PSYS 2QFY19 revenues declined 4.3% QoQ to USD118m (est. We expected IBM IoT resale to be impacted by seasonality. However, Digital failed to recover from its sluggishness led by a project closure and shifting to offshore, which further added to the 22 October 2018 disappointment. Digital revenue at USD26m was flattish sequentially, and grew by 17% YoY in 1HFY19, slowing down from its >30% run-rate. EBITDA margins expanded by 40bp QoQ to 17.2% despite wage hikes and decline in revenue, ahead of our estimate by 150bp (expected to decline 110bp QoQ). The beat was led by INR depreciation and higher offshoring. PAT at INR881m grew by 1% QoQ (est. of 7% QoQ) led by lower revenue and other income, and higher ETR. The company made several Digital, (b) changing sales incentives, (c) sharpening its product portfolio, (d) creating common engines to drive focus and sales, and (e) ramping up hiring.