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Firstsource Solutions Ltd. Interim / Quarterly Report 2020

Oct 29, 2020

61977_rns_2020-10-29_af2e9d9e-16c4-4959-a11a-5e17b65ad874.pdf

Interim / Quarterly Report

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29[th] October 2020

To:

National Stock Exchange of BSE Limited (Scrip Code: India Limited (Scrip Code: FSL) 532809) Exchange Plaza, Phiroze Jeejeebhoy Towers, Plot no. C/1, G Block, Dalal Street, Bandra-Kurla Complex Mumbai - 400 001 Bandra (East), Mumbai - 400 051

Dear Madam/ Sir,

Sub: Post intimation of Analyst/ Institutional Investor Call

Pursuant to Regulation 30(6) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, we are enclosing herewith a copy of the presentation regarding conference call held with the analysts and investors, on the financial results of the Company for the quarter and half-year ended 30[th] September 2020.

This is for your information and record.

Thanking you,

For Firstsource Solutions Limited Pooja Nambiar Company Secretary & Compliance Officer

Encl.: A/a

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Q2 FY2021 EARNINGS UPDATE

Partnering with World’s Leading Brands

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Disclaimer

Certain statements in this presentation concerning our future growth prospects are forwardlooking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in BPO services including those factors which may affect our cost advantage, wage increases, our ability to attract and retain highly skilled professional, time and cost overruns on client contracts, client concentration, our ability to manage ramp-ups and growth, our ability to manage our international operations, reduced demand in our key focus verticals, disruptions in telecom infrastructure and technology, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, performance of our subsidiaries, withdrawal of government fiscal incentives, political instability, legal restrictions on raising capital and acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry. Firstsource may, from time to time, make additional written and oral forward-looking statements, including our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

STRONG ALL-ROUND BUSINESS FY2021 GROWTH
PERFORMANCE MOMENTUM IS STRONG ESTIMATES REVISED
Revenue growth of • Banking & Financial Services continues • Revenue expected to
13.1% in
constant
to be the growth bearer driven by grow between 9-12% in
currency YoY in Q2 strong growth of our US BFS segment constant currency
Solid sales momentum; • Communications Media & Tech (CMT) • Operating Margin
15 New clients added in witnessing solid volume recovery expected to be in range of
the quarter • Healthcare
industry
continues
to
11.0-11.5%
experience volume challenges. Elective
procedures are still not close to the
pre-COVID
levels,
impacting
both
Hospital visits and HealthPlan claims
volumes
• Platform based services being scaled up
in chosen segments
© FIRSTSOURCE 2020 CONFIDENTIAL I 28 October 2020

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Summary of Performance During the Quarter

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OPERATING MARGIN
REVENUES
₹ 11,877 Million ₹ 1,358 Million
(US$ 159.8 Million) (Margin 11.4%)
YoY growth of 20.6% YoY Margin expansion of 260 bps
Constant Currency growth of 13.1%
PROFIT AFTER TAX EARNINGS PER SHARE
(DILUTED)
₹ 1,053 Million ₹ 1.50
(Margin 8.9%) per share
Q2FY’20 at ₹ 0.97 per share
YoY Margin expansion of 202 bps
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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Summary of Performance During the First Half

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OPERATING MARGIN
REVENUES
₹ 22,499 Million ₹ 2,527 Million
(US$ 300.6 Million) (Margin 11.2%)
YoY growth of 14.5% YoY Margin expansion of 61 bps
Constant Currency growth of 7.5%
PROFIT AFTER TAX EARNINGS PER SHARE
(DILUTED)
₹ 1,940 Million ₹ 2.77
(Margin 8.6%) per share
H1FY’20 at ₹ 2.28 per share
YoY Margin expansion 55 bps
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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Revenue Splits

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VERTICALS
Q2 FY21 Q2FY21 51.9% 18.8% 27.1% 2.2% • Strong growth momentum in BFS
• Communications, Media & Tech witnessing volume recovery coupled
Q1 FY21 51.2% 16.2% 29.9% 2.7%
with growth
Q4 FY20 42.8% 22.9% 31.3% 3.0% • Volume volatility continued in Healthcare as elective treatments
delayed; expected to pick-up in the next few quarters
Q3 FY20 42.9% 21.9% 32.4% 2.8%
• Lower volumes in clients in Diverse Industries
Q2 FY20 40.4% 22.0% 34.5% 3.1%
Banking & Financial Services Communication, Media & Tech
Healthcare Diverse Industries
SERVICE LINES
Q2 FY21 Q2FY21 49.1% 42.9% 8.0%
• Good progress on Platform based services
Q1 FY21 47.8% 44.2% 8.0% • Growth in Intelligent Back-office driven by strong Mortgage business
growth
Q4 FY20 51.2% 42.5% 6.3%
• Digitally Empowered Contact Centre growth attributed to volume
Q3 FY20 49.8% 45.0% 5.2% recovery
Q2 FY20 51.6% 42.8% 5.6%
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Intelligent Back Office

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Digitally Empowered Contact Centre

Platforms, Automation & Analytics

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Client Concentration

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Q2FY21 Q2FY21 16.2%
18.7 years
Total Tenure
Top Client Q2FY20 19.8%
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Q2FY21 Q2FY21 40.4%
14.2 years
Average Tenure
Q2FY20 39.5%
Top 5 Clients
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5 of Top 10 3 of Top 6 4 of Top 10 Mortgage servicers Retail banks in the UK Lenders in the US in the US

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650+ 5 of Top 10 Hospitals in the US Health insurance/ managed care companies in the US

1 of Top 3 Utility companies in the UK

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5 of Top 8
Credit card issuers
in the US
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1 of Top 2 2 of Top 6 Broadcasting and media Telecom and broadcasting companies in the UK companies in the US

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

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Annexure
8
PDATE
U
ARNINGS
Q2FY2021 E
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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Financial Performance (Quarterly)

In ₹ million Q2 FY 2019 Q3 FY 2019 Q4 FY 2019 Q1 FY 2020 Q2 FY 2020 Q3 FY 2020 Q4 FY2020 Q1 FY 2021 Q2 FY 2021
Income from services 9,442 9,723 9,642 9,669 9,715 10,446 10,673 10,537 11,783
Other operating Income 105 129 30 129 134 89 132 85 94
Revenue from operations 9,547 9,852 9,672 9,798 9,849 10,535 10,804 10,622 11,877
Revenue from operations (USD Mn) $ 136 $ 137 $ 137 $ 141 $ 140 $ 148 $ 149 $ 141 $ 160
QoQ Growth % - Constant Currency 1.8% 0.9% 0.7% 2.0% 1.1% 4.7% 0.6% -4.3% 12.2%
YoY Growth % - Constant Currency 3.2% 3.5% 3.8% 5.2% 4.5% 8.3% 8.2% 1.6% 13.1%
Personnel Expense 6,453 6,565 6,344 6,611 6,722 7,053 7,350 7,128 7,985
Operating Expense 1,766 1,927 1,943 1,530 1,803 1,816 1,813 1,826 2016
Operating EBITDA 1,328 1,361 1,384 1,657 1,325 1,666 1,641 1,668 1,876
Operating EBITDA % 13.9% 13.8% 14.3% 16.9% 13.4% 15.8% 15.2% 15.7% 15.8%
Depreciation / amortization 184 191 190 439 455 484 474 498 519
Operating Margin 1,144 1,170 1,195 1,217 870 1,182 1,168 1,170 1,358
Operating Margin % 12.0% 11.9% 12.4% 12.4% 8.8% 11.2% 10.8% 11.0% 11.4%
Other Income / (expense) (8) (3) (25) (34) 65 2 (16) (7) 16
Interest Income / (expense), net (52) (60) (57) (115) (129) (148) (121) (128) (119)
PBT 1,084 1,107 1,112 1,069 806 1,036 1,031 1,035 1,254
PBT % 11.4% 11.2% 11.5% 10.9% 8.2% 9.8% 9.5% 9.7% 10.6%
Taxes and Minority Interest 156 126 130 157 132 140 115 148 201
PAT 928 981 982 912 674 895 916 887 1,053
PAT % 9.7% 10.0% 10.2% 9.3% 6.8% 8.5% 8.5% 8.3% 8.9%
Diluted EPS (₹ /Share) 1.33 1.41 1.42 1.32 0.97 1.29 1.31 1.27 1.50

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9 Note: Operating Margin implies EBIT (Earnings Before Interest and Taxes)

© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Financial Performance (Yearly) In ₹ million FY 2016 Income from services 31,617 Other operating Income 556

In ₹ million FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 H1 FY2021
Income from services 31,617 34,569 34,315 37,867 40,502 22,320
Other operating Income 556 987 1,038 396 484 178
Revenue from operations 32,173 35,556 35,352 38,263 40,986 22,499
Revenue from operations (USD Mn) $ 491 $ 530 $ 548 $ 548 $ 578 $ 301
YoY Growth % - Constant Currency 2.0% 12.9% 2.8% 2.0% 6.6% 7.5%
Personnel Expense 21,727 23,834 23,955 25,573 27,735 15,113
Operating Expense 6,545 7,342 6,809 7,336 6,962 3,841
Operating EBITDA 3,901 4,380 4,589 5,355 6,289 3,544
Operating EBITDA % 12.1% 12.3% 13.0% 14.0% 15.3% 15.8%
Depreciation / amortization 609 590 659 744 1,852 1,017
Operating Margin 3,292 3,790 3,930 4,610 4,437 2,527
Operating Margin % 10.2% 10.7% 11.1% 12.0% 10.8% 11.2%
Other Income / (expense) 77 (21) (11) (26) 17 9
Interest Income / (expense), net (507) (400) (338) (225) (512) (247)
PBT 2,862 3,369 3,580 4,359 3,942 2,289
PBT % 8.9% 9.5% 10.1% 11.4% 9.6% 10.2%
Taxes and Minority Interest 257 569 315 581 545 349
PAT 2,605 2,800 3,265 3,778 3,397 1,940
PAT % 8.1% 7.9% 9.2% 9.9% 8.3% 8.6%
Diluted EPS (₹ /Share) 3.72 4.08 4.73 5.45 4.89 2.77

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10 Note: Operating Margin implies EBIT (Earnings Before Interest and Taxes)

© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Balance Sheet and Cash Flow Statement

₹ million As at 30-Sep-20 As at 31-Mar-20 ₹ million Quarter ended 30-Sep-20 Six Months ended 30-Sep-20
Cash Flow from Operating Activities
Equity And Liabilities
Operating Margin 1,358 2,527
Share Capital 6,948 6,938 Adj: Non Cash and Other Income / (Expense) 730 1,421
Operating Cash before Working Capital 2,088 3,949
Reserves & Surplus 21,883 20,716
Add: Working Capital Changes 459 701
Non - Controlling Interest 6 6 Less: Income Taxes Paid (196) (287)
Borrowings 5,992 8,369 Net Cash generated from Operating Activities 2,351 4,363
Cash Flow from Investing Activities
Other Non - Current Liabilities 5,201 4,874
Capital Expenditure (260) (461)
Current liabilities 5,235 4,967 (Investments)/ Proceeds from Current Investments (360) (694)
Earmarked Balances with Banks (Dividend Escrow) 0 (15)
Total 45,265 45,871
Net Cash used in Investing Activities (620) (1,170)
Assets Cash Flow from Financing Activities
Net Increase / (Decrease) in Borrowings (1,506) (2,363)
Goodwill on Consolidation 21,779 22,324
Net Interest Paid (125) (261)
Fixed Assets 6,464 6,385 Payment of Lease Liabilities (280) (561)
Increase in Shareholder's Funds 26 30
Cash and Cash Equivalents 1,453 1,907
Purchase of treasury shares (Employee Stock Option Trust) (98) (509)
Current Investments 706 0 Net Cash used in Financing Activities (1,983) (3,663)
Trade Receivables (Billed + Unbilled) 6,899 7,584 Net Increase / (Decrease) in Cash and Cash Equivalents (252) (470)
Opening Cash and Cash Equivalents 1,704 1,907
Other Non - Current Assets 6,227 6,119
Earmarked Balances with Banks (0) 15
Other Current Assets 1,737 1,551 Foreign Exchange (Gain) on Translating Cash and Cash Equivalents 1 1
Closing Cash and Cash Equivalents 1,453 1,453
Total 45,265 45,871
Cash and Cash Equivalents Including Current Investments 2,159 2,159

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Key Performance Indicators

Return on Equity

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14.7% 13.8% 13.9% 13.9%
13.5%
12.3%
FY16 FY17 FY18 FY19 FY20 H1FY21 x2
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Cash Flow

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4,000 4,104 4,363
3,902
2,971 3,151 2,913 3,156
2,526
2,114 1,981
1,128
FY16 FY17 FY18 FY19 FY20 H1 FY21
Operating Cash Flow Free Cash Flow
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Return on Capital Employed

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14.5%
14.1%
12.5% 12.7% 13.0% 12.3%
FY16 FY17 FY18 FY19 FY20 H1FY21 x2
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Debt Position

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2,522
1,525
3,490
8,341
7,760
7,030 7,101 7,148
6,526 5,885
5,390
5,273
3,885 3,910
3,233
187 92 185
FY16 FY17 FY18 FY19 FY20 H1 FY21
Long term Debt Short term Debt Net Debt
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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Operating Metrices

Particulars Q2 FY 2019 Q3 FY 2019 Q4 FY 2019 Q1 FY 2020 Q2 FY 2020 Q3 FY 2020 Q4 FY2020 Q1 FY 2021 Q2 FY 2021
Revenue by
Vertical
Banking & Financial Services 35.7% 34.6% 36.1% 35.6% 40.4% 42.9% 42.8% 51.2% 51.9%
Communications Media & Tech 27.6% 28.5% 27.5% 27.2% 22.0% 21.9% 22.9% 16.2% 18.8%
Healthcare 34.8% 34.1% 33.2% 33.5% 34.5% 32.4% 31.3% 29.9% 27.1%
Diverse Industries 1.9% 2.8% 3.2% 3.7% 3.1% 2.8% 3.0% 2.7% 2.2%
Revenue by
Service Lines
Digitally Empowered Contact Centre 55.2% 51.6% 49.8% 51.2% 47.8% 49.1%
Intelligent Back Office 39.6% 42.8% 45.0% 42.5% 44.2% 42.9%
Platforms, Automation & Analytics 5.2% 5.6% 5.2% 6.3% 8.0% 8.0%
Revenue by
Geography
US 55.1% 55.2% 55.3% 57.0% 61.6% 63.3% 63.2% 69.1% 68.1%
UK 43.8% 43.8% 43.6% 41.6% 36.9% 35.3% 35.3% 29.7% 30.6%
Rest of World 1.1% 1.0% 1.1% 1.4% 1.5% 1.4% 1.5% 1.2% 1.3%
Revenue by
Delivery
Offshore 19.9% 18.1% 18.5% 22.5% 22.8% 25.2% 25.6% 24.8% 27.0%
Onshore 80.1% 81.9% 81.5% 77.5% 77.2% 74.8% 74.4% 75.2% 73.0%
Top Clients
Revenue
Top client % 23.8% 24.9% 24.6% 24.9% 19.8% 19.5% 20.3% 13.7% 16.2%
Top 5 client % 41.6% 41.2% 42.3% 41.2% 39.5% 42.1% 42.2% 39.9% 40.4%
Other Metrices Total employees (end of period) 18,369 18,595 18,712 18,550 20,001 20,482 21,203 21,831 23,960

Employees in India
8,583 8,621 8,968 9,305 10,493 10,982 11,450 11,684 13,536

Employees outside India
9,786 9,974 9,744 9,245 9,508 9,500 9,753 10,147 10.424
Net Addition (390) 226 117 (162) 1,451 481 721 628 2,129
Offshore Attrition 44.8% 39.3% 41.5% 45.3% 40.0% 36.0% 33.5% 15.1% 26.3%
Onshore Attrition 54.9% 45.8% 42.9% 46.8% 54.6% 45.8% 41.9% 30.2% 47.3%

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Forex Hedges

Outstanding FX hedges at $57.2 million for USD and £59.5 million for GBP

GBP-INR GBP-INR USD INR USD INR GBP-PHP GBP-PHP
Period Hedged Average Rate Hedged Average Rate Hedged Average Rate
0-12 Months £28.14 Rs 102.56 /£ $ 57.19 Rs 76.35 /$ £0.40 Php 68.32 /£
13-24 Months £21.81 Rs 112.45 /£
More than 24 Months £9.20 Rs 119.04 /£

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Prior Period Reports

(Hyperlinks)

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PUBLISHED RESULTS INVESTOR PRESENTATIONS PRESS RELEASE
ANNUAL REPORT
FY2021 Q1 Q2 FY2021 Q1 Q2 FY2021 Q1 Q2
FY2020
FY2020 Q1 Q2 Q3 Q4 FY2020 Q1 Q2 Q3 Q4 FY2020 Q1 Q2 Q3 Q4
FY2019
FY2019 Q1 Q2 Q3 Q4 FY2019 Q1 Q2 Q3 Q4 FY2019 Q1 Q2 Q3 Q4
FY2018
FY2018 Q1 Q2 Q3 Q4 FY2018 Q1 Q2 Q3 Q4 FY2018 Q1 Q2 Q3 Q4
FACT SHEET TRANSCRIPTS SHAREHOLDING PATTERN
FY2021 Q1 Q2 FY2021 Q1 Q2 FY2021 Q1 Q2
FY2020 Q1 Q2 Q3 Q4 FY2020 Q1 Q2 Q3 Q4 FY2020 Q1 Q2 Q3 Q4
FY2019 Q1 Q2 Q3 Q4 FY2019 Q1 Q2 Q3 Q4 FY2019 Q1 Q2 Q3 Q4
FY2018 Q1 Q2 Q3 Q4 FY2018 Q1 Q2 Q3 Q4 FY2018 Q1 Q2 Q3 Q4
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Click Here

To subscribe for future updates

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Established in 2001

About Us

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UK
US
4,621 6
5,269 20
PHILIPPINES
13,536 11
534 2
INDIA
Our Global Footprint
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Revenues of INR 41.0 Billion

(approximately $578 Million) in FY2020

23,960 firstsourcers

across US, UK, India and Philippines

Leaders in chosen segments

across Banking & Financial Services, Healthcare, Communications, Media & Tech

100+ global clients including

17 Fortune 500 companies and 9 FTSE 100 companies

Publicly Traded on Indian Stock Exchanges

NSE: FSL BSE: 532809 Reuters: FISO.BO Bloomberg: FSOL@IN

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Part of RP-Sanjiv Goenka Group Since 2012 Carbon Black Power & Natural Resources Retail & FMCG Media & Entertainment Combined Revenues of Infrastructure IT & ITeS $3.8 Billion in FY2020 Education & Sports

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Leading CX service providers in the UK across Media and BFS segments

Top 15 Global Collections Provider

Most comprehensive set of licenses in the

US Mortgage outsourcing industry

Top 3 in the chosen Revenue Cycle Management segments in US Healthcare

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• Streaming Services • Hospital Providers
Onboarding Inbound Sales and • Cable TV, Broadband • Health Plans Eligibility & Receivables
Outbound Sales Enrollment Services Management
and Telephony • Health Services
• Consumer Tech • Med. Devices
Tier 1 & Tier 2 Retention • E-Commerce Debt Collections Intelligent Automated
Customer Support and Loyalty Eligibility & Enrollment
• Shared Economy
Self-Service / Customer Insights / Digital Mailroom Intelligent Data
Contact Avoidance Analytics Operations Capture
Complaints Handling Revenue Claims Adjudication Telehealth Tech
and Remediation Generation & Adjustments Support
Customer Service Mortgage Operations Origination |
Voice | Chat | Chat Servicing | Title, Closing & Escrow Meter 2 Cash Self-Service /
bots | Text | Social Operations Digital Deflection
Digital Collections
Compliance and Risk
Management Inbound Sales Customer Insights /
and Outbound
Dispute Management Automation
Sales & Service
Complaints Handling &
Remediation
Factoring & Discounting
Level 1 & Level 2
• Asset Finance​ • Utilities Customer Support Complaints handling
Lead Management, Sales • Credit Cards​ • Government Entities
Conversion & Onboarding
Default Management • Mortgages​
• Retail & SME Banking​ Retention
Debt Management
Analytics and Business • FinTech and Loyalty
Intelligence Fraud Management
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Strong Domain Driven Operating Model 30%+ Revenues linked to Outcomes Delivered | 73%+ Onshore Delivery

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Select Awards

Global Innovation Challenge

2019: Top 3 for Automated Auditor built on proprietary platform Sympraxis

KLAS: Software & Services Report

2018: Ranked MedAssist #1 in the Eligibility Enrollment Services category

Global Sourcing Association UK Awards

2019: Technology-enabled Project with NowTV and Customer Experience Provider of the Year with giffgaff

2017: BPO Contract of the Year – Sky – FSL partnership

The UK Complaint NelsonHall Handling Awards 2019: Best Complaint Positioned as a Handling in Financial Services

Positioned as a ‘Leader’ in NelsonHall’s NEAT Evaluation both for ‘Overall Mortgage & Loan Services’ as well as ‘Support for New Digital Business Models’

2018: Overall Winner in ‘Customer Insight Strategy’ category 2017: Best Personal Entertainment and Telecoms

Industry Associations

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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

Corporate Management – Senior Leadership

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Dinesh Jain Prashant Nandella Venkat Raman Venkatgiri Vandali
Finance Operations Healthcare Health Plans &
Provider Healthcare Services
Anshul Verma Siddharth Parashar Arjun Mitra Steven Schachter
Communications, Europe Business Collections Mortgage
Media & Technology
Vipul Khanna
MD and
Chief Executive Officer
Soma Pandey Sundara Sukavanam Rajlakshmi Raghavan
Human Resources Digital Services Marketing & Corporate
Communications
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© FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

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Helping customers stay ahead of the curve through transformational technologies and capabilities

Firstsource Solutions is a leading provider of customized Business Process Management (BPM) services. Firstsource specialises in helping customers stay ahead of the curve through transformational solutions in order to reimagine business processes and deliver increased efficiency, deeper insights and superior outcomes.

We are trusted brand custodians and long-term partners to 100+ leading brands with presence in the US, UK, Philippines and India. Our ‘rightshore’ delivery model offers solutions covering complete customer lifecycle across Healthcare, Telecommunications & Media and Banking, Financial Services & Insurance verticals.

Our clientele includes Fortune 500 and FTSE 100 companies.

www.firstsource.com

© Firstsource Solutions Limited | Confidential | 28 October 2020 © FIRSTSOURCE 2020 | CONFIDENTIAL I 28 October 2020

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