Inventurus Knowledge Solutions (NSE:IKS) Q1 2026 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to IKS Health Q1 FY 'twenty seven Earnings Conference Call. Please note that this conference is being recorded. I now hand the conference over to Ms. Seema Naik for ICICI Securities. Thank you, and over to you, Ms. Good morning, ladies and gentlemen. Thank you for joining us today on the Q1 FY 'twenty seven earnings call of IKS. On behalf of ICICI Securities, I would like to thank the management of IKS Health for giving us the opportunity to hold this call.

0:46 Today, we have with us mister Sachin Gupta, founder and CEO, miss Nitya Bala Sukrumanjan, CFO, and mister Saranj Mudra, head of investor. I turn it over to mister Saransh for his brief statement and to take the proceedings forward. Thanks. Over to you, Saransh. Thank you. Thank you, Seema. Good morning to everyone. Thank you for attending our earnings call. We hope you had the opportunity to look at our earnings and presentation. Before I hand it over to Sachin, brief disclaimer. As part of our prepared remarks and during question and answers, we will make certain statements that involve estimations, significant uncertainty. We don't take any responsibility to update such forward looking statements, and your discretion is warranted by making any investment decisions. Thank you. Over to you, Sachin.

1:33 All right. Thank you, Saransh, and good morning, good evening, everyone, depending on wherever you are. Welcome to our conference call for discussing the financial performance for the first quarter of fiscal twenty seven ending 06/30/2026. On the call today, I will start off with providing a quick overview and sort of state of the union of the business, provide a high level financial overview, turn it over to Nithya for some detailed remarks on some of the financials, and then take it back to close towards the medium term outlook of the business, especially as we look to consolidate TruBridge integrated effectively and how the next few years are looking. And then, you know, we'll turn it over to everybody for q and a.

2:18 So to start off with, again, because there's always some, you know, new participants on the call as well as there's been a significant evolution in the company. Just to remind everyone, I think we're we're a unique platform, a unique care enablement platform that is focused on delegating the chores of health care so that health care providers can focus on their core. And there are two aspects of our platform now with the acquisition of TruBridge that make us unique. One, in our traditional market, I think we're still the only truly comprehensive system of action that sort of delegates these short tasks from providers to the right combination of technology and humans, including AI enabled technology. And and, again, in a market that's full of point solution vendors, I think we are pretty much the only comprehensive platform that does that for large medical groups, either with independent or health system owned. That's been our traditional market.

3:14 And now we've added a a very important dimension to our business where we are now working towards being the only truly integrated system of action and system of record for the rural and community market. As you know, typically, health care systems, do live... Delivery organizations, they are often straddled between technology that is coming from the electronic health record vendor, which is the system record, and multiple point solution vendors that delegate short tasks that are created due to regulations as well as, in fact, some tasks being created due to the system records being inefficient. And in the rural and community market, which is which is a very, very large market with 2,100 plus hospitals, The the reality is we will be the first of its kind deeply integrated system of action and system of record such that all of the short tasks can actually be orchestrated in the native workflows of the EHR itself without context switching in. I think it's unequivocally validated that for health care provider organizations, that's the holy grail. If they can actually receive that, that truly takes care of all of their challenges. So excited about the recent evolution that we've had for the rural community market. Of course, a lot of work to do to realize it effectively.

4:34 But I think, overall, when you combine those two dimensions and the cross leverage that those two dimensions bring, I think we are really in the in the process of building a new operating system for health care provider organizations to bring them clinical and financial sustainability. All of this, as you know, is a very large TAM, which is now expanded further for us because of the rural health system market kicking in north of $260,000,000,000 of which outsourcing is only about $35,000,000,000. Just to remind everybody, the overall market is growing at close to 8%, and the outsourced TAM is growing at about 12%. And today, prior to TruBridge, we're about 600 odd large provider groups that we've serviced across urban and suburban settings.

5:22 And, obviously, most of that, because we are basically the operating infrastructure for these provider systems, most of that tends to be recurring revenue because we're basically part of their operating infrastructure that helps them operate on a day to day basis. Long tenure of clients. And prior to TruBridge, we're about 12,900 odd people, which obviously... I'll talk a little bit more about that in the context of our financials because year on year, we continue to see nonlinearity between revenue growth and people growth, which we'll also... Which we also witnessed in this past quarter relative to the same quarter last year, of which about 1,900 of our people are clinical and nearly 600 now are technology focused engineering employees that we are leveraging to continue to build our proprietary technology embedded in our platform. And towards two sixty sales and marketing, but obviously, are pre TruBiz numbers and the TruBiz deals closed on July 10.

6:20 So these are all numbers for the quarter ending 06/30/2026. So, again, large TAM, great growth opportunity, very significant installed base in which we can continue to expand our platform and and really unique positioning as the new operating system for health care delivery going forward. And with that, I think it's important to lay out. As you know, over the last few conversations, I've always said what are our key strategic pillars of execution. And with TruBridge getting integrated, obviously, those key strategic pillars of execution have evolved dramatically. Today, I wanted to introduce everybody to what are the renewed strategic pillars of execution from here.

7:05 And we still have five incidentally, but the first one, which probably is the most strategic and the most exciting for the long term, is this integrated system of action and system of record for the rural community health system market. This is actually the most strategic rationale of combining TruBridge with IKS and creating this new operating system for health care. And let me just lay out a few very important steps in how we are going to go about creating that. As I've laid out before in the conversations about Two Bridge, one of the biggest values that the Two Bridge acquisition brings to us is this massive dataset of 5,000,000 plus patients that we now have access to, that we can de identify and now convert into a structured unified database that can then be labeled where you can then start labeling and, you know, bringing building linkages between the clinical context, the actions taken on the data, as well as the outcome achieved. And that is what you... That eventually becomes the AI training mode or or the AI training corpus on which you can start to build your own proprietary language models.

8:15 And so, obviously, we're going to do that. We're we're already well into our journey of starting to build that database. Two is already starting to do it. We're quickly bringing momentum to that. And as that structured database comes together, we will start training our own SLMs. And it's really important because these SLMs are a very, very strategic aspect of our future. Because in absence of these SLMs, you are constantly relying on frontline large language commercial models, which as people are discovering now, as exciting as they are, they're extremely expensive. The token cost is hard to justify over a period of time. And with this model where we are going to be able to build our own SLMs, train our own models, tune our own models by specialty, by task over a period of time, we will significantly...

9:08 Very significantly reduce our dependence on the LNMs for all the generative AI that we are going to use. So I think this is a really, really important strategic aspect of of this pillar of execution. And then I think one of the other things that's important for our shareholders and our customers to recognize is that one of our big philosophies is that in health care, you don't just need generative AI, but you need explainable generative AI. Because in health care, it's not good enough to just arrive at an answer, but you also need to be able to explain how you arrive at an answer. And so one of the things that we are pioneering is building this construct of a glass box or explainable AI construct. And we're doing that through another recent acquisition that we did for AI AI where we've built a whole bunch of knowledge graphs that actually bring that ability to not only leverage our proprietary models to generate intelligence and and accomplish the task or orchestrate the task, but it also allows us to explain how we arrive at the task. So I think this is a very, very important dimension of our strategy and could be a differentiator over a period of time. And then, of course, I would remind everybody about the key distinction.

10:19 You know, we are all getting so much noise that sometimes it's easy to lose the signal between what generative AI is really going to do versus not. And I think a simple concept at the risk of oversimplifying it a little bit that I wanna continue to emphasize is that there's going to be multiple tasks in our system of action. Some of these tasks are essentially going to be deterministic in nature, where the outcome of the task is a finite binary outcome. Right? Like, it could be a medical code. It's very deterministic. And there's only a few tasks that are nondeterministic in their outcomes, like narratives, like clinical documentation, which is a whole narrative. Generative AI is exceptionally good at these nondeterministic task outcomes. Right? And that's where when there are tasks that have nondeterministic outcomes, you can start to get autonomous to a great extent. You'll still be luring the loop for some edge cases, but you can get very high levels of autonomy when the outcome of the task is nondeterministic in nature, like clinical documentation. But when the outcome of a task is deterministic in nature, you have to constrain the generative AI models with further rules based AI and human in the loop. And that rules based AI can take the form of a knowledge graph or what have you. And so, again, the way we are approaching building and evolving all the features in our platform is we've clearly stratified deterministic versus nondeterministic.

11:42 Based on that, we have created a very pragmatic autonomy aspiration by task. And based on the autonomy aspiration, we have a road map by feature on what that journey to autonomy or appropriate autonomy is and what that human in the loop will continue to evolve to look like in by task. So I think that's a very, very integral part of the strategy. So as we build explainability, we will constrain the generative AI appropriately to human in the loop as well as knowledge graphs. And then last but not the least, obviously, embed these system of action workflows in the native workflow of the EHR so that there is no context switching for the user, and they're able to orchestrate all of these tasks within their native EHR workflows. So that's the vision of this very important first pillar, which is the biggest strategic rationale from a long term perspective of combining the two organizations. And in the medium to long term, I think this will become a very, very important strategic differentiator and driver for growth and profitable growth for us.

12:41 And then one of the byproducts of doing that is the very models that we are going to train, the SLMs that we are going to train for the rural and community system market, actually, will feed into the similar system of action that we have for the urban and suburban market. Because the reality is 70% of care that's delivered in these rural and community settings, even in the hospitals, is outpatient care. And, obviously, our traditional business is all around outpatient care. So as we build out these proprietary SLMs with a little bit more tuning and adaptation, those SLMs will be extensible or extendable, if you would, into our traditional market, which is where our second pillar is, where we actually translate these trained agentic workflows from the rural community market into those features for our traditional market and continue to empower our comprehensive system of action for the urban market, for the large group market, continue to empower that with these agentic generative AI enabled interconnected workflows.

13:43 And, obviously, in that market, we will have to rely on... Continue to rely on API based integration with the EHRs. Then we don't obviously have native workflow integration, which obviously is not the most optimal solution, but it's still a huge differentiated mode because the other option that large medical groups have is to buy multiple point solutions and integrate all of them with the EHRs. So they're much better off having a comprehensive platform from us that starts to integrate with their EHRs. And then, again, we'll obviously continue to embody explainability in the generative AI as that as human in the loop where appropriate depending on deterministic versus nondeterministic outcomes. And then our our win... Our right to win in this traditional market will continue to be that for the large health system or groups where they buy buy feature and then expand into other feature of the platform, we need to be number one or two or three in each of those features, which is demonstrated to our class ratings, KNS ratings, which is sort of calling the Gartner of health care IT, if you would. And, obviously, you've seen probably two or some of our releases.

14:45 We made great progress in several features as it relates to our class ratings. Obviously, Blackmove rating, there's another demonstration of our leadership in those features, and then yet continue to be one of the only comprehensive systems of action for that market. So, again, these two strategic pillars relative to both of our key markets going forward are a very important part of our strategy. Third, of course, is now we have very clearly stacked... Stratified go to markets for the rural and community market and for the independent medical group market as well as the health system on market. As I always said in the health system on market, we pivoted our strategy from a full comprehensive platform go to market approach to a more land and expand approach.

15:31 Both in the results of this quarter and the last couple of quarters, we're starting to see the fruits of that. Happy to announce that we've had a couple of very significant wins in that land and expand strategy over the last couple of quarters, and I'll talk a little bit about those in the financials. And then for the other two markets, which is the rural and community market, obviously, the go to market eventually will be a comprehensive integrated system of action and system of record. And then for the independent medical group, that's where we are seeing... And for the mid sized health system, that's where we're seeing more and more appetite for platform based deals. So those will be very clearly stratified GTMs for those three market segments that our business is is focused on from here. Needless to say, perhaps, any deal that has strategic rationale still has to work financially.

16:20 And so happy to note that we have our plan laid out for getting back to our early to mid 30 EBITDA margins after our pro form a will drop post consolidation of TruBridge initially to, you know, the 26, 27% range. Obviously, we have built out our plan to get back to that early to mid thirties, which is also reflected in our two north goal that we have laid out for everybody for FY thirty. And that is achieved through both, continuing to evolve our model from tech led human in the loop to appropriate level of autonomy by feature, leveraging generative explainable AI, but also then transforming the TruBridge operating model to appropriately leverage the technology that we already have and the technology that we are building and then combine that with the appropriate human in the loop from an offshore or global execution perspective.

17:16 And then obviously, there's going be some natural other operating and SG and A synergies as we combine these two organizations of significant size into a business that's just short of about $700,000,000 in revenue. As a combination of those three levers, we feel confident about about ability to get back to our regular cadence of margins here in the next couple of years. And then all of this eventually is predicated on the operating culture that we drive. And, you know, I know many people have heard the culture, each strategy and execution for vectors. The reality is we've experienced that already significantly through our past transactions and acquisitions. And so our commitment to building a single institutionalized culture that is really driven around outcomes. I think one of the things that's coming out as this whole AI hype cycle flushes itself out is that the AI is greater than technology, but if it can't improve outcomes from a cost and quality perspective, then that's not gonna be worth it. Right? And so luckily for IKS, we've constantly always had an outcome oriented culture, which is also reflected in our pricing, and we obviously have to institutionalize that culture across the one integrated IKS, the combination of TruBridge and IKS that starts off with north of 16,000 employees globally and now close to 2,000 clients that are going to be our clients across two organizations as they come together.

18:47 We're also in the process of consolidating the leadership team, and I think there are some very complementary strengths that we are discovering across legacy through bridge and legacy IKS leadership. And so bringing all of that together into one complementary leadership team is a big dimension of culture. And then last but not the least, continue to drive the value behaviors that have made IKS what it has been over the years. So these are the five strategic pillars of execution. I will continue to report progress against these five pillars, some of which will be reflected directly in our quarterly financials, others will, you know, reflect over the medium to long term. We'll move on and go to... It's always good to receive some recognition for all the good work that's happening. There's several out there for you all to read, but the ones that are, I think, most important are two. The first one is we are very happy to report a patent that has been approved for our industry path breaking AAW model, which is a a model that basically predicts patient behavior across various dimensions.

19:47 One of them is the whole... You know, we have a scheduling optimization feature within our patient engagement hub that we've built out, and that scheduling optimization feature enables providers to achieve maximum fixed cost utilization of their time as well as improve access to care. And all of that is done through this propensity to show or no show algorithm that is based on a composite score of patients' ability... Awareness of when exactly their appointment is, their ability to show up, some older patients running to logistical issues to show up, and then, of course, their willingness to show up for the care that they are scheduling even. And so based on that propensity, no show, we have differential nudging algorithms that ensure that patients show up, but then also we schedule for providers intelligently to make sure that for the patients that have the highest propensity of no show, we are perhaps doing things like double booking the slots. So that at no point does a slot for a provider go waste because the patient runs for. Also, this has been...

20:48 This had already a huge impact in one of the very important drivers of health care reimbursement. As you know, the patient component of health care reimbursement, generally, care reimbursement for health care providers consist of the patient pay and the insurance pay. The patient component of the reimbursements typically is increasing over a period of time as co pays and deductibles keep going up in these insurance plans. And generally, collecting from the patient is a difficult endeavor. And so our AWR algorithm also predicts patients' propensity to stay. And based on their propensity to pay, which is a composite score of their awareness, ability, and willingness, you know, then we can differentiate them on making sure that they actually paid before the care is delivered because collecting for patients after the care is delivered typically has a very high write off ratio. So so this is a path breaking momentum. It's already been deployed in our MyCare hub patient engagement technology that has already proven significant upsides in patient connections as well as optimizing the schedule for our customers. And then the second one I wanna point out, Suraj, we move to the next slide, is this case study that we published recently with actually a woman's health where through our optimized coding, we actually delivered a $12,000,000 cash impact in a fully compliant manner with 96% coding accuracy, reducing coding denials.

22:11 So I think this is a very, very important demonstration, again, of the power of the system of action that we have built in terms of its actual ability to deliver tangible value, not just the right technology. And all of this obviously adds up into... I just wanna point out quickly, if you can go back, Suraj, on the slide, to the features of our system of action. This is the comprehensive system of action that we have built for all these years. This system of action applies both to our traditional large group, large health system setting in the urban and suburban markets, as well as to now being adapted to the rural and community markets. And as you can see now, earlier we used to track by feature the automation potential.

23:00 Now we are starting to track by feature the autonomy provision of each of these features. And that autonomy fee... Potential obviously is driven by, like I was saying, the deterministic versus the nondeterministic nature of each of these tasks. So we'll continue to do that and report our progress in this journey to autonomy. And, again, autonomy being in health care, meaning there'll always be some human in the loop. Although the humans might go from doers of task to auditors of task over a period of time. So how does all that add up into our keyword financials? Happy to report another strong quarter of financial performance in which we delivered 21% year on year growth for fiscal Q1, 12% in constant currency, resulting in revenues of about INR893 crores.

23:50 And while doing that, we've been able to deliver 33% EBITDA at INR $2.94 crores. It's really important to recognize though that that EBITDA would be approximately 200 bps higher if we adjust for that one time exceptional cost associated with the TruBridge acquisition. Actually proud to say that we were able to accomplish this TruBridge acquisition at an unprecedentedly lower cost than most of these transactions coming at. I think it was just north of about over 1%. And some of that 1% is about 30 odd crores is reflected in in the costs in this quarter. And so when you adjust for those 20 crores, that 294 crores basically becomes 314 crores, and the 33% pretty much comes back to that north of 35% operating EBITDA. So just wanted to call that out, which then also takes care of the quarter on quarter EBITDA growth, if you would, going from then INR 300 odd crores to INR $3.14 crores, which would make it a healthy quarter on quarter growth. So I wanted to call that out very clearly. So strong growth, strong continued performance in operating margins that results in appropriate growth impact, which is reflected at about 28% year on year, coming in at INR193 crores, which again, if you were to adjust for the one time exceptional acquisition cost, it goes even higher. And all of that obviously on the back of very strong continued operating and free cash flows

25:21 that the business continues to generate, which were on a cash basis affected by onetime leave up payment that we had associated with the customer, which is why it's not reflecting in the net debt, but continued strong operating and free cash flow performance that is reflecting the strength in the business. So all in all, pretty strong quarter. And also want to highlight some very, very exciting client wins for the quarter. One, we're not able to name, but it's a very, very large and visible health system in California where we are actually helping them as they are taking most of their regions to Epic. They made a partnership with us. We were helping them succeed on Epic. That is also good for our overall relationship with Epic and continues to strengthen our partnership with Epic in our traditional market. If you remember, one of our concerns or some of your concerns was as we integrate TruBridge, then Epic gets perhaps competitive with us. And the reality actually is both in our traditional market through partnerships like the big California Health System, we continue to get closer to them. We continue to integrate more and more features. But then also, there are things happening between TruBridge and Epic independent of us that are taking TruBridge closer to Epic as well and collaborating with each other in that rural market. So more to follow on that, but I think, knock on wood, our relationship with Epic seems to keep getting stronger and stronger. Another very significant win with a national musculoskeletal leader. They're a very, very large national

26:55 aggregator in the musculoskeletal space that is signed with a significant RCM relationship and a commitment to explore other dimensions of platform. And I think our flagship relationship with Advocatech is a strong example. We are in this quarter two examples of really strong momentum starting to emerge in our cross sell endeavor. Remember, we have pivoted our cross sell strategy from a platform based approach for larger systems to a land and expand approach. And both this California based system and advocate are very, very strong examples of this approach now really starting to work. Advocating of particular note because it's one of the top five health systems in the country with north of $35,000,000,000 in annual revenue. They have significantly expanded their partnership with us both in revenue cycle and in the coding dimensions, And we are still only scratching the surface even with this expansion.

27:46 Very, very excited about this relationship and to be able to believe it. And then we've also partnered with one of the largest vascular and vein surgery organizations called Stride Care, which again, I think is the leading national integrator in that space. So healthy amount of wins both from a cross sell perspective, a couple of new customer acquisitions in the independent single specialty space continue to demonstrate growth momentum that we should be able to take advantage of going forward. And with that, what I will do is turn it over to Litya to provide some additional remarks on our financials, a little bit more detail, and then we'll bring it all together with a medium term outlook on the business. Thank you, Sachin. Good morning, everyone. Thank you for joining us today.

28:34 If you can stay back on the previous slide, Suraj. So EPS will obviously came in line with the profit growth that Sachin had already commented upon. It was a very healthy 30% year on year growth. If you look at return on equity, it it is again at a very healthy 26%. The decline quarter on quarter is largely due to the onetime acquisition cost that Satan called out as well as an increase in the valuation of average, which is one of our strategic investments. We had to mark to we had to mark to mark the asset at a higher valuation. If you can go to the next slide. So a few additional details on the financials. Revenue, of course, grew at a very healthy 12% constant currency.

29:22 If you look at ForEx gain, it was rather neutral this quarter compared to q four where we had substantial support from ForEx gain. If you look at employee benefit expense and other expense together, there are a couple of drivers that I wanna call out quarter on quarter. One is why we had fewer number of employees, which, of course, helped in reducing reducing costs. However, we also integrated senior technology resources from think DTM as well as IRI in the quarter. And in addition, there are also onetime acquisition costs across both the quarters. In q four, we had about 25 crores of acquisition expenses, and in q one, we had about 20 crores of acquisition expenses. We do expect a little bit of integration expenses going into the quarter as well. It's likely to remain in a similar range. We'll, of course, talk to you about it when we talk to you about Q2.

30:17 Adjusting for both the onetime acquisition expenses as well as currency, While the reported EBITDA is at 33% in q four, the adjusted EBITDA adjusting, as I said, for currency as well as acquisition expenses is actually at 35%, which is in line with the q four number as well. If you look at finance and depreciation and amortization expenses, they came largely in line with previous quarter. Tax tax rate was higher this quarter. This is something we had discussed last quarter as well. Tax expenses were in the range of 22.4% this quarter. For legacy IKS for the rest of the year, this is likely to remain in the 22 to 23% range. We will, of course, talk to you about the the combined pro form a tax rate when we speak to you next quarter.

31:08 So net net net, the profit for the period stood at 194 crores or 22%. If you can go to the next slide. These are key key metrics that we talk to you about every quarter. Very happy to report again that the adjusted EBITDA per employee continues to grow at a very healthy healthy pace given the technology transformation and the continuous deployment of automation that we're able to achieve across our platform. Revenue from top 10 customers as well as top five customers, again, grew very healthy in terms of contribution. It remained rather flat compared to q four. Again, very happy to report that our vintage and our relationship with these top 10 customers and top five customers remain very strong. Top 10 vintage is at approximately six years and top five vintage is at approximately seven years.

32:01 FCF yield continues to be very healthy. Again, adjusted for that onetime expense. FCF yield came in at 90% in this quarter. Satin, I'll hand it over back to you. Okay. Great. So again, strong financial performance for the quarter. And it sounds like we're now about I think this is our seventh quarter of being public and reporting performance as a public company. Our first quarter was the quarter ending 12/31/2024 as a public company. So the seventh quarter, and I thought it'd be good for us to just take a step back and just reflect on where our journey has come to and where it's taking us. And I'll start off with the journey for shareholders that have been with us even prior to the IPO.

32:48 If you look at a ten year horizon historically, you know, it's been a a healthy growth journey of about 29% revenue. And very importantly, nonlinearity between revenue and batch demonstrated over a ten year period. And then I thought it's important to recognize where our journey is taking us, where it has been. You know, I thought let's benchmark the period from when we went public, and let's look at it about six years out to which I think we have some decent amount of visibility from an earnings perspective and that I can say with a good amount of confidence that, you know, this is a true north objective that we really should be able to meet. And so just to put that in perspective, when we went public in December, the trailing twelve month EBITDA of the business was about 647 crores, give or take. Right? That's the trailing twelve month as of 09/30/2024 just before we went public.

33:45 Just in the last, call it, eighteen to twenty months, with no dilution, we have basically taken that business of 647 crores to 1,148 crores on a standalone basis pre TruBridge. Right? And so that is about nearly a 40% CAGR when annualized in terms of growth between TTM September 2024 and TTM June 2026. And like I had said, when we were doing the TruBridge acquisition, we had said that there was going to be a true north objective for FY thirteen for 3,000 growth. And I just want to reiterate today that as we have now closed TruBridge and are starting to get our arms around it, I wanted to reset everybody's expectation on how I'm seeing the future.

34:35 So first of all, want to reiterate that we are continuing to maintain our two north objective of getting to at least 3,000 growth in EBITDA by fiscal year thirty, number one. Number two, I also wanna provide that we will be able to do that again with very marginal dilution perhaps associated with Esops to incentivize our people. But outside of that, that objective is to achieve that without any further dilution to shareholders outside of ESOPS and getting back to that net debt position that we had prior to the two bridge acquisition. Right? So without dilution or without significant dilution, other than marginal dilution for ESOPs, as well as without expanding our our debt, we will be back to the free to bridge debt number and 3,000 crores of EBITDA. And just to put that in perspective further, what have we learned about TruBridge in the few days that we've had after close or from the period when we spoke last to now, what are we about a month into close, give or take? I think there's two highlights.

35:44 It's it's a it's a generally good news. The good news... The big good news is we had said when we completed the transaction that it looked like TruBridge was in the 68 odd million annualized EBITDA range. I think we're happy to confirm that that is the operating EBITDA that we are essentially inheriting through the TruBridge acquisition. So so very happy with that. However, I think on the revenue side, that high... That EBITDA margin of that 68,000,000 is kind of a lower revenue base. We actually believe that the operating revenue that once translated into IKS on a steady state basis will be about $300,000,000 a year. Again, we'll produce the same 68,000,000 in EBITDA margin starting out at the 300,000,000 a year than the three forty million a year that we were anticipating free flows. And so what are the drivers of this 10,000,000 order quarter or 40,000,000 a year annual reset? There are actually three or four key drivers. First is the way they used to recognize revenue for RCM deals. I think there's a good, give or take, 2 to $3,000,000 a quarter just from a rev rec perspective that we are much more conservative in how we recognize revenue from RCM customers. They've been a little more aggressive where they estimate the revenue that will be collected for their customers, and then they estimate the revenue based on that. We take it based on actual revenues. So as we adjust that, I think on an ongoing basis, we'll we'll see that adjustment.

37:11 Second, there were two services or lines of service that I've said earlier that are not profitable and that eventually we will look to eliminate. And those two lines of service are basically around small IT management services for these rural community hospitals and some early outside services, and those itself were about 8,000,000 a quarter. The reality is when you take those services out, it doesn't affect profitability or in fact, it helps profitability a little bit. So we are... We have encouraged them to think about that. Of course, we have no control over it pre close. We're happy to report that they're already on their way to doing that, and that will reset the base for a couple of quarters by as much as $8,000,000 a quarter. And then, obviously, in order to rapidly accelerate the transformation of their operating model, we're anticipating some customer discounts, etcetera, over the next few quarters, which will be about 2,000,000 to 3,000,000 a quarter. So again, I think the way to think about the combined business is, as you know, IKS is at a run rate of about $97,000,000 a quarter, which is about $388,000,000 annualized.

38:13 TruBridge has a run rate of about $75,000,000 a quarter, 300,000,000 annualized. Together, it's about a $688,000,000 revenue business with a combined EBITDA of about INR $11.50 crores on the IKS side and about $68,000,000 on the true bid side, which is about 650 crores. So that's what the starting point is. And again, our iterate has been excited about the true north objective that we've laid out for ourselves for FY thirty. And that's sort of the overall state of the union. And again, if I put all that in perspective from our December 2024 timeline, which should be basically about even less than six years and five and a half years, we have taken combined EBITDA of the organization from 647 crores to 3,000 crores if we hit our two north. Of course, there's an if there, but I'm I'm putting us out there saying that I think we have a really, really good line of sight to that. So so that's the overall state of the union.

39:11 Again, I'll round up by saying very exciting quarter, strong performance. The cross sell land and expand strategy is starting to work in large health systems on the legacy IKS side. Very excited about the new operating system for health care that we are building as we combine TruBridge. And while we think of this as a multi decade journey, if I was to break it down for the next, say, four or five years, I think we have a pretty healthy outlook for the next four to five years. So with that, I'll wrap up our prepared remarks and turn it over to the operator for helping facilitate questions. Thank you. We will now begin the question and answer session. The first question comes from the line of Satyam Kumar with GM Group Family Office. Please go ahead.

40:21 Hi. Am I audible? Yes, Sandeep. Please go ahead. Yes. Thanks for the opportunity. So actually, have couple of questions. Sir, it will be like helpful if you could help us understand like at an organic level, what kind of constant currency revenue growth you consider healthy or sustainable or medium term? Actually, I'm not asking for the informal guidance, but rather than trying to get a better sense of the level of underlying growth of business is comfortable delivering consistently. Because right now, if I see, since we got listed, on an average, we have delivered around 14 odd percent kind of growth. And this quarter being 12%, one of the slowest growing quarter in constant currency.

41:08 So broadly, like, how do you see going forward? And also, don't you think, like, most of the operating leverage we are generating, it's coming through, like, currency gains which we are making. So at organic level, how you are seeing this going forward? Not guidance, but more better understanding and clarity, if you can share. Great. Great. Thank you for the question, Satya. So I'll answer the second part of your question first. You said in all the margin growth coming through currency, no, not really, to be perfectly honest. For example, our currency... Our our 12% year on year growth for this quarter that you have experienced has come on a people increase of... Or people cost increase of only 4.2%. Right? So our headcount has gone in June 25. We were at 12,300 people. In June 26, we are at 12,889 people, which is basically a growth of 4.2% in people cost versus 12% constant currency growth in revenue. So, actually, if you keep looking at it on a year on year basis, we've demonstrated constant nonlinearity between revenue growth and profit growth and it is all driven by operating efficiencies. And in fact, right now, our operating account is a little inflated simply because we are anticipating integrating TruBridge. There are certain aspects that we need to invest in in the TruBridge customer base that are factored in as some additional cost that we are carrying because we want to elevate the performance of some of their customers on the RCS side. So I think that's

42:38 the first part of your question. Sorry. Second part of your question. Just to add to that, I think this quarter where exchange gains were completely neutral, you would see that our underlying EBITDA performance is again very healthy. The 33% reported number adjusted for the acquisition cost is actually 35%. So the entire growth in EBITDA has actually been driven by operational improvements and not by currency. Thank you, Ritya. Ratin, on your growth, also look, I mean, I've constantly said that the market is growing at 12%. And so I've always said, look, I am not smart enough to predict what will happen every quarter. But over a period of time, if we are growing faster than 12% on constant currency terms, our market share is growing, not reducing. So I continue to say that that should be our aspiration, that will be our aspiration, that is not a guidance. I'm not good enough to predict that. I can tell you that we will aspire to continue to grow that $388,000,000 book of business at 12%, which is the legacy IKS business, and continue to drive nonlinearity as it relates to profitability in that growth.

43:46 And that nonlinearity will mostly be demonstrated in the gross margin because that's where the juice comes out of. There might be EBITDA investments that... Or the SG and A investments that offset some of that gross margin, but we'll continue to see some non linearity there. And then as it relates to the TruBridge book, I have to say that you know what their historical growth pattern has been, and I need at least two, three quarters to wrap my hand around it. Once I've understood exactly what are the various levels, then I'll understand what the Two Bridge growth potential is, and I think we'll be able to have a more better conversation on what our two bridge book growth aspiration should be in that market. So that as much as I can tell you is retaining that 12% plus growth aspiration constant currency on the IKS book, still wrapping my head around what the two bridge growth is. Again, our aspiration will be to be the fastest growing integrated system of action and system of record in the rural community market. What that number is going to be, I think we need some two, three quarters to understand that, which is why intentionally, if you see the slide, we put a tune off on EBITDA, but I haven't yet put a tune off on revenue.

44:53 But I have put a tune off on EBITDA that we think we'll achieve based on whatever little I do know about revenue. Thank you for your question. Understood, sir. Like, I think in here about industry growth, we'll continue to maintain particularly. And sir, second question, if you allow. So my second question is with regards to your AI strategy. So, sir, in today's conference call also and last call, sir, you explained in detail about your vision of leveraging AI, small language model, and Glassbox AI. So to be precise, like, just wanted to understand, like, how SLM sits alongside or on the top of LLM, and where exactly Glassdoor AI, like, framework fits in. Like, is it around SLM? Like, how how how SLM and LLM will work together and where Glassworks AI, like, actually fixes? So my second question.

45:46 That's a great great question, Sagir. Without getting too technical and making this a class in AI, I will quickly say that there are basically three SLM models. One is a classic standalone SLM model. Second, which... The big advantage of the classic standalone SLM model is it has much lower latency than relying on an LN. It can often run on CPUs or edge devices. So, obviously, you have lower GPU and cloud costs. The second is an SLM that is distilled from an LLM. That's another very common approach where, you know, you use the LLM only during the training of the model, and then the SLM takes over. So think of the LLM as a teacher to the SLM. And then the third is what I call a hierarchical SLM plus LLM model. Right? Where the SLM is used for things like instant intent detection or classification or more simpler q and a, workflow execution, which is important, routing of tasks, which is important. And then the LLM is only involved when the task requires deep reasoning. Now what we will have is we will have all of these three manifests for different tasks. We'll have standalone SLMs for some tasks. We'll have SLMs that are distilled from an LM from some tasks, and we'll have hierarchical SLMs and LMMs working together for some tasks. And that's the strategy that they will deploy. Together, what that's going to lead to is this construct where we will have much lesser dependency on the frontline LLM model. So that's to your question of when the SLMs really kick in. I wish I could tell you that based on the combination of these approaches,

47:18 my token utilization will drop by 60% versus the traditional random approach. I'm not smart enough to tell you that today, but over a period of time, that metric will emerge for us. Second, your question was around where do we... Where does the explainability come from? And explainability comes from the knowledge graphs that we have acquired through our AI acquisition and that we will continue to do. And what is the knowledge graph? Knowledge graph is nothing but a set of relationships between data points that then starts to explain how the AI is arriving at the inference that it is arriving at. And so that knowledge graph is really what will enable us to bring the explainability into the AI inferences that we are arriving at. So, hopefully, that's enough for this call at least. And, again, I didn't wanna make this an AI class, but since you asked, I at least wanted to give you a a bit of a Sure, sir. That's helpful. I have one more question. I'll get back into the queue.

48:18 Thank you. Next question comes from the line of Varun Gandhi with Fin Avenue Growth Fund. Please go ahead. Hi, Sachin and team IKS. Congrats on a solid set of quarter. And again, congratulations on the strategic acquisition of TwoPridge. My question is related to the acquisition itself. So Sachin, would like to understand you know, how long have you been in the market looking for acquiring a company in the EHR who who have developed the EHR systems? Was was this you who made an active decision to go out there, look for an acquisition, or was a banker there pitching you the idea? Wanted to understand some thought process over there.

49:03 And secondly, you know, the IKS acquisitions have been very strict and have performed very well from a capital allocation standpoint. So what are the... From a narrative standpoint, what are the few criteria as you look which which, you know, makes the acquisitions fit into the IKS story. That's it from my Thank you for the question. Appreciate it. Look, I think as I've related to the time of articulating the Drew Bridge acquisition, this was a very, very strategic thematic approach that we had. Right? Because we understood that the true operating system of the future would be a deeply integrated combination of system of action and system of record. Now in our traditional large group pocket, there are some large EHR vendors that are already firmly installed that are themselves trying to become system of action. So with them, we have this cooperative relationship where we are cooperators because we do rely on integrating with them through API, but we are competitors as it relates to our systems of action. Right? And so the chances of acquiring any of those large EHR vendors were limited.

50:15 So we started thinking, what if we look at an adjacent market, but there is still a large EHR vendor where there is an opportunity for deep integrated system of action that could, you know, bring efficiency to these chores and where that acquisition will not make us overly competitive with the EHR vendors in our traditional market. And so it was with that very thematic mindset that we spread the word from our top dev team around what we're looking for. And I think it was a good year, eight... Eighteen months, maybe that much to land to which, of course, was in an act... Was in an auction process. But when we landed it, we were instantly attracted by it for two reasons. One, the rural market is a very large market. Second, to which have a very significant 50% plus market share in that rural market. It's one of the two dominant EHRs. And third, because the service mix in the rural market is very similar to the ambulatory market. Right? And so when you when you look at that together, Tuvish became a very, very attractive proposition for us, and that's how we arrived at choosing them and going.

51:19 Very thematic strategic pursuit that led to the discovery of TruBridge. They were in an auction process to a banker, and we were able to land the deal. There was a second part of your question, if you don't mind reporting. I'm sorry. Re... Repeating. I'm sorry. Yes. So the question was, you know, acquisitions historically have performed very well from a capital allocation standpoint and an IRR standpoint. But from from a narrative perspective, how how do you see, you know, acquisitions... This acquisitions in general fitting into into the IKS story? Yeah. So, look, I think what IKS will not do is acquisitions for the sake of acquisitions.

52:04 Typically, there is there is going to be a strategic thesis behind the acquisition. That has to be the mainstay of the acquisition. And then so the strategic rationale should be the main driver of the acquisition, and then it also has to make financial sense. It would make strategic sense, but it totally is a bad thing from a capital allocation perspective or it's going to be hugely financially challenging and creates inordinate amounts of risk, then we will be careful about it. Right? So I think it's... The mainstay is strategic objectives, and then it has to be financially viable. One, it should not create too much leverage on our balance sheet relative to our current EBITDA. That's one thing. And second, you know, it has to come at a price that is accretive. If you think about TruBridge now, we acquired $68,000,000 of EBITDA for about $550,000,000, give or take, which is a pretty healthy accretive addition to us with further upsides coming from the synergies that we are going to drive.

53:05 Got you. Thank you very much. I'll join the queue. Thank you. Next question comes from the line of Mayank Pavla with Carnelian AMC. Please go ahead. Hi. Thank you for taking my question. Am I audible clearly? Yes. Absolutely. Yeah. So my first question is to Nithya. I think there was a comment on the higher acquisition M to M price. Could you please clarify a bit on that? And second, I'll follow-up on this. Happy to. The... My comment was regarding our investment in Upbridge. It's a strategic investment that we have held the last several years.

53:54 And this quarter, we had to record it at a higher valuation. And that's the reason the denominator that I'm calculating return on equity, the equity value increased a lot more than my profit increase because there is no impact on the. It goes through OCI, ma'am. So it goes directly into equity, the revaluation. That's why the base increases, but the... It doesn't show up in the profit. So I was talking about a bridge. It had nothing to do with the true bridge acquisition. Sure. Sure. Sure. Thank you for clarifying that. And my second question is just, know, considering that there there is some revenue rationalization in TruBridge, which was unforeseen before the acquisition, Do you still believe that f y twenty seven, it will be EPS accretive for us?

54:45 Absolutely. Because the good news is even with the revenue reduction, the EBITDA is still the same. And so absolutely, EPS accretive, perhaps even a bit more EPS accretive than we had imagined. Sure. Sure. Those are my two questions. I'll get back in the queue. Thank you so much. Thank you. Thank you. Next question comes from the line of Aditi with I Wealth India. Please go ahead. Hello. Am I audible? Yes, Aditi. Yeah. Hi, sir. I just wanted to ask in the future, like, with the acquisition of. So I'm Aditi, sorry to interrupt. You're breaking up now. Sorry, Aditi. You're breaking up now. Sorry.

55:36 Your voice is breaking, miss Aditi. Can you please come in the range and talk? Hello? Now is it Yes. No. It's still breaking. Hello? Yes. Please go ahead. Hi. Just wanted to clarify that the IKS business that your opening comments, that would be 12 to 13% growth. And with Tubridging, I wanted to understand the revenue synergies. After the Tubridging consolidation and with the revenue synergy, like, what would be a consolidated pro form a? Aditi, I'm still struggling to understand the question. If you're asking about medium term growth outlook of revenue based on TruVid and IKS combined, like I was saying earlier to Satyen's question, the aspiration on the legacy IKS side continues to be north of 12% constant currency. On TruVige, I still need a couple of quarters to articulate, understand what the right aspiration is there for that rural and community market. And so can't really give you that outlook. Having said that, is there a is there a significant cross sell opportunity into which is customer base or IKS' system of action? Absolutely.

56:55 So that will be one of the drivers of that growth that we will create, but we're not in a position to give you a revenue growth outlook for the two bridge book yet. Understood. Got it. That was my question. Thank you. Thank you. Next question comes from the line of Madhu Chanda De with MC Pro. Please go ahead. Hi. I have a couple of questions. The first is on this acquisition. As you mentioned that this margin is EBITDA margin is close to 22%, 23%, which at this stage is much lower than IKS. Like what we had seen in equity also, the margin was much lower, but you could achieve a blended EBITDA margin north of 30% in a very short span of time. So if you could just give us some idea about I'm not asking for a guidance, about your expectations and what are the low hanging fruits to take this margin up?

58:05 And my second question is you have given a medium term guidance of INR 3,000 crore of EBITDA without equity dilution. Does this mean that you're not really looking at any big acquisition between now and FY 'thirty? And is there any other white space in your line of business that you are looking at where an organic opportunity is possible? Great. Thank you for the question, ma'am. Yes. So yes, absolutely. As I was saying, one of our five strategic pillars of execution is to get the blended business to the early to mid-thirty margins over the next couple of odd years. And we have sufficient levers in the two bridge book to transform their operating margins through the right use of technology that we already have, technology that we are building, and the appropriate use of offshore human in the loop to get the margins to that place. So, yes, that is definitely our aspiration and we are working through that process of getting back the margins to the right place just as we did in Acuity.

59:13 And then as it relates to acquisitions, no, I don't think we're saying we won't do any acquisitions. What we're saying is that we think we can get to this 3,000 crores without the additional acquisition. Now it's possible we do acquisition and we get even bigger. But without contemplating an additional acquisition in the mix, we could get to INR 3,000 crores. We could get an acquisition, do better than INR 3,000 crores, worse than INR 3,000 crores. Obviously, there's a bit of speculation, but as things stand today, we feel like we can get the business to INR 3,000 crores of EBITDA. But we're not saying that our doors are closed for acquisition. We're just saying that we will continue to be disciplined and the reality is we have a lot of integration to do right now and we're heads down in that process. Okay. Thank you and all the best.

1:00:00 And sorry to your question, is there more white space to acquire? Yes. Yes. I think this space is huge. There's going to be a lot of opportunity. I am certain spec about what happens to point solution vendors, even RCM only vendors, traditional back office RCM only vendors going forward. So will there be more opportunity? I think there's a lot of opportunity. I think the shift from intellectual recognition of full platform to actual buying behavior of full platform is imminent. So as all that plays out, there... There's definitely gonna be opportunity, which means we will have to be even more disciplined because we are gonna get hit by acquisition opportunities every other day, and we have to be absolutely disciplined about what we pursue. Got it. Got it.

1:00:52 Thank you. Next question comes from the line of Omkar with Muscles. Please go ahead. Yes. Hi. Am I audible? Yes, sir. Yeah. My question is on this mid June launch by a bridge of their clinician intelligence platform. So from what I read read about the initiatives, they are moving just beyond being an AI and moving into pre visit, during the visit, and also mediating the relationship between payers and providers. So everything that IKS talks about in terms of capability of a platform, that is what a bridge is also talking about. So just wanted to get your perspective on how do you see that and the competitive intensity going forward.

1:01:46 Look. I... I'll tell you that we respect the bridge as an organization, which is why we invested in them and have continued to hold a stake in them. Having said that, I will say that there are 50 such vendors that are all now aspiring to evolve from point solutions to platform. Not everybody is going to be able to execute through that. There will be some winners and some losers. And, also, there is a huge time and effort that it takes to expand from an AI ascribe business to pre post... Pre... Post visit the platform. And so I think all power and my best of luck to a bridge. We will obviously carefully be validating them, but also many other vendors. And, you know, the reality is that the competitive intensity in this space is increasing, should increase, and will increase. I mean, when you have a TAM of 200 plus billion dollars that's growing at, you know, 8% and outsourced TAM of 35 growing at 12%, the competitive intensity is naturally going to increase.

1:02:48 The question is, have we built enough of a competitive book that allows us to win in that increasing competitive intensity? And we obviously are drunk in that cool day. But we are also watchful of competition and a bridge is one of those many, many, many point solutions that are trying to... That have now realized that point solution existence is fraught with all sorts of risk. And so they are trying to go upstream and try to build a bigger platform. How well they do, how well they don't do will be a matter of time. Okay. And just a follow-up to that. So in your renewal conversation with the hospital providers, is the pitch by all these new platform providers on just pricing or any further capabilities that they are trying to sell?

1:03:40 With the large health systems? Sorry. You're asking about the large health systems? Yeah. With the large health large health systems mostly. Okay. You're having a pricing impact. Oh, pricing. No. I I... Look. I think with increasing competitive intensity, there is always going to be pricing pressure. But I will say that, you know, we are we are signing deals at a very healthy price. We just signed another deal recently that was a five year lock in at a very healthy price. So I would say right now, outside of tasks that are truly nondeterministic in nature that can be reaching a high level of autonomy, pricing is not the biggest issue. The issue is there is competitive intensity. The issue is for customers to separate the signal from the noise and and then be able to make the right decisions about how elaborate a platform approach they want to take.

1:04:38 So, yes, is there pricing pressure? I think with increasing the barrier density, there will be pricing pressure, but we continue to believe that there is continued margin leverage in the business in spite of that pricing pressure based on our value proposition in the market. Okay. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of question and answer session. I now hand the conference over to Mr. Sarraj Pundra for closing comments. Thank you, everyone. For any additional question, please feel free to reach out to us at our Investor Relations ID. Thank you, everyone, for attending the call. Thank you. Thank you.

1:05:28 Thank you. On behalf of IKS Health, that concludes this conference. Thank you for joining us. You may now disconnect your lines.