Global digital product engineering and technology service provider Nagarro recently announced its financial results for FY22 Q2. The company had a record-breaking revenue growth of 65 per cent year-on-year, where it saw an increase from €127.3 million (INR 10 billion) in FY21 Q2 to €210.0 million (INR 16 billion) in FY22 Q2.
In terms of constant currency, the year-on-year revenue growth was 55.7 per cent, a little higher than the previous quarter, which was 55.2 per cent. “The numbers speak for themselves,” said Manas Fuloria, co-founder at Nagarro, pointing at its strong fundamentals like entrepreneurial, agile, and global character. He said this is the fifth successive quarter of 10 per cent sequential quarter-on-quarter growth, with EBITDA of 19.1 per cent. However, the sequential quarter-on-quarter revenue growth was 13.2 per cent.
Nagarro recently updated its revenue guidance for 2022, which looks to touch €800 million, a gross margin of about 27 per cent, and an adjusted EBITDA margin of about 14 per cent.
Gagan Bakshi, managing director at Nagarro, said it feels great to be one of the fastest-growing companies in the industry today. He said, at Nagarro, we do not think quarter by quarter; we spend all our time and focus on building a company that lasts and grows for decades. “But we have got a strength of good quarters, and we can only be thankful for that,” added Bakshi.
Based in Munich, Bayern, and Germany, Nagarro SE is a global digital engineering company that helps customers with their digital transformation journey. The company employs over 16,000 people in 30 countries. In the latest quarter, i.e. FY22 Q2, it added about 872 employees globally.
The company offers services in trending technologies, including AI/ML, data science, IoT, cloud, low code, agile, DevOps, Chaos engineering, etc across industries. This includes BFSI, automotive, energy utility, gaming and entertainment, life science and healthcare and others.
Understanding the Demand and Supply Side of Things
Fuloria said that the demand continues to be strong despite macroeconomic fears. However, he said there might have been a slight drop in the demand intensity, and their focus would be more on solving the supply constraints rather than the demand side.
He added that the job market for top engineering talent continues to be hot. “Whether this is a sign that demand remained robust across the entire industry or because of something else, only time will tell,” said Fuloria.
Nagarro claimed that the fastest-growing industry was management consulting and business information technology. The slowest growing industry for the company was telecom, media and entertainment, followed by energy, utilities, and automotive. But, even that was not bad, where it noted revenue growth of 28 per cent.
Geography-wise, Nagarro noted that Europe was relatively weaker compared to the US. On the customer demand side, the company noted slower growth from bigger customers, where the top five customer concentration grew to 15.4 per cent, from 13.9 per cent last year.
“The caution at large companies is something that we have seen, but there are several reasons why our client concentration has continued to grow,” said Fuloria. Further elaborating on the reasons, he said that their top clients might not necessarily be the largest companies by themselves. He said it takes some time (referring to the caution) to flow through to their results.
Acquisition Strategy
Nagarro acquired two companies this year – Techmill and RipeConcepts. Techmill is a niche financial IT service provider. On the other hand, RipeConcepts is a creative solutions company that works in design, 3D, animation and others. Prior to this, it acquired four companies, including Advanced Technology Consulting Service (2021), Farabi Technology (now S4M) (2019), ANECON (2018), and Mokriya (2016). In total, the company has acquired about six companies to date.
“Every other company that we acquire, we have an earnout period where the company stays separate, but are gradually moving to find synergies,” said Fuloria, citing Techmill and RipeConcepts on how they are adding value and creating opportunities.
“We are happy to have the senior management and entrepreneurs behind these companies join the larger management team. Our team is full of extremely energetic and powerful entrepreneurs. That is one of the biggest differentiators for Nagarro,” said Fuloria.
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