Sonata Software Limited Earnings Summary — Q3 FY2025

• International Services delivered a constant currency (CC) revenue growth of 4.4% QoQ, though EBITDA was impacted by one-time cost items.
• The Domestic Business (Sonata Information Technology Ltd) saw a record performance with Gross Contribution increasing by 16.7% QoQ.
• Secured two significant large deals, including the company's first multi-million-dollar deal on Microsoft Fabric and a Gen AI modernization project.
• Consolidated PAT of ₹105 Crores remained relatively stable QoQ (-1.4%), while YoY figures show a sharp recovery from the net loss reported in Q3 FY24.
• The India segment continues to be the primary volume driver, contributing ₹184,140 lakhs to revenue this quarter, up significantly from ₹105,078 lakhs in Q2.
• Day Sales Outstanding (DSO) showed a slight uptick to 47 days in International and 41 days in Domestic, indicating a marginal slowdown in collections.
• Management is currently renegotiating contingent consideration terms for the Quant Systems acquisition, expected to conclude next quarter.

Management remains optimistic about its 'Modernization Engineering' strategy and long-term vision, focusing on Gen AI and Microsoft Fabric to drive future growth.

Stable

While top-line growth is robust and deal wins are healthy, the EBITDA margin compression in the International business due to one-time costs offsets the domestic strength.

The company is transitioning toward high-value modernization services like Gen AI and Cloud. A key monitorable will be the margin recovery in International Services and the conclusion of the Quant Systems renegotiation.