Aztec Software, one of the leading mid-size software developers based in Bangalore, has reported second quarter results which are in line with market expectations. The company has managed to sustain the growth momentum witnessed in the last few quarters.

Net profit for the quarter ended 30 September 2006, increased 27.3 per cent to Rs 11.46 crore, or Rs 2.59 per share, from Rs 9 crore for the previous year quarter. Sequentially, the bottom line has expanded 23.6 per cent from Rs 9.27 crore reported for the first quarter.

Consolidated revenues increased 41.5 per cent to Rs 67.92 crore from Rs 48.01 crore for the previous year quarter. Sequential revenue growth is at 14.2 per cent from Rs 59.48 crore.

Operating profits or EBITDA increased 43.5 per cent year-on-year to Rs 15.88 crore from Rs 11.07 crore and sequentially by 28.2 per cent from Rs 12.39 crore for the first quarter. Operating margins improved by 200 basis points on a sequential basis to 23 per cent from 21 per cent.

The improvement in operating margins as compared to the previous quarter was mostly on account of slower growth of 12.3 per cent in staff costs and other development expenses. Staff and development costs as a percentage of revenues declined to 62 per cent from 63 per cent during the previous quarter. The company managed to hold selling expenses steady while general & administration expenses went up by 8.4 per cent sequentially.

Depreciation charges went up by 24.1 per cent year-on-year and 18.2 per cent sequentially. The company booked an exchange loss of Rs 85 lakh for the quarter as compared to a loss of Rs 3 lakh for the June 2006 quarter and a gain of Rs 40 lakhs for the previous year quarter.

The split between offshore and onshore revenues remained steady at 85 per cent and 15 per cent respectively as compared to the previous quarter. Revenue contribution from top-5 and top-10 clients declined to 53 per cent and 63 per cent from 55 per cent and 66 per cent respectively for the first quarter. The corresponding figures for the previous year quarter were 53 per cent and 70 per cent respectively.

The company added 13 new clients during the quarter and is ramping up infrastructure for future growth. Facilities for 280 seats would be added in Bangalore and 25 seats in Pune.

Aztec had a total of 2,643 employees as of September end, a net addition of 525 employees during the quarter. Staff utilisation declined to 76 per cent from 79 per cent during the previous quarter, but was higher than 73 per cent a year ago.

Dendrite International, one of the key customers of Aztec, has decided to acquire the dedicated offshore development centre being run by Aztec in Bangalore for the last three years. The centre currently contributes 10 per cent of the company's revenue and the transfer would be effective from 01 January 2007.