Mastek (NSE:MASTEK) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Mastek Limited Q1 and FY 'twenty seven Earnings Conference Call. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinion, and expectation of the company as of late of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode, and there will be opportunity for you to ask question after the presentation conclude. Please note that this conference is being recorded. I now hand the conference over to Mr. Prateek Jadka from ENY Investor Relations. Thank you, and over to you, sir.

0:50 Thank you, Danish. Good afternoon to all of you, and welcome to q one FY twenty seven earnings call of Mastek Limited. The results and presentation have already been made to you, and you can also view it on our website, www.mastek.com. To take us through the results today and to answer your questions, we have the top management of Mastek represented by Uman Mahata, CEO and Deepak Kedia, CFO. Uman will start the call with a business update for the quarter, which will be then followed by Deepak, who will take us through the financials. Post that, we will open the floor for q and a session. As usual, I would like to remind you that anything mentioned in this call that reflects any outlook for the future or which can be construed as a forward looking statement must be viewed in conjunction with the risks and uncertainties that we face.

1:46 These risks and uncertainties are included, but not limited to, what we have mentioned in the prospectus filed with SEBI and subsequent annual reports that you can find on our website. Having said that, I will now hand over the call to Mang Nahada. Over to you, Mang. Thank you, Prateek. Hi, everyone. Welcome to the Q1 results and earnings call for Mastek. On an overall basis, quarter one has been a good quarter with predictable performance and growth. The general demand sentiment in the market continues to be positive. And especially with the AI transformation and evolution, a lot of AI led new demand opportunities have started popping up.

2:39 In this quarter, we continue to see good demand in new AI led deals, and we had 40 plus new opportunities that we've closed in the current quarter, which were backed on AI led initiatives. Our order book performance for the quarter continues to remain strong, and our twelve month order backlog has grown to 25% year on year terms and 13% in constant currency terms. On the back of a positive order book growth that we had demonstrated earlier, we've now seen a strong revenue growth in this quarter with a 5% quarter on quarter growth in INR terms and a 1.8% growth in constant currency terms.

3:29 Our U. K. Business continues to be our strong foundation and foothold. The U. K. Business grew by 3% quarter on quarter in constant currency terms. If you as we go in detail, financial services which in banking, which was a strong performance for Q4 as far as order book is concerned, is now resulting in a positive growth in terms of revenue terms as we continue to expand our business in existing customers as well as acquire new customers in the vertical. A lot of demand in the private sector in U. K. Is also shaping because of AI led initiatives in the market. The health care sector, which is one of our strongest performing sectors over the last few quarters, continues to see a very strong positive demand.

4:19 Although there has been a transition in Q1, where some of our projects have ramped up, but new projects have already started, and a lot of these new projects are in the data and the data modernization space in health care. And we believe these will help us ramp the revenue numbers up back in the rest of the year. The U. K. Public sector business, which has been our core pillar, continues to stay stable and grow. Our Q1 performance grew sequentially on the back of stable performance in our existing customers as well as some new customer acquisitions in the local government sector. While there has been political leadership change in the country, we continue to observe the changes quite closely and understand the policy and priority changes of the new government.

5:14 And also, as the weeks and months evolves, how do these priority and policy changes result in budget changes is something that we will be keeping a close watch on. In general, the demand for cost savings and continuous efficiency is high on the public sector side, and we are working closely with our customers using technology and business process innovation to help them to help meet cost saving costs. Moving forward to North America. North America, again, saw a strong order book performance for the third consecutive quarter, led by a $25,000,000 AI transformation deal in Salesforce, Agent Force, which is one of our largest deals in the recent quarters.

6:04 The North America business continues to focus on health care and life sciences as its key vertical. The demand for AI led initiatives in this vertical, especially AI transformation, continues to ramp up and is an important area of focus for Mastek as we go forward. The overall business grew around 2% quarter on quarter in constant currency terms and 6% in INR for this current quarter. This is for North America. The Middle East business, on the other hand, continues to face some severe headwinds. As we all know, the West Asia crisis is creating a lot of instability as well as unpredictability in the market. And while we navigate the current volatile environment, working closely with our customers and our leadership team in the geography, we continue to see some uncertainties in our business in Middle East.

7:03 Although at the later part of the quarter, we did see some new order book getting signed, but the predictability of the business is still a little uncertain. Despite of the shaky performance in Middle East, like I said, the overall performance of the company continues to be strong and positive. As we move forward, transforming or steering Mastek towards becoming an AI transformation company in our select verticals is the key direction of travel that we want to execute. As a company, we have a very unique position with our enterprise application transformation business, our data strong data practice as well as a phenomenal engineering practice, which makes us uniquely positioned to become a transformation company, starting these transformations from back office and then taking them forward into the entire business.

7:55 Also, deep clientele as well as strong vertical insights, especially into health care and public sector, creates a phenomenal position for Mastek to take AI transformation lead in select verticals, especially health care and public sector. We also had some important changes in our leadership team. We had Amit Gajwani, who has joined us as our new chief operating officer. Amit joined us from LTM and has a phenomenal track record in delivering hands on leadership on delivery and delivery transformations. Under Amit's leadership, we are looking at a phenomenal change in terms of our talent pool and really transforming the talent pool, strong governance in our delivery as well as transforming Mastek into an outcome focused organization, delivering outcome focused results for our customers.

8:58 Overall, we believe that Mastek is really well positioned to take phenomenal advantage of this growing AI evolution and AI wave, while still maintaining stable delivery on our existing business and continuing to expand there. I will now hand over this call to Deepak Kedia to share more details on the financial performance. Deepak, over to you. Thank you, Uma. Thank you, Prateek. And a very warm welcome to everyone on the call, and thank you for taking the time to attend Mastek's earning call. Let me start with quarter's numbers update before I talk about other metrics and updates. In Q1, we reported revenue of $104,800,000 sequentially up by 1.2 and an operating EBITDA of 15.4%.

9:45 On a constant currency basis, revenue had a robust sequential growth of 1.8%. Middle East continues to be impacted by geopolitical situation, resulting in increased bench cost and delayed collection. This has impacted our EBITDA in Q1. In rupee terms, we reported revenue of INR $9.85 crores, a sequential growth of 5% and a Y o Y growth of 7.7%. We reported PAT of INR105.9 crores or 10.6% of total income. We closed the quarter with a healthy twelve month backlog of $310,000,000 a sequential growth of 3.2% and a Y o Y growth of 13.3% in USD terms and 25% in INR terms. We reported a basic EPS of 34,200,000 up 14.8% compared to last year and a diluted EPS of $33,900,000 up 15% compared to last year.

10:38 Moving on to cash position of the company. During Q1 'twenty seven, we had another good collection quarter where we collected $116,000,000 from our customers, resulting DSO of $75,000,000 an increase of two days, primarily due to push out of collection of almost $2,500,000 in the first two, three days of July and geopolitical headwinds in India. During the quarter, we paid INR 107 crore as variable to our employees. Despite that, we were able to generate positive operating cash of almost INR 27 crore. In last two quarters, our net cash and investment position have improved by almost INR 200 crore, consequent to prudent cash management and aggressive collection initiatives. Moving on to some geo specific performance now.

11:23 Both U. K. And North America geo grew sequentially in Q1. U. K. Continues to make the healthy EBIT of almost 20%. North America closed the quarter with a healthy order book, improving their total backlog position by 29.8% sequentially and 23.5% Y o Y. In terms of service line, data automation and AI business grew by 9.8% sequentially, thereby reinforcing our focus on as AI transformation company. In terms of industry, public sector business continues to show its strength by growing 7.9% sequentially. Utilization, excluding trainees, were down by 2% sequentially due to order push outs and situation we have in Middle East. Some other business 100 parameters. We added 13 new customers during the quarter. Our closing headcount was 4,097, an addition of 167 during the quarter, out of which U. K. Added 125 on the back of ramp power fleet projects.

12:16 Our attrition rate, last twelve months attrition rate is down by 1% from 17.4% to 16.4%. Last update on the tax assessment. There has been so we have already uploaded that in CV a couple of months back. During the quarter, we received an income tax assessment for financial year 'twenty to 'twenty three, wherein the Assisting Officer added an income of INR 91 crores on account of transfer pricing and INR 32.5 crores on account of domestic tax. I'll repeat the word income, that was not the tax which got added to our it was not a tax demand of INR 135 crores or INR 135 crores, it was actually an income added to our overall income. Hence, the tax impact will be approximately INR 31 crores.

13:02 We have filed an appeal to Commissioner of Income Tax Appeals on June twenty sixth of June and transfer pricing and tax experts are guiding us on the next steps. With that now, I'll hand over back to Prateek to open up for Q and A. Thank you. Thank you, sir. Ladies and gentlemen, we will now begin with the question and answer session. If you wish to remove yourself from the question queue, you may press star and two. Participants are request to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question comes from the line of Susho One from Anandrati, Share and Stock Brokers Limited. Please go Hi. I hope my voice is audible.

13:58 Yes, sir. Yes. Yeah. Actually, a few questions. I'll ask the first two questions and then go back in the queue. These deals of FCA, Atlas, and Hades, when do you expect that to ramp up, when do you expect The US deals to ramp up? In which quarter, that is one? And the second is effectively the top five clients. I think this time, quarter on quarter, there has been a decline of 412% Y o Y. If you could just give us the rationale for that, that will be helpful. Susho, thanks for the questions. The FCA deal has already started ramping up. And as you see, the financial performance improvement in our banking and financial services in U. It's largely on the back of ramp up of FCA, but we'll continue to see some more ramp up in Q2.

14:48 The Hades deal has also Hades deal was actually a renewal deal of our existing customer. So it will not necessarily have any ramp up impact, but it continues to deliver steady revenue for our business. The deal that we announced in North America, we are expecting it to ramp up by H2. As far as the decline in the top five, top 10 customers is concerned, like I mentioned earlier, in our health care business in U. K, which is and it is England, which is one of our most prominent customers, We're going through a phase where we are closing out the old project and we're starting the new project. It's a timing gap, and we believe as we get into, you know, q two and beyond, we should be able to get back to our usual performance and growth in those customers. So it's a onetime timing gap in this quarter where it closed down the old project and we are ramping up new business. Interestingly, the new ramp up is in much more modern spaces of data modernization and building the data platform for health care for NHS.

15:57 And just just two questions for Deepak. Basically, the subcon cost, I think, is that also increasing now as a percentage of revenue? That is one. And the other part is effectively on the impact of ESOPs. How much will that be going forward in this year? Because I think that is almost one one point one percent of the revenue we could possibly focus on that. Yeah. Sure. Sure. So subcon cost, yeah, it is 18.5% of our total revenue in the current quarter, which is in line with what we had in Q4 as well. So we are not seeing any significant increase in subcon cost in Q1. In terms of impact of ESOP, the ESOP grant will happen from Q2.

16:45 We are estimating an impact of 400,000 to $500,000 per quarter. Yes, the $400 to $500,000 you said, right? That's right, 400,000 to $500,000 Yes. Next question comes from the line of Pulkit Chawla from three sixty one Capital. Hi. Thanks for the opportunity. My first question is if you could just help me understand how are the TCV trends been. We've obviously seen the twelve month of the executable book growing quite well for the last couple of quarters. Now you've obviously wanted to make the business more predictable, have longer tenured deals. So if you could just help me understand how is the TCV trends been overall over the last few quarters?

17:34 My second question is on discount split. Some of your larger peers have called out that at times, there has been some irrational behavior, wherein discounts have exceeded maybe even 50%. In the past, I think you've given close to 10% to 15% discounts while renewals. Are you also seeing some unreasonable or irrational behavior coming into the picture? And just a small clarification on your health care vertical. You did mention some of the teams are ramping up now. So do you see that vertical returning to sequential growth from Q2 onwards? You. Pulkit. Thank you for all your questions. I'll try to answer them one by one. If I miss anything, please do remind me. As far as the TCV growth is concerned, so the total order book growth is definitely also moving in the right direction.

18:23 While we don't disclose order book numbers, but the general direction of twelve month order backlog, which you already know is a 25% growth year on year. But the total order book growth is actually equally better as we look at it. So we're looking at, you know, like I said, for example, the deal that we signed in North America, it's a five year deal, $25,000,000. So you can see the impact on TCV, just an example case here versus the ACV impact that we are demonstrating here today. So in general, the TCV numbers are quite healthy and are moving in the right direction. As far as the health care business is concerned also, I'll come to that in the third point. So I'll answer the health care question and then I'll come to the discounting.

19:12 As far as the health care business is concerned, our health care business is quite spread across geographies. So we have a pretty strong healthcare presence across all geographies. Our healthcare business in U. K, which is our most prominent growth business, we believe will start ramping back up in the right direction from Q2 and as we get into H2. It should be at the same levels and growing from there. The health care business in U. S. Is the health care life science is a key focus area, and we are looking at further investing in that business as we go forward. So that should also turn around, whether it is going to be Q2, but it's not necessarily firm. But especially as we get into H2, we are quite sure that our health care business, health care life sciences business in U. S. Is also going to be ramped.

20:03 The Middle East business, as you know, is going through a degree of uncertainties, while we actually had a healthy order book closure in Middle East health care also in Q1. However, the ramp up in Middle East is currently running a little uncertain depending on how and when the clients are ready for going through these transformation executions. But we feel positive that in general, the Middle East Healthcare business will also do extremely well from an overall financial year point of view. The third part of the question that you had, Pulkit, in terms of the unreasonable or extraordinary discounts. We are definitely seeing aggressive price competition, both in terms of net new wins as well as renewals that we are going through. However, the level of discounts have not gone to as high as 50%.

20:56 But depending upon the customer and scenario, they are still around 20%, 25% tops in one or two cases, but generally a 15% like I'd mentioned earlier. Having said that, the net new business that we win or compete for is definitely coming at a much more price aggressive positioning. On the same hand, our ability to execute them faster and better is also improving. And especially businesses that come on fixed bid or outcome focused contracts, we believe we should be able to execute them at a much better margin than we see them today. Perfect, Mam. That's super helpful. Thank you. Thank you. Our next question comes from the line of Amit Chandra from HDFC Securities. Please go ahead.

21:56 Thanks for the opportunity. So my question is on the total the total order backlog number that you have given. So now there's a healthy growth both sequentially and Y o Y. But if I exclude the 25,000,000 deal, you that we have won in The US geography, it appears to be flat sequentially. So, you know, how do you see the order book panning out? And and also if you can highlight how the, you know, how the how the funnel is looking like in terms of how healthy the funnel is and also in terms of the conversions, how fast they're happening across across geographies. And, also, in in terms of the, like, Middle East geography, obviously, you highlighted that there is a pressure.

22:41 But we have one one large deal there that is, you know, highlighted in your presentation, which is largely a multiyear fixed price kind of engagement. So, you know, when that will start to ramp up and, you know, when we can see the margins in The Middle East, like, normalizing. And overall, in terms of the margins, The US and The Middle East margins have been, you know, like, volatile. And with these deals ramping up, the $25,000,000 deal in The US and the uncertainty in The Middle East, do we expect the margins in these two lower fees to be, you know, like, suppressed over the next few quarters? Thank you. Amit, again, I'll answer... Try to answer all the questions. I've noted them down. But if I miss anything, do remind.

23:26 As far as the overall pipeline and funnel is concerned, I think the pipeline continues to, improve consistently. Like I said in my opening comments, the demand cycle generally looks positive all across. There are a lot of these transformation that Mastek is going through will require some large deal wins consistently happening across geographies, across quarters. We are seeing a good increase in the number of large deal pipe line items that we have. This is a change from what we had seen earlier. We did not have as many number of large deal opportunities in our pipe across geographies. And our ability to transform and win these opportunities is going to be significant in our long term turnaround.

24:17 Having said that, we firmly believe that these are not just opportunities, they are also well qualified, and we have a very serious winning chance in many of these opportunities, let's say. On the other hand, like I mentioned in my commentary, the AI led initiatives are also creating a lot of mid and mid to large, you know, growing opportunities. Many of these are more like land and expand opportunities where you start with either AI foundation, which is governance and, you know, security and compliance kind of projects or with some use cases or in some cases, services or software, which is transforming SaaS to non SaaS, know, build kind of modules. Many of these opportunities, while small today, have a phenomenal opportunity of expanding into these accounts as we go in. But the number of net new AI opportunities that are popping up in our pipeline is consistently increasing.

25:16 So I believe the AI led demand as customers look to upgrade their systems and adopt more and more technology is going to be an important factor in the demand cycle as we go forward. As far as the Middle East business is concerned, you're right. We like I mentioned earlier in the previous question, we did close a large health care deal in Q1, and we actually have a few more large health care deals in our pipe, which we should close very soon. Most of these have already started they've planned to ramp up immediately. Having said that, as you know, in the last couple of weeks, the environment has again become a little volatile. So we are closely observing and discussing with our clients.

26:02 The current signals is they want to continue to start and ramp up those businesses. As these projects that we have already won ramp up, we believe that Middle East should at least stay flat depending on how the macroeconomics works out or the geopolitical situation works out. If we get more stability, we have a strong pipe, which is very close to signature and ramp up. So if things stabilize, we should be able to actually move back to growth in Middle East. From a margin standpoint, which was the third question that I noted, you're right. The current quarter, like I said, it has been a very uncertain quarter where we at various points of times, we believe that we are out of the crisis and we should be back to business as normal.

26:48 And we were holding a certain amount of bench, but the ramp ups have been slower than our anticipation, which led to those bench costs impacting our overall margin as well as some of the slowdown in collections in some of our customers, which had a onetime impact in the quarter, which we believe will be able to reverse as we go forward down the year. On the North America business, there is a business certain kind of size and scale that we will have to reach to. So as we start reaching close to 28,000,000 to $30,000,000 a quarter run rate is where we believe the North America business will start delivering healthy margins of somewhere around mid teens. Again, it's a strategic market for us. We are well invested in terms of our sales and marketing.

27:34 And with the growing opportunities in AI, specifically AI transformation in health care, we believe it's a good opportunity and staying invested should deliver us healthy results in the long term. Okay. And,, on the on the AI deals that we have announced, so it's it's encouraging to see that the AI order book is also improving, if, you know, significantly, and the deal size is also increasing in terms of the AIDs. So all these deals that we are winning is coming from existing clients. Like, these are, like, totally net new accounts and all these sales and and what's. I'm sorry to interrupt you, Amit, but your voice is breaking.

28:24 Hello? Yes, Amit. This was the first part of the question. Can you repeat the last part again? No. So I was just asking about this AI deal. So in terms of all the sales approaches there, is it... These things are coming from existing accounts, or these are totally net new engagements? Yeah. So the AIDs are both... Amit, as far as existing customers are concerned, there is a very active campaign that we are running across all of our installed base customers having, you know, significant AI discussions. We've also created an internal maturity model where we rate customers from level zero to level five depending on where their AI need and maturity is. And based on that assessment, we are also working with them on the kind of road map or path or solution that they could take it to. We've done that across a large number of our existing customers, and we continue to cover all of our customers in the next, you know, ninety to one eighty days. As we do that kind of discovery, these are resulting into various AI projects, which are of different, you know, shapes and nature. Like I said, starting from foundation stuff, like governance and security and compliance and road map to more mid tier stuff in terms of, you know, adoption of AI and technology for SDLC or testing or managed services to pretty advanced stuff in terms of looking at AI transformation enterprise wide.

29:52 So that's the pitch that we are looking at in existing customers, and there have been some wins across all the three segments in our business, and we continue to see pipe fit. There's a similar x side that is also running for net new businesses. These are closely aligned to our, you know, Oracle, Salesforce, Snowflake, Databricks relationships, where we are using the AI components within those tools to deliver net new businesses, which have a significant portion of AI transformation aligned in those projects that we are delivering. The third part of the business that we are aggressively going after is trying to be the champion challenger in customers. Like I saw in the previous question, there are many customers who are evaluating new partners who could offer more or better pricing competitiveness as compared to their existing large vendors.

30:44 And that's the... We're calling that AI for tech, but that's the third stream where we are aggressively competing in new accounts trying to, you know, be the champion challenger and turn it around into large deal for us. So all the three motions are very active and on, and I'll also share more details on how are we preparing ourselves internally at the end of the call. Okay. Thank you, ma'am. Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Our next question comes from the line of Sushawan from Anandrati, shares and stockbrokers Limited. Please go ahead. Yes. Thank you.

31:40 Just two questions, one for Rumang, one for Deepak. I just wanted to understand what has changed so significantly in this quarter versus last quarter because I think last quarter, the commentary was quite subdued. But now I believe, as you said, the demand environment, you are seeing significant positives despite whatever is happening in The Middle East. Could you possibly give us some flavor on that? What exactly are you seeing that the change either from pricing or a volume perspective, if you could provide that? And would want to have the EBITDA margin bridge between q four and q one because the currency also would have played an impact. So these are the two questions. Sushovan. I think nothing I would say the business is trending in the similar direction that we have seen in Q4. It has while there's been continuous more demand, but it's not drastically changed from where we were in q four. Like we had presented in q four also, our twelve month order backlog was consistently growing, and we...

32:41 Which continues to happen now also. So we are executing on that twelve month order backlog or the order book that we had executed over the last three or four quarters is getting into execution stage. So that's one part of the commentary. The second part is, like I said, the demand in general across variety of sectors continues to see, you know, good positive traction. Like I explained earlier, our UK business, health care, we've always maintained that the demand potential that we're seeing is phenomenal. And we believe in the mid- long term, The U. K. Health care business has a very strong opportunity to grow sizably. The public sector business, like I said and I maintain, is a more stable business today.

33:29 It is also going through these political changes, and therefore, we are closely monitoring it. So those are two core businesses of us. The third business, which is the financial services sector in U. K. Again, we saw some good wins earlier in Q4. We are now into execution. And on the back of those learnings and execution, we are also going after and trying to compete into net new opportunities in that sector. North America, definitely the wins that we've had in Q1, the large deal win is a good indicator and creates a strong positive upbeat for us as we go forward. But this is not just this quarter, North America order book that we've been saying for the last three quarters. We've been having good turnaround in our order book in North America.

34:14 And we believe as we start ramping up these order book as well as managing the you know, old projects which we're ramping down, the difference between the two. As we get into h two, we should be looking at, you know, turning around Mastek's North America business also. The AI initiatives are definitely picking up more and more. So that's one area that has changed between q four and q one, and I think it is continuously going to change and expand. Like I explained in the previous question, these are coming from variety of opportunities across all sectors of customers, whether existing or new and across all geographies. Sushon, I can take the next part of the question, which is around EBITDA margin. Again, a good pick by you.

35:04 Never fail to miss out on this. Our EBITDA, as I was mentioning earlier in my narrative that we did have impact because of Middle East where certain collections got delayed. And even some of the unbilled, we were not able to invoice because of unavailability of the clients. So we had some provision for doubtful impact within the quarter. We had certain mix change as well as some regulatory costs in U. K, which got offset by the cost efficiency as well as the currency tailwind which we had in the quarter. My only suggestion here is with this new cost, which is going to come on account of, what do you think will be the steady state EBITDA and EBIT margin for the company now? Because I think now we are at 15.4.

36:02 So do you think for the full year, we should be... It'll be lesser than that? Because this itself will be, think, 25% factor. So just wanted to get your views on that. What do you think would be the steady state margin as such? Any state, if would it be possible? Okay. So, Sean, couple of things, and I'll kind of give a little bit of narrative, but then I'm gonna chime in over here. I believe that... So that a couple of impacts over here. As you rightly pointed out, SOP is one area where we definitely will have some impact and that will have a that will rather reduce our EBITDA for the year. Secondly, we also have increment plan in Q2. So Q2 margin definitely will be a bit impacted around that because of that.

36:48 However, for the full year basis, while we will not be able to provide any guidance at this point in time, but we are definitely working on internal cost efficiencies basically mitigate a significant portion of it. So, Shubhrant, just to add to that, especially on the ESOP cost, and as we have been saying, we are building Mastek towards the transformation organization and some long term shifts. ESOP is a very critical part of that, and many of you guys as analysts and advisers and investors have also recommended us that. We believe creating a long term impact also requires a good long term team, which is aligned to the same goals and values and outcomes. Having said that, the ESOP cost currently is an additional cost to where our current EBITDA situation is. And like Deepa correctly pointed out, it will have some impact on our steady state EBITDA performance for this year. But in the long run, we should be able to deliver much better, you know, as we have stability of leadership and employees in the organization.

38:17 Reminder to all the participant, if you wish to ask a question, may press star and one. Our next question comes from the line of Devang Bhatt with Spark PWM. Please go ahead. Hi. Thank you for taking my question. So since we are now seeing good traction in order book and that is materializing in our revenues and North America dealings are also healthy. So from now onwards, do we can we see a Q o Q improvement continuing that we are seeing in Q4 to Q1? Or are there any headwinds that you are seeing apart from Middle East that will hamper our growth in the near term?

39:08 Devang, like you rightly said, the order book momentum both in U. K, U. S. Is positive. We are quite comfortable and confident that our U. K. Business will continue to deliver good growth and momentum as it has been. In North America business, like I've been saying, while we have good order book tailwinds on our side, including a large deal, there is also the nature of the business had a lot of projects in it, and therefore, there's also a continuous ramp down on certain parts of the business that we are dealing with. I believe, and this is what I've mentioned earlier, we will take at least H2 of this year. So we have had three good quarters. I think we will need one or two more good quarters, including shaping the kind of business that we do.

39:56 So by H2 is where we believe North America should turn itself into a growth engine. The headwinds, if you ask, Middle East definitely is in a little state of uncertainty. Like I mentioned earlier, while we have a strong pipe, but the deal closures are uncertain given the political turmoil that the region is seeing. As far as the other headwind that we are consistently looking at is this AI led competition that we see in both existing and new customers. So while we are going after and competing on net new accounts and customers and trying to win, We are also consistently trying to protect our turf on existing customers where we are getting challenged by incumbents who come in, challenges on our turf. So that's the key headwind that, we have to manage as we, move forward.

40:59 So... But is this current trajectory in q one, is that feasible at least from H2 onwards? Or we'll still see some headwinds continuing going forward? Devang, like I just said, we believe our FY 'twenty seven performance should be better than FY 'twenty So that's the direction of travel that we see. The backlog that we see is a good indicator of where we believe the direction of travel is. Having said that, we generally don't give guidance, but I'm also giving you a little bit of caution in terms of Middle East, and we will have to make sure that we consistently are able to protect our turf in our existing accounts. The net news are... You know, we're com... We're quite confident that there will be new net news that will keep coming in.

41:49 Directionally, feel comfortable that we are going in the right direction. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. As there are no further questions from the participant, I would like to hand the conference over to the management for the closing remarks. Thank you, and over to you, Tim. Hi, Prateek. Thank you. Before I make a quick closing remarks to all of you, there's one important update that I also wanted to share in terms of the direction of travel that we are taking.

42:39 While AI transformation is key and we are doing it for our clients and we are trying to steer Mastek into an AI transformation company in our chosen verticals, we are also going through a significant internal transformation. As we had mentioned earlier, last year was a transformation on our delivery on our technology where we were upgrading ourselves to deliver technology efficiencies to execute against the growing demand of productivity in the market. We are now going through a phase where we are running a business transformation within Mastek. This is going to transform and we've taken Mastek as customer zero and executing a significant AI led business transformation within the organization. It starts from service as a software where we have already replaced some of our core systems of records, including our CRM system, our recruitment systems, our payables, etcetera, by a new, you know, AI native developed solution, which is much more of a system of intelligence.

43:39 And these systems transformation are not just delivering a newer system, but are much more directed towards delivering business outcomes internally, whether it is improvement in our recruitment cycle times, whether it is improvement in our win predictabilities, whether it is cost efficiencies in our g and a spend, etcetera. These transformations, which is more like a service as a software transformations, are not only creating positive impact internally in the organization, These are also case studies that equally allow us to share our experiences with our clients and, hence, you know, building Mastek into a full stack transformation organization. At the same breath, there's a phenomenal investment in terms of transforming our resources from engineering resources to forward deployed engineering resources.

44:31 A lot of our domain consultants to forward deployed domain consultants kind of organization. In fact, some of these deployments have already become a part of our project that we are executing. And as a part of skill metrics change, you will see a significant change in terms of the kind of resources that we have. So a large portion of the resources will become FTEs and FDDCs as we go forward. This journey of transforming Mastek from an engineering powerhouse to a transformation powerhouse is what we are really all in for, and we look forward to keep updating you on those changes. Thank you overall for asking your questions, and we look forward to these continued interactions over the quarter and in Q2.

45:16 Thank you. Thank you, everyone. Thank you so much, sir. Ladies and gentlemen, on behalf of Mastek Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.