Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Firstsource Solutions Ltd (BOM:532809, Financial) reported a strong revenue growth of 25% year-on-year in INR terms and 23% in USD terms for Q2 FY25.
- The company secured three large deals in Q2, maintaining a healthy deal pipeline.
- Firstsource Solutions Ltd (BOM:532809) added 13 new logos during the quarter, the highest in the last two years.
- The acquisition of Ascensos is expected to enhance the company's footprint in the retail and e-commerce segments, adding strategic delivery capabilities.
- The company has been recognized as a Great Place to Work across four key geographies, highlighting its commitment to employee satisfaction and retention.
Negative Points
- The EBIT margin for Q2 was 11.1%, which is stable but includes a 30 bps impact from one-time charges related to the Ascensos acquisition.
- Organic revenue in Europe, excluding Ascensos, declined by about 4% quarter-on-quarter.
- The company faces macroeconomic uncertainties, particularly in the BFS vertical, which could impact future growth.
- The Payer segment in the Health Care vertical experienced a typical slowdown in decision-making due to the US presidential elections.
- The company's trailing 12-month attrition rate remains high at 31%, although it has decreased from previous quarters.
Q & A Highlights
Q: Could you explain why the growth guidance remains conservative despite strong deal wins and performance in the first half of the year?
A: Ritesh Idnani, CEO: Our guidance is based on the current line of sight for the business over the next two quarters. We have raised our guidance to 14.5% to 15.5% organically, excluding the 5% contribution from Ascensos. This does not account for any macroeconomic changes, which could present an upside.
Q: How much of the headcount increase is due to the Ascensos acquisition?
A: Ritesh Idnani, CEO: Ascensos contributed approximately 2,500 people to our headcount, with the rest being organic growth.
Q: With the Ascensos acquisition, will you reach the $1 billion revenue mark earlier than FY26?
A: Ritesh Idnani, CEO: Our medium-term aspiration remains to hit a $1 billion run rate by Q4 of FY26. We will reassess as the business environment becomes clearer.
Q: Can you provide more insight into the decline in the UK business excluding Ascensos?
A: Ritesh Idnani, CEO: The decline was expected due to the nature of strategic deals that ramp up differently. However, we have a robust pipeline and expect growth to pick up in the second half of the year.
Q: What is the margin profile of Ascensos, and how does it align with Firstsource's margins?
A: Dinesh Jain, CFO: Ascensos' margin profile is slightly lower than ours but not materially different.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
