Latent View Q2 EBITDA margin declines on wage and bench costs

Latent View reported a 20.7% adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin in Q2 FY27, 1.9 percentage points below the prior year, as higher bench and wage-hike costs weighed on profitability. Revenue from operations rose 14.2% to Rs 294.1 crore, while go-to-market and marketing savings supported a reported 0.2-percentage-point sequential margin increase.

Why did Latent View's Q2 FY27 EBITDA margin decline year on year?

Latent View's adjusted EBITDA margin declined 1.9 percentage points year on year to 20.7% in Q2 FY27, while adjusted EBITDA increased 4.8% to Rs 60.8 crore. Revenue from operations grew faster, rising 14.2% year on year to Rs 294.1 crore, showing that the quarter's revenue increase did not translate into equivalent EBITDA growth.

Reported profit after tax (PAT) rose 6.1% year on year to Rs 48.5 crore, but the reported PAT margin fell 1.0 percentage point to 15.6% in Q2 FY27. Reported profit before tax margin was 21.0%, down 1.4 percentage points year on year, alongside the adjusted EBITDA margin decline.

The presentation identifies higher bench and wage-hike costs as a 1.9-percentage-point negative item in its Q1 FY27-to-Q2 FY27 adjusted EBITDA margin bridge. It also reported that gross margin fell to 45.3% in Q2 FY27 from 48.0% in Q1 FY27, attributing that decline to heavy nearshore projects and the wage hike.

How did Latent View's operating cost ratios change in Q2 FY27?

Latent View's gross-margin decline was partly offset by lower selling, general and administrative (SG&A) and Centre of Excellence (CoE) cost ratios in Q2 FY27. Gross margin decreased by 2.7 percentage points from Q1 FY27, while SG&A cost as a share of revenue fell by 1.8 percentage points and CoE cost as a share of revenue fell by 1.2 percentage points.

Latent View said its SG&A ratio declined because it rationalised go-to-market (GTM) resources and lowered marketing expenses in Q2 FY27. The presentation defines SG&A as costs other than delivery and CoE employee costs, including general and administrative costs, making the reduction separate from the delivery-cost pressure reflected in gross margin.

Latent View attributed the CoE cost decline to redeploying artificial intelligence, or AI, CoE talent into billable roles. Its workforce increased to 1,779 in Q2 FY27 from 1,727 in Q1 FY27, and delivery employees rose to 1,517 from 1,412, while utilisation declined to 84% from 85% over the same period.

Which offsets supported Latent View's Q2 FY27 margin?

Latent View said rationalisation of GTM costs and lower marketing costs offset part of the impact from higher bench and wage-hike costs. Its margin bridge shows a 1.2-percentage-point benefit from GTM-cost rationalisation and a 1.1-percentage-point benefit from lower marketing costs, against the stated 1.9-percentage-point impact from bench and wage costs.

The financial summary reports a 0.2-percentage-point quarter-on-quarter increase in adjusted EBITDA margin in Q2 FY27, while the bridge displays rounded endpoint margins of 20.4% in Q1 FY27 and 20.7% in Q2 FY27. The bridge components should therefore be read as presentation figures rather than as a precise reconciliation of the reported sequential change.

The lower CoE ratio was a further cost indicator but was not listed as a separate component in the adjusted EBITDA margin bridge. Latent View linked the move from 2.6% of revenue in Q1 FY27 to 1.4% in Q2 FY27 specifically to AI CoE employees moving to billable work, whereas the 1.1-percentage-point bridge benefit came from lower marketing costs.

What did Latent View's revenue mix show in Q2 FY27?

Latent View generated Rs 294.1 crore of revenue from operations in Q2 FY27, up 2.5% quarter on quarter, with Industrials and others its fastest-growing industry grouping. Industrials and others grew 21.4% sequentially, compared with 3.5% for Financial Services and 2.7% for Retail and consumer packaged goods, while Technology revenue declined 0.3%.

Technology remained Latent View's largest industry grouping, contributing 55% of Q2 FY27 revenue, followed by Financial Services at 21%, Retail and consumer packaged goods at 15%, and Industrials and others at 9%. The fastest sequential growth therefore came from a segment with a smaller share of revenue, while the largest segment was broadly flat.

North America accounted for 89% of Q2 FY27 revenue, with the rest of the world contributing 9% and Europe and the United Kingdom contributing 2%. Latent View's top five clients represented 56% of revenue in the last 12 months to Q2 FY27, down 1 percentage point from the last 12 months to Q1 FY27, while clients served increased to 97 from 96.

How did client and workforce indicators change for Latent View?

Latent View's revenue mix shifted away from its largest client band in the last 12 months to Q2 FY27. Clients generating more than Rs 50 crore accounted for 58% of revenue, down from 63% in the last 12 months to Q1 FY27, while the Rs 10 crore to Rs 50 crore client band increased to 28% from 20%.

Latent View had six clients generating more than Rs 50 crore in the last 12 months to Q2 FY27, compared with five in the preceding 12-month period. Its under-Rs-5-crore client band contained 68 clients, up from 63, while the number of Rs 5 crore to Rs 10 crore clients fell to 10 from 13.

The company reported a 25% last-12-month attrition rate in Q2 FY27, unchanged from Q1 FY27 and above 22% in Q2 FY26. Its utilisation rate was 84% in Q2 FY27, matching Q2 FY26 but below 85% in Q1 FY27, providing context for the presentation's reference to higher bench costs.

Conclusion

Latent View's Q2 FY27 figures show a trade-off between delivery-cost pressure and overhead savings. Gross margin fell to 45.3% from 48.0% in Q1 FY27 as heavy nearshore projects and wage hikes affected costs, while SG&A and CoE costs fell to 23.2% and 1.4% of revenue, respectively. The result was a reported sequential improvement in adjusted EBITDA margin despite the year-on-year decline.

What to watch next is whether the disclosed GTM-resource rationalisation, lower marketing spending and redeployment of AI CoE talent to billable roles continue to offset bench and wage effects. Latent View ended Q2 FY27 with 1,779 employees, 84% utilisation and a 25% last-12-month attrition rate, metrics that will provide further context for subsequent margin movement.