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Firstsource Solutions Ltd. Interim / Quarterly Report 2020
61977_rns_2020-08-12_e817c31c-fcd3-4de6-8698-dd077a4913e0.pdf
Interim / Quarterly Report
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12th August 2020
To,
National Stock Exchange of India Limited Exchange Plaza, Plot no. C/1, G
Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 (Scrip Code: FSL)
BSE Limited Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001 (Scrip Code: 532809)
Dear Madam/ Sir,
Sub: Intimation of Schedule of Analyst/ Institutional Investor Meeting
Pursuant to SEBI (Listing Obligations and Disclosure requirements) Regulations 2015, please note that a representative of our Company will attend Emkay Confluence: Ideas for Tomorrow - virtual meet on 13th August 2020.
Please find attached herewith a copy of presentation.
Kindly take note of the above.
For Firstsource Solutions Limited
Pooja Nambiar Company Secretary & Compliance Officer
Encl.: A/a
Q 1 F Y 2 0 2 1 E A R N I N G S U P D A T E
Partnering with World's Leading Brands
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.
STRONG START TO THE YEAR
- Revenue growth of 1.6% in constant currency YoY
- Solid sales momentum; 10 New logos added in the quarter
DISRUPTIONS FROM COVID-19 LARGELY MITIGATED
- New Operating model At-Home + At-Office, working well
- Recalibrated client demand largely met
- Short/ medium term uncertainties continue to drive volume volatility
- Good progress on the 8 workstreams setup to industrialize our work at home operations and re-architect our distributed operating model
OPERATIONS ORG. STRENGTHENED TO DRIVE A UNIFIED BEST-IN-CLASS DELIVERY
• Global Chief Operating Officer – Prashanth Nandella joined in June 2020
BUSINESS MOMENTUM IS STRONG
- Banking & Financial Services benefiting from the macro-environment tailwinds; Low interest rates and Govt. stimulus driving significant revenue growth
- Healthcare experiencing volume compression with elective treatments being delayed; both hospital visits and claims volume impacted. Volumes expected to revive in late Q2/ Q3
- Communications Media & Tech (CMT) and Utilities experiencing volume recovery after steep declines
- Platform based services being scaled up in chosen segments
FY2021 WILL BE A GROWTH YEAR DESPITE THE HEADWINDS
- Revenue expected to grow between 6-10% in constant currency
- Operating Margin expected to be in range of 11.0-11.5%
Summary of Performance During the Quarter
Revenue Splits
VERTICALS
- Strong growth momentum in BFS across US and UK; macro tailwinds coupled with sales wins driving growth
- Communications, Media & Tech decline attributed to volume compression due to COVID-19; volume starting to recover
- Volume compression in Healthcare as elective treatments delayed; expected to pick-up in the next few quarters
- Diverse Industries largely stable
Platforms, Automation & Analytics
- Good progress on Platform based services across Healthcare and BFS
- Growth in Intelligent Back-office driven by strong Mortgage business growth
- Digitally Empowered Contact Centre decline attributed to volume compression due to COVID-19
Client Concentration
Total Tenure
5 of Top 10 Mortgage servicers in the US
3 of Top 6 Retail banks in the UK
4 of Top 10 Lenders in the US
650+ Hospitals in the US
5 of Top 10 Health insurance/ managed care companies in the US
1 of Top 3 Utility companies in the UK
Average Tenure
3 of Top 5 Credit card issuers in the US
1 of Top 2 Broadcasting and media companies in the UK
2 of Top 6 Telecom and broadcasting companies in the US
Annexure
Financial Performance (Quarterly)
| In ₹ million | Q1 FY 2019 | Q2 FY 2019 | Q3 FY 2019 | Q4 FY 2019 | Q1 FY 2020 | Q2 FY 2020 | Q3 FY 2020 | Q4 FY2020 | Q1 FY 2021 |
|---|---|---|---|---|---|---|---|---|---|
| Income from services | 9,060 | 9,442 | 9,723 | 9,642 | 9,669 | 9,715 | 10,446 | 10,673 | 10,537 |
| Other operating Income | 131 | 105 | 129 | 30 | 129 | 134 | 89 | 132 | 85 |
| Revenue from operations | 9,191 | 9,547 | 9,852 | 9,672 | 9,798 | 9,849 | 10,535 | 10,804 | 10,622 |
| Revenue from operations (USD Mn) |
\$ 137 | \$ 136 | \$ 137 | \$ 137 | \$ 141 | \$ 140 | \$ 148 | \$ 149 | \$ 141 |
| QoQ Growth % - Constant Currency |
1.1% | 1.8% | 0.9% | 0.7% | 2.0% | 1.1% | 4.7% | 0.6% | -4.3% |
| YoY Growth % - Constant Currency |
-0.1% | 3.2% | 3.5% | 3.8% | 5.2% | 4.5% | 8.3% | 8.2% | 1.6% |
| Personnel Expense | 6,210 | 6,453 | 6,565 | 6,344 | 6,611 | 6,722 | 7,053 | 7,350 | 7,128 |
| Operating Expense | 1,700 | 1,766 | 1,927 | 1,943 | 1,530 | 1,803 | 1,816 | 1,813 | 1,826 |
| Operating EBITDA | 1,281 | 1,328 | 1,361 | 1,384 | 1,657 | 1,325 | 1,666 | 1,641 | 1,668 |
| Operating EBITDA % | 13.9% | 13.9% | 13.8% | 14.3% | 16.9% | 13.4% | 15.8% | 15.2% | 15.7% |
| Depreciation / amortization | 180 | 184 | 191 | 190 | 439 | 455 | 484 | 474 | 498 |
| Operating Margin | 1,101 | 1,144 | 1,170 | 1,195 | 1,217 | 870 | 1,182 | 1,168 | 1,170 |
| Operating Margin % | 12.0% | 12.0% | 11.9% | 12.4% | 12.4% | 8.8% | 11.2% | 10.8% | 11.0% |
| Other Income / (expense) | 10 | -8 | -3 | -25 | -34 | 65 | 2 | -16 | -7 |
| Interest Income / (expense), net | -56 | -52 | -60 | -57 | -115 | -129 | -148 | -121 | -128 |
| PBT | 1,055 | 1,084 | 1,107 | 1,112 | 1,069 | 806 | 1,036 | 1,031 | 1,035 |
| PBT % | 11.5% | 11.4% | 11.2% | 11.5% | 10.9% | 8.2% | 9.8% | 9.5% | 9.7% |
| Taxes and Minority Interest | 169 | 156 | 126 | 130 | 157 | 132 | 140 | 115 | 148 |
| PAT | 886 | 928 | 981 | 982 | 912 | 674 | 895 | 916 | 887 |
| PAT % | 9.6% | 9.7% | 10.0% | 10.2% | 9.3% | 6.8% | 8.5% | 8.5% | 8.3% |
| Diluted EPS (₹ /Share) | 1.28 | 1.33 | 1.41 | 1.42 | 1.32 | 0.97 | 1.29 | 1.31 | 1.27 |
Financial Performance (Yearly)
| In ₹ million | FY 2016 | FY 2017 | FY 2018 | FY 2019 | FY 2020 |
|---|---|---|---|---|---|
| Income from services | 31,617 | 34,569 | 34,315 | 37,867 | 40,502 |
| Other operating Income | 556 | 987 | 1,038 | 396 | 484 |
| Revenue from operations | 32,173 | 35,556 | 35,352 | 38,263 | 40,986 |
| Revenue from operations (USD Mn) |
\$ 491 | \$ 530 | \$ 548 | \$ 548 | \$ 578 |
| YoY Growth % - Constant Currency |
2.0% | 12.9% | 2.8% | 2.0% | 6.6% |
| Personnel Expense | 21,727 | 23,834 | 23,955 | 25,573 | 27,735 |
| Operating Expense | 6,545 | 7,342 | 6,809 | 7,336 | 6,962 |
| Operating EBITDA | 3,901 | 4,380 | 4,589 | 5,355 | 6,289 |
| Operating EBITDA % | 12.1% | 12.3% | 13.0% | 14.0% | 15.3% |
| Depreciation / amortization | 609 | 590 | 659 | 744 | 1,852 |
| Operating Margin | 3,292 | 3,790 | 3,930 | 4,610 | 4,437 |
| Operating Margin % | 10.2% | 10.7% | 11.1% | 12.0% | 10.8% |
| Other Income / (expense) | 77 | -21 | -11 | -26 | 17 |
| Interest Income / (expense), net | -507 | -400 | -338 | -225 | -512 |
| PBT | 2,862 | 3,369 | 3,580 | 4,359 | 3,942 |
| PBT % | 8.9% | 9.5% | 10.1% | 11.4% | 9.6% |
| Taxes and Minority Interest | 257 | 569 | 315 | 581 | 545 |
| PAT | 2,605 | 2,800 | 3,265 | 3,778 | 3,397 |
| PAT % | 8.1% | 7.9% | 9.2% | 9.9% | 8.3% |
| Diluted EPS (₹ /Share) | 3.72 | 4.08 | 4.73 | 5.45 | 4.89 |
Balance Sheet and Cash Flow Statement
| ₹ million |
As at 30-Jun-20 | As at 31-Mar-20 |
|---|---|---|
| Equity And Liabilities | ||
| Share Capital | 6,940 | 6,938 |
| Reserves & Surplus | 21,375 | 20,716 |
| Non - Controlling Interest |
6 | 6 |
| Borrowings | 7,505 | 8,369 |
| Other Non - Current Liabilities |
4,747 | 4,874 |
| Current liabilities | 5,179 | 4,967 |
| Total | 45,753 | 45,871 |
| Assets | ||
| Goodwill on Consolidation | 22,278 | 22,324 |
| Fixed Assets | 6,123 | 6,385 |
| Cash and Cash Equivalents | 1,704 | 1,907 |
| Current Investments | 341 | 0 |
| Trade Receivables (Billed + Unbilled) | 7,290 | 7,615 |
| Other Non - Current Assets |
6,214 | 6,119 |
| Other Current Assets | 1,802 | 1,521 |
| Total | 45,753 | 45,871 |
| ₹ million | Quarter ended 30-Jun-20 |
|---|---|
| Cash Flow from Operating Activities | |
| Operating Margin | 1,170 |
| Adj: Non Cash and Other Income / (Expense) | 691 |
| Operating Cash before Working Capital | 1,860 |
| Add: Working Capital Changes | 242 |
| Less: Income Taxes Paid | (91) |
| Net Cash used in Operating Activities | 2,012 |
| Cash Flow from Investing Activities | |
| Capital Expenditure | (201) |
| (Investments)/ Proceeds from Current Investments | (333) |
| Earmarked Balances with Banks (Dividend Escrow) | (15) |
| Net Cash used in Investing Activities | (550) |
| Cash Flow from Financing Activities | |
| Net Increase / (Decrease) in Borrowings | (858) |
| Payment of Lease Liabilities | (280) |
| Increase in Shareholder's Funds | 4 |
| Purchase of treasury shares (Employee Stock Option Trust) | (411) |
| Net Interest Paid | (135) |
| Net Cash used in Financing Activities | (1,680) |
| Net Increase / (Decrease) in Cash and Cash Equivalents | (218) |
| Opening Cash and Cash Equivalents | 1,907 |
| Earmarked Balances with Banks | 15 |
| Foreign Exchange (Gain) on Translating Cash and Cash Equivalents | (0) |
| Closing Cash and Cash Equivalents | 1,704 |
| Cash and Cash Equivalents Including Current Investments |
2,045 |
Key Performance Indicators
Cash Flow Debt Position
Return on Capital Employed
Operating Metrices
| Particulars | Q1 FY 2019 | Q2 FY 2019 | Q3 FY 2019 | Q4 FY 2019 | Q1 FY 2020 | Q2 FY 2020 | Q3 FY 2020 | Q4 FY2020 | Q1 FY 2021 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Banking & Financial Services | 34.7% | 35.7% | 34.6% | 36.1% | 35.6% | 40.4% | 42.9% | 42.8% | 51.2% | |
| Revenue by | Communications Media & Tech | 28.5% | 27.6% | 28.5% | 27.5% | 27.2% | 22.0% | 21.9% | 22.9% | 16.2% |
| Vertical | Healthcare | 35.3% | 34.8% | 34.1% | 33.2% | 33.5% | 34.5% | 32.4% | 31.3% | 29.9% |
| Diverse Industries | 1.5% | 1.9% | 2.8% | 3.2% | 3.7% | 3.1% | 2.8% | 3.0% | 2.7% | |
| Digitally Empowered Contact Centre | 55.2% | 51.8% | 49.8% | 51.2% | 48.0% | |||||
| Revenue by Service Lines |
Intelligent Back Office | 39.6% | 42.6% | 45.0% | 42.5% | 43.7% | ||||
| Platforms, Automation & Analytics | 5.2% | 5.6% | 5.2% | 6.3% | 8.3% | |||||
| Revenue by Geography |
US | 54.1% | 55.1% | 55.2% | 55.3% | 57.0% | 61.6% | 63.3% | 63.2% | 69.1% |
| UK | 44.7% | 43.8% | 43.8% | 43.6% | 41.6% | 36.9% | 35.3% | 35.3% | 29.7% | |
| Rest of World | 1.2% | 1.1% | 1.0% | 1.1% | 1.4% | 1.5% | 1.4% | 1.5% | 1.2% | |
| Revenue by | Offshore | 23.1% | 19.9% | 18.1% | 18.5% | 22.5% | 22.8% | 25.2% | 25.6% | 24.8% |
| Delivery | Onshore | 76.9% | 80.1% | 81.9% | 81.5% | 77.5% | 77.2% | 74.8% | 74.4% | 75.2% |
| Top Clients | Top client % | 24.7% | 23.8% | 24.9% | 24.6% | 24.9% | 19.8% | 19.5% | 20.3% | 13.7% |
| Revenue | Top 5 client % | 42.7% | 41.6% | 41.2% | 42.3% | 41.2% | 39.5% | 42.1% | 42.2% | 39.9% |
| Total employees (end of period) | 18,759 | 18,369 | 18,595 | 18,712 | 18,550 | 20,001 | 20,482 | 21,203 | 21,831 | |
| • Employees in India |
8,664 | 8,583 | 8,621 | 8,968 | 9,305 | 10,493 | 10,982 | 11,450 | 11,684 | |
| Other Metrices | • Employees outside India |
10,095 | 9,786 | 9,974 | 9,744 | 9,245 | 9,508 | 9,500 | 9,753 | 10,147 |
| Net Addition | 56 | (390) | 226 | 117 | (162) | 1,451 | 481 | 721 | 628 | |
| Offshore Attrition | 51.7% | 44.8% | 39.3% | 41.5% | 45.3% | 40.0% | 36.0% | 33.5% | 15.1% | |
| Onshore Attrition | 48.7% | 54.9% | 45.8% | 42.9% | 46.8% | 54.6% | 45.8% | 41.9% | 30.2% |
Forex Hedges
Outstanding FX hedges at \$50.9 million for USD and £65.4 million for GBP
| GBP-INR | USD INR | GBP-PHP | |||||
|---|---|---|---|---|---|---|---|
| Period | Hedged | Average Rate | Hedged | Average Rate | Hedged | Average Rate | |
| 0-12 Months | £27.06 | 102.18 | \$50.91 | 76.69 | £1.00 | 68.17 | |
| 13-24 Months | £22.61 | 109.14 | |||||
| More than 24 Months | £14.70 | 118.27 |
Prior Period Reports
(Hyperlinks)
| ANNUAL REPORT | PUBLISHED RESULTS | INVESTOR PRESENTATIONS | PRESS RELEASE | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | SHAREHOLDING PATTERN | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 |
Our Global Footprint
Established in 2001
Revenues of INR 41.0 Billion (approximately \$578 Million) in FY2020
21,831 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
Part of RP-Sanjiv Goenka Group Since 2012
Power & Natural Resources Carbon Black
Retail & FMCG Media & Entertainment
Infrastructure
Education & Sports
IT & ITeS
Combined Revenues of \$3.7 Billion in FY2019
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 Handling Awards
2019: Best Complaint Handling in Financial Services
2018: Overall Winner in 'Customer Insight Strategy' category
2017: Best Personal Entertainment and Telecoms
NASSCOM BPM Summit
Positioned as a 'Leader' in NelsonHall's NEAT Evaluation both for 'Overall Mortgage & Loan Services' as well as 'Support for New Digital Business Models'
Industry Associations
Leadership Team
MD and Chief Executive Officer
Finance
Healthcare Provider
Health Plans
Venkatgiri Vandali Anshul Verma
Communications, Media & Technology
Europe Business
Collections
Human Resources
Marketing & Corporate Communications
Mortgages
Digital Services
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
Q1FY2021 EARNINGS
UPDATE