Firstsource Solution Ltd
Key Highlights of Q4 FY18 and FY18
Financial Performance
- Q4 FY18
o Revenue grew to 897.3 Cr over 887.2 Cr in Q3 FY18 and 892.3 Cr in Q4 FY17
QoQ growth of 1.1% in INR terms and flat in constant currency terms
YoY growth of 0.6% in INR terms and growth of 0.5% in constant currency terms
Proforma Domestic business, then YoY growth of 6.9 % in INR terms and 6.7% in constant currency terms
o EBITDA grew to 132.5 Cr over 116.1 Cr in Q3 FY18 and 99 Cr in Q4 FY17
QoQ growth of 14.1%, margin expansion by 168 bps from 13.09% to 14.77%
YoY growth of 33.8%, margin expansion by 367 bps from 11.10% to 14.77%
Proforma Domestic business, then growth of 40.6% YoY
o EBIT grew to 115.3 Cr over 99 Cr in Q3 FY18 and 88 Cr in Q4 FY17
QoQ growth of 16.5%, margin expansion by 170 bps from 11.15% to 12.85%
YoY growth of 31.0%, margin expansion by 299 bps from 9.86% to 12.85%
Proforma Domestic business, then growth of 36.5% YoY
o PAT grew to 92.8 Cr over 75.5 Cr operating PAT and 99.5 Cr reported PAT in Q3 FY18 , 65.4 Cr in Q4 FY17
QoQ growth of 23% on operating PAT, margin expansion of 184 bps from 8.51% to 10.35%
QoQ de-growth of 6.7% on reported PAT, margin reduction of 87 bps from 11.22% to 10.35%
YoY growth of 42.0%, margin expansion by 302 bps, from 7.33% to 10.35%
Proforma Domestic business, then growth of 50.1% YoY
o Recommend a dividend of 15% (INR 1.50 per share )
o Revenue by Geography
North America stand at 55.6 % over 54 % last year same quarter
UK stand at 43.2 % over 45 % last year same quarter
From India and rest of world at 1.2 % over 1 % last year same quarter
o Revenue by Verticals
Healthcare stand at 37.60 % over 37.40 %FY18 last year same quarter
Telecom and media stand at 31 % over 33.3 % last year same quarter
BFSI stand at 31.4 % over 29.3 % last year same quarter
o Revenue by Delivery was same as last year
o Revenue by Segment
Customer Management stands at 53.5 % over 54.5 % last year same quarter
Healthcare stands at 35.2 % over 35.5 % last year same quarter
Collections stand at 11.3 % over 10 % last year same quarter
o Revenue by Client Concentration
From Top 5 Client stands at 45.1 % over 47.5 % last year same quarter
From Top client stand at 27 % over 29.2 % last year same quarter - FY18
o Revenue de-grew by 3,535.2 Cr over 3,555.6 Cr YOY
Y-o-Y de-growth of 0.6% in INR terms and growth of 2.8% in constant currency terms
Proforma Domestic business, then growth of 3.7 % in INR terms and 7.1% in constant currency terms
o EBITDA grew by 458.9 crore over 438.0 crore YOY
Y-o-Y growth of 4.8%, margin expansion by 66 bps from 12.32% to 12.98%
Proforma Domestic business, then growth of 8.9% YoY
o EBIT grew by 393 Cr over 379 Cr YOY
Y-o-Y growth of 3.7%, margin expansion by 46 bps from 10.66% to 11.12%
Proforma Domestic business, then growth of 7.5% YoY
o Operating PAT grew by 302.4 Cr from 280 Cr YOY
Y-o-Y growth of 8.0%, margin expansion by 68 bps, from 7.88% to 8.56%
Proforma Domestic business, growth of 13.4% YoY
o Reported PAT grew by 326.5 Cr over 280 Cr YOY
Y-o-Y growth of 16.6%, margin expansion by 136 bps, from 7.88% to 9.24%
Proforma Domestic business, then growth of 22.2% YoY
o Revenue by Geography
North America stand at 53.6 % over 55.3 % last year same quarter
UK stand at 43.6 % over 38 % last year same quarter
From India and rest of world at 2.8 % over 6 % last year same quarter
o Revenue by Verticals
Healthcare stand at 36.8% over 35.8 %FY18 last year same quarter
Telecom and media stand at 33.9 % over 32.2 % last year same quarter
BFSI stand at 29.2 % over 31.8 % last year same quarter
o Revenue by Delivery
Offshore stand at 75.9 % over 72.9 %
Onshore stand at 24.1 % over 27.1 %
o Revenue by Segment
Customer Management stands at 55 % over 55.8 % last year same quarter
Healthcare stands at 34.5 % over 33 % last year same quarter
Collections stand at 10.5 % over 11.2 % last year same quarter
o Revenue by Client Concentration
From Top 5 Client stands at 46.3 % over 43 % last year same quarter
From Top client stand at 28.3 % over 22 % last year same quarter
Key Highlights - Repayment of Debt of $61.7 million in FY2018
o Full and final repayment of $135 million Term Loan and $20 million ECB - Successfully divested Domestic Business in FY18
- Employee and Attrition Details
o Headcount
18,703 employees as on March 31, 2018
8,809 employees in India
9,894 employees based outside India
Net reduction of 523 employees in Q4 FY18
o Attrition Details:
Onshore (US and Europe) – 47.3% compared to 39.4% in Q3 FY18
Offshore (India and Philippines) – 46.6% compared to 39.8% in Q3 FY18 - Outstanding FX hedges at $71 million for USD and £107 million for GBP
o Next 12 months: 58% coverage for USD at INR 70.7 levels, 62% coverage for GBP at INR 101.1 levels, 38% coverage for USD at PHP 51.7 levels and 73% coverage for GBP at PHP 68.6 levels
o Next 12 – 24 months: 61% coverage for USD rates at INR 69.8 levels, 71% coverage for GBP at INR 99.2 levels and 25% of GBP at PHP 72.0 levels
o Post 24 Months: 83% coverage for GBP at INR 108.0 levels - Business Outlook
o Growth momentum looking good for FY2019. Constant currency revenue growth to be at the top-end of the Industry growth rates
o Healthcare and BFSI would lead the growth in FY19. Transformation led revenue acceleration will be evident. Sales pipeline across BFSI and Healthcare robust. - Margin expansion to continue in FY2019; 60-80 bps expected. Transformation led gain-share and operating leverage provide continuing tailwinds for margin expansion
Q&A - What would be the Growth in number term ? What will be the impact of currency ?
o 9-10 % growth in FY19
o In profitability there will be 25% growth shown in Q1FY19 compare to Q1 FY 18
o Company had 60-80 % currency hedges . Any growth will benefit on the pound
o If dollar and pound hold the same position where they are then there will be same upside - What will be the Dividend policy in FY19 or capital allocation ?
o 35-40% payout of PAT. 47-48 Million of interest expense will be over as company will become debt free in October 2018 - Why does company get low benefit from currency movement compare to others ?
o Earlier loan book was there so cash flow book was hedged toward foreign currency payment - What is company CAPEX plan for FY19?
o Around 10-12 $ Million range - What is driving the growth for the company and benchmark for the company ?
o Mortgages , BFSI , Healthcare, customer management service support by banking segment , Collection part are the drivers of growth - How much margin company is targeting ?
o 14 % EBITDA margin - Why there is flattish growth in Q4 revenue ? Is current margin sustainable ?
o Flattish growth is because of change in client revenue from one of top client
o Margin is seasonality element next year target is 14 %