we are already engaged in most -- as I mentioned, 75% of the programs, which are happening in this area. And sometimes we cannot or cannot really put together a big deal and make an announcement as you cannot do it always. But we are already engaging 75% of the program as the key partners. So that is exactly what we have mentioned, and we are in line with that.
Yes. So on the margin front, yes, there are levers like offshoring, as Kishor mentioned earlier. Offshoring is one of the factors, then also leveraging the fixed cost that we have. So both of these will contribute to sustainable EBITDA margins as we move forward, and therefore, the currency headwinds will not have a significant impact on the profitability.
I mean, naturally, it will be helped by higher growth that we can achieve in the quarter and higher realization, as I mentioned.
Sure. Sure. That's very helpful. And lastly, I think, if you look at the U.S. geography, we have seen a strong growth over the last 2 quarters, which is Q1 and Q4. But historically, it's been a little patchy, and we have been very strong in terms of growth from Europe. Just wanted your thoughts on the opportunities you're seeing broadly in the U.S. And do you think this sort of growth will sort of sustain or will you continue to be sort of volatile? And what's really driving volatility in that geography? That's all from my.
Yes. As far as the Americas well, U.S. is the biggest part of our business, -- it's -- there is enough pipeline. We have strong clients there who form our T25. From each 1 of them, we are seeing opportunities to grow and so to us right now that volatility is not very visible. We believe that year-on-year, we'll have a healthy growth in the U.S.
So I think so far, so good at this point in time -- so that's helpful. and all the very back -- thank you.
Next question is from the line of Sandeep Shah from Equirus Securities.
Just a question in terms of the average revenue for employees. So if I'm not wrong, I think the earlier comment indicated the offshore revenue has been Offshore revenue is more or less stable versus 4 to 5 months back. However, the average revenue per employee has been declining on a Q-on-Q basis from 3Q, 4Q and 1Q -- how should we read this? Because we are also commenting about a rate increase, which is happening and helping you in terms of margins as well.
I think 1 of the key parties, we have added more number of people. And as you can imagine that some of this technology takes more time. And you can see it in utilization -- sorry, we have been going down a bit, and that has an impact this. So overall -- but at the same time, you would recognize that our EBITDA margins and overall profitability as well. And for us, the denominator includes everyone.
It also includes the pressures when we calculate the average revenue per employee.
Got it. Got it. Correct. So what should be the fresher addition program in FY '23 versus FY '22? And how it will look like from 2Q to 4Q?
We have changed that overall, the way we look at it. We generally give certain key go to certain key campus and give offers -- but the rest, we really hire on every rolling 3 months from the market because now campus recruitment is very important for us. But it does not remain as exclusive as it used to be.
So people can go beyond the campus offers, and they can take offers from anywhere. So we are taking the that's why it gives us also flexibility to hire people at other points of time instead of committing 18 months before.
Okay. Okay. And now we have also changed the classification of strategic treatment, you have customer revenue to now strategic customer revenue. So is it fair to say we might have entered in more than 21 strategic clients.
Yes, this is T25 revenue.
This is a T25 revenue.
Okay. Okay. And last question. In terms of the fixed price contribution to the revenue has been coming down. So how to read this because increasing time and material also indicates about project-based business within the company.
No, this is also related to what Mr. Kishor Patil said earlier about some of the new programs that we are starting, which have a little bit of higher on-site initially, they also -- the initial part also is done a little bit more on a T&M basis. So I think that is the reason why we'll see a little bit of increase in T&M. But as a secular trend, the fixed price will go upwards as we move ahead and get these projects shifted to offshore.
Next question is from the line of Chirag Cadia from Ashika Institutional Equities.
Congratulation on good set of numbers. I just want to understand the scheme of arrangement which we have done 2 years back between this Birlasoft [indiscernible] company. So are we on track? What management internally has decided in terms of growing this business separately? And what next step you are -- guys are planning to garner more market share and what we are doing. Because the underlying segment itself is a huge potential in next [indiscernible].
As you know, -- So thanks for asking that question. As you know, 4 years ago, we took somewhat of a risk by letting go a big chunk of our business. And we are at a stage where we are happy to say that all the stakeholders have benefited tremendously on both sides. So as far as our expectations and the plan, we are absolutely on the plan, and everybody is happy, and we hope that you also share our sentiment. And as far as the future is concerned, you know our vision which is reimagining mobility for cleaner, safer and smarter world. That's what we are committed to. And essentially, the way to realize our vision is through our clients, T25 clients. If we can hedge them with their programs to make their vehicles cleaner safer and smarter, if you do more and more of that, I think we'll be closer to the vision. And in return, we'll have a profitable growth that we have seen over the last several quarters.
So the organizations have been separate for all this time. So there is nothing standing along that.
Yes.
The next question is from the line of Vivek Gupta, an individual investor.
I would like to congrats with the management for a brilliant set of numbers. So KPIT is reporting highest EBITDA margin is something like worth a pause. So conviction on KPIT increases after every quarter. So I have some general questions. I believe most of the intelligent gentlemen have asked most of the questions with respect to macros and all.
To begin with, sir, I was getting the investor update. I found that we have mentioned that we have active clients number as 60, which was same in last quarter as well. Correct me if I'm wrong. So is that understanding correct?
Yes.
So we had a couple of deal wins in the last quarter as well. So were those deal wins from the existing clients only? Or there were new clients which were added in last quarter.
So all of them are engagements with our existing clients. We are very picky about adding a new client. Our primary responsibility and goal is to go deep and wide in our existing clients and really help them be successful in their journey. So we are very mindful. All the short answer to your question is all those engagements that we talked about, they are static the existing clients.
So does that understanding hold true for the new deal wins also which you have reported now?
Yes.
Okay. Okay. And one more question, which I would like to ask is the margin guidance which you have given is more from an aggressive perspective or it is a conservative guidance which you have put forward and FY '23 outlook also?
Why I'm asking this question is because of a lot of things going around with respect to this Russia-Ukraine war and recession being talked about in U.S. and all. So do you foresee any impact on this guidance like -- or is there a conservative guidance only taking into account all these things?
I think you brought out both sides, and you are aware of the dynamic situation. So what we believe is it's a very fairly realistic 18% to 19% is what we have given, considering all the factors that you brought out.
Okay. Okay. So one of the questions, which I would like to ask was that I think has been answered already. That was with respect to fixed cost revenue being declined Q-on-Q. So the new tile wins, sir, are more on T&M based or it is also like a mix of T&M and fixed costs?
There are always a mixture. See, what happens is when we get into new engagements, especially on the new architecture, the initial work is always done on T&M. It's a lot of consulting work that needs to get done. So it's beneficial to both parties that it's T&M in nature. And then we carve out programs out of that, that they become fixed price.
So I think we'll continue to get a good basket of both going forward. We just have to be smart about it. I think that in some sense, T&M makes more sense over fixed price to both, So that's what we are doing. But in general, as an outcome of doing some T&M work, there is always some kind of carving out of the fixed price programs.
Okay. So as you mentioned earlier, like in Q2, you'll be rolling out these wage hikes and all. So currently, we saw that rupee was at all-time low. So will that compensate a bit to that part?
No. As we said earlier, even though the INR has depreciated against the dollar, it has appreciated against euro, which is also a major currency of operation for us. So if you look at the percentage of share of revenue between dollar and euro, it is the same. So whatever gains were there because of the dollar have been offset by the euro and GBP and yen. So net-net basis, there was no impact on the operating margin this quarter because of the currency movements. Okay.
Okay. Makes sense, sir.
Next question is from the line of Amar Mourya from AlfAccurate.
Just one bookkeeping, if it is possible to you. I mean, we've moved to the new reporting and new segmentation. Is it possible like at least for this quarter, if we can give the old reporting numbers as well, like powertrain, ADAS and commercial vehicles and others?
I think this we have done in line with our organization and how now we have started doing it. The main reason for this is many of the programs are cross practice. So it's -- will be artificially changing the numbers in many of the programs. And that is the reason we have done that. It is aligned with client organization. It is aligned with KPIT organization, and it is aligned with the new trend of cross-practice deals.
Okay. Okay. So like then are you saying now this is the new standard. I mean we have to look this way, but I mean just for this quarter, if it is possible, if it is handy for you, I mean, if you can share.
It will be artificial numbers. We don't now trace those numbers.
Next question is from the line of Rahul Jain from Dolat Capital.
Just one question more from a macro point of view. Of course, the current sentiment, what clients are sharing is suggesting the kind of an outlook that we have given. Just trying to understand from your learning from the past such situation, do you think there would be some tweaking in the type of the spend they would like to do? Like would they like to go slower on the project that are far off from a revenue monetization point of view versus the project which are more near term in nature. So is that a kind of a behavior that you have seen in the past? Or is there any other kind of conversation happening at this point as well?
We have -- instead of responding, I had mentioned in the last time also when we gave this. The best strategy is to maximize in H1. And then that's a strategy we can execute on. So we will do that. So then we will be ready for any eventualities in any case. So that's the strategy we would follow, and I think that is the best way.
I can just add to the comment about the trends. Trends are great, but the implications of the trends are different every time. So there are new things coming up every time. So you always take them with [indiscernible].
Due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.
So thank you, everyone, for your participation. We value your participation on the call. If you still have any questions that are unanswered, please feel free to write to me, and we'll be happy to get back to you. Thank you, and have a great evening.
Thank you.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.