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Sagility reported a steady operating performance in 2Q. Revenue grew 2.3% qoq, marginally below our estimate of $214mn. EBITDAM expanded by 290bps sequentially, aided by operating efficiencies, disciplined cost management, and FX tailwinds. Steady-state deal ACV grew by ~14% sequentially to $40.2mn, including a large payment integrity win with a top-10 health plan. Sagility closed the acquisition of Chirok Health (at ~2.5x EV/S and ~7x EV/adj EBITDA on TTM basis) to fill the mid-revenue cycle gap and expand the provider portfolio. Management has lowered seasonal revenue (AEP, OE) expectations by ~100bps to ~5% of revenue in FY27, though it retained low-double-digit CC organic revenue growth guidance for FY27. Chirok and CareSeed acquisitions are expected to contribute incrementally to growth. It has also raised adjusted EBITDAM guidance to 25–26% (vs 24-25% earlier), driven by the build-up in 2Q. Incorporating the Chirok acquisition and factoring in the 2Q performance, we revise our FY27 estimates by ~3% while keeping FY28/29E EPS largely unchanged. We retain BUY with an unchanged TP of Rs55, at 18x Sep-28E EPS.

Results summary

Revenue grew 2.3% qoq/12.2% yoy to $212.6mn, below our estimate of $214mn. Organic growth was 11.9% yoy in CC terms. EBITM expanded by 290bps sequentially to 18.7%, above our estimate of 17.3%. Employee headcount increased to 51,486, up 8.8% qoq and 16.5% yoy in 2Q, as the company built capacity ahead of AEP and open enrollment. Voluntary attrition moderated to 25.7% from 28.6% in 1Q. The company declared an interim dividend of Rs0.15 per share. What we like: Margin beat, healthy deal wins. What we do not like: Continued softness in provider revenue, lower seasonal revenue guidance.

Acquisition of Chirok to strengthen footprint in provider segment

Sagility, through its wholly owned subsidiary Sagility (US) Holdings Inc, acquired 100% of US-based Chirok Health LLC for up to ~$32.35mn in cash ($20mn upfront + up to $12.35mn contingent on specified performance milestones). This is Sagility’s first acquisition focused squarely on the provider segment and is expected to add ~15% to provider revenue and ~1.5% to overall revenue. Strategically, Chirok complements Sagility’s front-end revenue cycle capabilities (patient access) and back-end services (denials, appeals, A/R follow-up and collections) by adding mid-cycle expertise in clinical documentation and coding. The expanded end-to-end RCM capabilities are expected to strengthen Sagility’s ability to win larger deals, while enabling the extension of its Synchrony AI capabilities into the mid-cycle.

Strong ACV led by a large payment integrity deal Deal

ACV grew 18.2% yoy to $40.2mn, driven by wins from 31 existing clients and one new logo. Key wins included a large payment integrity engagement with a top-10 health plan covering over 10mn members, with minimum ACV potential exceeding $10mn and potential to scale significantly higher. Given the contingency-based nature of payment integrity contracts, revenue is expected to ramp up gradually based on recoveries.

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