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XT Global Infotech Ltd

| Q2 & H1 FY26 Earnings Conference Call Transcript

BULLISH SENTIMENT

Report Source

⬤18th Nov 25

Summary : XTGlobal Infotech shows strong Q2/H1 FY26 growth, expanding globally and targeting significant revenue and margin increases for FY27, despite broader IT sector headwinds.

Management Perspective positive : We believe we are positioned to benefit meaningfully from the industry's next phase of recovery. Our gross profits and net profits are expected to grow up over the next year or two. Our goal is to be able to give at least twice a year dividend policy.

Concall Report Analysis & Insights

Business Overview

  1. Q2 FY26 consolidated revenue increased 2.3% quarter-on-quarter and 93.7% year-on-year.
  2. Added 11 new clients, including 7 in finance/accounting and 4 in IT services.
  3. Successfully exited Madhurawada SEZ unit, enhancing operational flexibility.
  4. Initiated rollout of a new CRM platform, scheduled to go live in December 2025.
  5. Expanded global footprint by launching operations in Australia with two anchor projects.

Future Growth Prospects

  1. Targeting a stabilized 20-25% revenue growth rate for fiscal year 2026-2027.
  2. Aiming to achieve at least 15% EBITDA margin by increasing operational efficiency.
  3. Leveraging existing infrastructure to support growth up to 2,000 employees without new capital.
  4. Expanding global presence with planned office openings in Australia and UK/Europe.
  5. Focusing on GCC model and increasing product revenue for enhanced profitability.

Management Insights

  1. Strengthened business fundamentals and expanded market footprint during the quarter.
  2. Board approved an interim dividend of 5 paise per equity share for FY25-26.
  3. Digital transformation of sales operations with a new CRM platform is underway.
  4. Global expansion in Australia secured two anchor projects, enhancing international presence.
  5. Consistently looking for strategic acquisitions that offer cultural and capability fit.

Signs of Skepticism

  1. Management did not provide specific revenue or margin guidance for H2 FY26.
  2. Acquisition discussions are ongoing, but no concrete deals have been announced yet.
  3. UK/Europe expansion shows traction, but no closed deals or offices are established yet.

Risk Factors

  1. Indian IT sector faces moderated demand and deferred discretionary client spending.
  2. Broader macro uncertainty and ongoing tariff-related noise in the U.S. market.
  3. Healthcare vertical exhibits cautious sentiment, retail and automotive face policy pressures.
  4. Deal flow remains concentrated on cost optimization and vendor consolidation.

Good To Know

  1. Global economy remains steady; India's economy expanded 7.8% in Q2 FY26.
  2. Company is not heavily dependent on H-1B visas, seeing offshore model as an advantage.
  3. Network Objects subsidiary contributes approximately $20 million, primarily from onsite consulting.
  4. Won first major public sector RFP with the US Department of Transportation for $5 million over five years.
  5. Intends to provide dividends twice a year, an interim and one more.

Key Drivers

  1. Strong Q2/H1 financial performance.
  2. New client wins, market expansion.
  3. Digital transformation, CRM rollout.
  4. Leveraging existing infrastructure.

Key Analyst Discussions

Market Trends & Consumer Behavior

  1. Q: How does the H-1B visa impact revenue from North America?
  2. A: Minimal H-1B dependency; offshore services model is an advantage.
  3. Q: Contribution of Network Objects subsidiary to overall revenue?
  4. A: $20 million, mainly onsite consulting; minimal India standalone impact.

Financial Highlights

  1. Q: Breakdown of revenue drivers by vertical, geography, and service line?
  2. A: Most revenue from US, Australia just started. 50% IT consulting, 50% product/accounting outsourcing.
  3. Q: Evolution of dividend policy after interim payout?
  4. A: Plan is to give dividends twice a year.
  5. Q: Revenue and EBITDA margin guidance for H2 and FY27?
  6. A: Targeting 20-25% revenue growth and 15% EBITDA margin for FY27.

Product Composition

  1. Q: Most revenue comes from which services?
  2. A: 50% IT consulting, 25-30% product, 10% accounting outsourcing.

Strategic Considerations

  1. Q: Contribution of US government sector in Q2 and pipeline?
  2. A: Won first $5M DOT RFP; expect $1-1.5M annually from this client.
  3. Q: Progress on new acquisitions?
  4. A: Consistently looking for right-fit acquisitions; currently in discussions.
  5. Q: Progress on UK market initiative after Australia expansion?
  6. A: Seeing traction in UK/Europe; planning office openings this quarter.