Mphasis Q3 Results Review - Digital Risk Decline Leads To Result Miss; Near Term Headwinds: Dolat Capital

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Dolat Capital Report

Mphasis Ltd. reported revenue decline of 2.6% constant currency QoQ (our estimate: up 1.4%), where direct business declined 2.8% constant currency QoQ (our estimate: up 1.6%). Sharp fall in mortgage business of digital risk, Q3 seasonality of furloughs and lower number of working days led to de-growth. DXC grew 0.8% QoQ in CC terms.

Ebit margin stood at 15.3% and was flat QoQ (our estimate: 15.2%). Management has retained operating profit margin guidance of 15.25-17% for Q4. Signed total contract value of $401 million up 20% YoY.

Mphasis provided additional color on growth, where direct revenue grew 6.3% YoY in CC terms, but excluding digital risk, growth was 14.7% YoY in CC, reflecting that remaining verticals continued to see positive momentum.

Q3 performance was impacted by digital risk, while overall total contract value wins and margin retention provided some bit of stability.

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