Quess Corp Limited — Earnings Release 2020

Oct 30, 2019

October 30, 2019

The General Manager Department of Corporate Services, BSE Limited, 1st Floor, New Trading Ring, Rotunda Building, Phiroze Towe rs, Dalal Street, Mumbai - 400 001 Security Code - 539978

The Manager Department of Corporate Services, National Stock Exchange of India Limited Exchange Plaza, Sandra- Kundra Complex, Jeejeebhoy Sandra (East), Mumbai - 400 001

NSE Symbol-QUESS

Dear Sir/ Madam,

Sub: Press Release

We are enclosing herewith copy of Press Release dated October 30, 2019 titled "Quess Corp delivers wins on multiple fronts; Shows strong operating growth and steady profitability; Demonstrates its robust business model amidst a slowing economy".

Kindly take the same on record.

Thanking you,

Yours sincerely, For Quess Corp Limited

t?¥

Kundan K Lal Company Secretary and Compliance Officer

Quess Corp Limited

Quess House, 3/3/2, Bellandur Gate, Sarjapur Road, Bengaluru-560103, Karnataka, India Tel: +91 80 6105 6001 I connect@quesscorp.com I CIN No.L74140KA2007PLC043909

30th October 2019

(₹ cr)

BSE: 539978 I NSE: QUESS I ISIN: INE615P01015 I CIN: L74140KA2007PLC043909 I WWW.QUESSCORP.COM

Quess Corp delivers wins on multiple fronts; Shows strong operating growth and steady profitability; Demonstrates its robust business model amidst a slowing economy

Bengaluru, India – 30th October 2019: Quess Corp, India's leading business services provider announced its financial results for the second quarter (Q2 FY20) ended 30th September 2019 today.

Particulars	Q2 FY20	Q2 FY19	YoY(%)	Q1 FY20	QoQ(%)	H1 FY20	H1 FY19	YoY(%)
Headcount('000s)	377	280	27%	357	6%	377	280	35%
Revenue	2,650	2,092	27%	2,395	11%	5,045	4,060	24%
EBITDA	161	112	44%	147	10%	309	214	44%
EBITDAMargin	6.09%	5.36%	73 bps	6.15%	-6bps	6.12%	5.28%	84 bps
PAT	65	62	5%	56	16%	121	116	5%
PAT Margin	2.45%	2.95%	-49 bps	2.35%	10 bps	2.40%	2.86%	-45 bps

The key consolidated financial parameters are:

Financial Highlights (Q2 & H1 FY20):

• Headcount grew 27% YoY for Q2 FY20 and 35% YoY for H1 FY20.
• Revenues grew 27% (organic growth of 23%) YoY on the back of highest ever increase in employee headcount of 97k, over the last four quarters.
• Quarterly EBITDA grew significantly by 44% YoY to ₹ 161 cr. EBITDA margins for H1 FY20 improved by 84 bps YoY, to 6.12%.
• PAT of ₹ 65 cr during the quarter was higher by 5% YoY**.** Without the IndAS adjustments, the Operating PAT was ₹ 70 cr, which was a 13% increase YoY.
• Cash flow from Operations (OCF) stood at ₹ 117 cr for H1 FY20 as against ₹ 72 cr in H1 FY19, a significant increase of 62% YoY.
• OCF/EBITDA conversion improved to 47% during H1 FY20 compared to 34% in H1FY19.
• Significant debt reduction of ₹ 375 cr achieved during the quarter. Gross Debt at the end of the quarter stood at ₹ 920 cr; Net Debt stood at ₹ 272 cr.

Corporate Actions:

• Trimax Resolution: In the Ahmedabad Smart City project, Quess had pending dues of ₹ 179 cr (loans & receivables outstanding). Since the JV partner Trimax IT went into bankruptcy, the payments had not come through to Quess. Quess has now completely resolved the issue by acquiring Trimax IT's 49% stake in the JV for ₹13 cr and hence, owning 100% of the JV. All current dues and future payments will flow exclusively to Quess. ₹ 20.7 cr has already been received by Quess (as of Oct 30, 2019). Another ₹ 20 cr is expected in Q3 & ₹ 40 cr in Q4 FY20. Therefore, overall payments expected to be received in FY20 would be approx. ₹ 81 cr.
• Thomas Cook India Ltd. (TCIL) De-merger: The De-merger of TCIL is expected to be completed by December 2019. The scheme has been approved by shareholders and creditors of TCIL and Quess. Post the de-merger, Quess will be directly held by Fairfax Holdings (~33%), with public shareholding going up to ~44% (from ~28% currently)
• Optimization of Group Structure: Quess' strategy is to simplify its overall group structure and reduce the number of entities from 45 to less than 30. In line with this strategy, 4 subsidiaries – Aravon, CenterQ, CoAchieve and Master Staffing Solutions are being merged into the parent. Additionally, a few other Indian/overseas entities are either being merged or converted to branches.
• Rationalisation of Intercompany Loans: Quess initiated an exercise to rationalize intercompany loans and advances, which stood at ₹ 560 cr in the previous quarter. It successfully reduced ₹117 cr in the quarter, while another ₹ 274 cr reduction is underway. Post the TCIL De-merger, ₹ 74 cr would be further reduced. With all these, the intercompany loan balances are expected to come down to ₹ 95 cr by December 2019.
• Amazon Investment: Quess issued 7.54 lakh shares to Amazon, at a price of ₹ 676 per share amounting to an investment of ₹ 51 cr by way of a preferential allotment. The investments are being utilized towards business expansion of DigiCare.
• Vedang Acquisition: Quess currently holds 70% stake in Vedang. Board has approved the acquisition of incremental 18.7% stake for upto ₹10 cr. Post this transaction, Quess will own 88.7% stake in Vedang.
• Change to Big 4 Auditors at Allsec & Terrier: In Allsec Technologies and Terrier, the Statutory auditors have been changed to Deloitte Haskins & Sells. This is in line with the growing operations of these companies, while also complying with the SEBI guideline of covering 80% of the Consolidated Revenues.

Business Updates:

Quess has continued to deliver stellar Revenue growth (27% YoY) amidst an environment with macroheadwinds. This re-iterates the all-weather nature of the Company's business model.

The key business updates, split platform-wise, are as follows:

Workforce Management Platform:

• Strong Growth in Staffing: Quess' General Staffing business continued its strong growth trajectory, registering headcount addition of ~59k employees in H1 FY20, which surpassed the full year addition of ~56k in FY19. The General Staffing headcount crossed 240k.
• Collect & Pay contracts share improved significantly to 72% in the quarter, from 60% in Q2 FY19.
• General Staffing business' Core to Associate ratio continues at industry leading efficiency of 1:333 in Q2 FY20. The ratio improved by 15% YoY.
• Logistics Business (Dependo) touched a new peak of 1.5 lakh deliveries/day as against the earlier peak of ~1.0 lakh deliveries per day.
• Our Skill Development business has received fresh targets to train students for ~21k students across Govt. programs. Overall training targets as of H1 FY20 were ~52k students, which was 67% higher YoY, reflecting a very strong pipeline.

Operating Asset Management Platform:

• Our Facilities Management business continued its strong organic growth momentum during the quarter with a revenue increase of 8% YoY**.**
• Split of SLA (Service level agreement) vis-à-vis Headcount business mix improved to 26:74 visà-vis 22:78 YoY.
• Overall headcount increased to ~78k, up by 7% YoY.
• The monthly Revenue realization per head-count increased by 10% YoY to ~₹ 22k.

Tech Services:

• Significant scale-up in DigiCare: Amazon's investment in Quess is being utilized to build Digicare into a large brand-agnostic after-sales service provider with a PAN India service network. The Service footprint has increased from 350 to 600+ towns across India (YoY). Quarterly call volumes crossed 4.2 lakhs (up 10% YoY), while Accessories sales which started last quarter, has increased 74% QoQ.
• Monster: Monster launched a new version of its mobile application, and its user ratings went up to 4.4/5 from 3.8 in the previous quarter, bringing it on par with industry leaders. Key operational parameters continued to see growth:

• Organic traffic increased to 12.8Mn (up 24% YoY).
• Job views increased to 2.6Mn (up 53% YoY).
• Job applications increased to 1.3Mn (up 10% QoQ).
• Leadership Update: Mr. Ashish Johri has been appointed as the CEO of Allsec Technologies. Ashish has an MBA from Purdue University, USA and an undergraduate degree in Architecture. He is an entrepreneurial leader with 24 years of diverse experience in Business Process Outsourcing, Global Operations, Banking and Analytics, across firms like TCS and Capital One. Ashish has a track record of successfully scaling businesses through setting up operations, driving a culture of operations excellence and disciplined margin management.

Segment Wise Performance:

(₹ cr)

Platforms	Q2FY20	Q2FY19	YoY (%)	Q1FY20	QoQ (%)	H1 FY20	H1FY19	YoY (%)
WorkforceManagement
Revenue	1,667	1,208	38%	1,487	12%	3,155	2,356	34%
EBITDA	90	69	30%	89	1%	180	137	31%
EBITDAMargin	5.4%	5.7%	-30 bps	6.0%	-60 bps	5.7%	5.8%	-10 bps
OperatingAssetManagement
Revenue	432	434	-0.5%	427	1%	859	833	3%
EBITDA	29	34	-15%	32	-9%	61	64	-5%
EBITDAMargin	6.7%	7.9%	-120 bps	7.5%	-80 bps	7.1%	7.7%	-60 bps
Tech Services
Revenue	551	449	23%	480	15%	1,031	871	18%
EBITDA	63	28	125%	46	37%	110	49	124%
EBITDAMargin	11.5%	6.1%	+540 bps	9.6%	+190 bps	10.6%	5.7%	+490 bps

Commenting on the financial results, Chairman & MD Mr. Ajit Isaac said that*, "This quarter saw us executing successfully on multiple fronts. While we delivered a strong operating performance with 27% growth, we also made significant strides in our businesses by resolving the Trimax issue, simplifying our overall entity structure, downsizing our inter-company loans and reducing the debt on our books. We invested in hiring senior leadership talent by bringing on Mr. Ashish Johri as the CEO of Allsec. Ashish has extensive experience with top-tier technology firms and we are excited in terms of the long-term growth he can deliver for us."*

About Quess Corp

Quess Corp Limited (BSE: 539978, NSE: QUESS), is India's leading business services provider. At Quess, we excel in helping large and emerging companies manage their non-core activities by leveraging our integrated service offerings across industries and geographies which provides significant operational efficiencies to our clients. Quess has a team of over 377,000 employees across India, North America, South America, South East Asia and the Middle East across platforms such as Workforce Management, Operating Asset Management and Technology Services. Quess serves over 2,300 clients worldwide. Established in 2007, Quess is headquartered in Bengaluru, India and has a market cap of approx. ₹ 6,900 cr as of September 30 th, 2019.

For further details on Quess Corp Ltd., please visit: http://www.quesscorp.com.

For more information, please contact:

Investor / Analyst contact: Media Contact:

Vijay Rajagopal Director, Corporate Development & Head - Investor Relations vijay.rajagopal@quesscorp.com +91 80 61056408

Girish H.M Vice President – Marketing & Communications

girish.m@quesscorp.com +91 80 61056019

Disclaimer: This document contains statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its directors and officers with respect to the results of operations and financial condition of the Company. These statements can be recognized by the use of words such as ''expects", "plans", 'will", "estimates", "projects", or other words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in such forward-looking statements as a result of various factors and assumptions, which the Company believes to be reasonable in light of its operating experience in recent years. The risks and uncertainties relating to these statements include, but not limited to, risks and uncertainties, regarding fluctuations in earnings, our ability to manage growth, competition, our ability to manage our international operations, government policies, regulations, etc. The Company does not undertake any obligation to revise or update any forward looking statement that may be made from time to time by or on behalf of the Company including to reflect actual results, changes in assumptions or changes in factors affecting these statements