Firstsource Solutions Net Income surged on 21.4% in 2015 while Revenue decreased on 2.3%

05-05-2015 • About Firstsource Solutions ($FSL) • By InTwits

Firstsource Solutions reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Firstsource Solutions is a company in decline: FY2015 revenue growth was -2.3%, 5 years revenue CAGR was -2.8%
Firstsource Solutions has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.7%. At the same time it's a lot of higher than industry average of 52.2%.
CAPEX is quite volatile: 16,086 in FY2015, 30,764 in FY2014, 35,642 in FY2013, 34,662 in FY2012, 14,612 in FY2011
The company has business model with low profitability: ROIC is at 9.5%
It operates with high leverage: Net Debt/EBITDA is 2.5x while industry average is -0.4x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Firstsource Solutions ($FSL) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	20,110	22,550	28,185	31,059	30,347	-2.3%
EBITDA	2,906	1,958	2,796	3,621	3,808	5.1%
Net Income	1,385	620	1,466	1,930	2,343	21.4%
Balance Sheet
Cash	2,358	1,464	885	1,846	800	-56.7%
Short Term Debt	19	367	4,263	5,327	6,222	16.8%
Long Term Debt	14,913	9,259	8,501	6,642	4,143	-37.6%
Cash flow
Capex	431	526	396	358	463	29.4%
Ratios
Revenue growth	-42.4%	12.1%	25.0%	10.2%	-2.3%
EBITDA growth	4.6%	-32.6%	42.8%	29.5%	5.1%
EBITDA Margin	14.5%	8.7%	9.9%	11.7%	12.5%	0.9%
Net Income Margin	6.9%	2.8%	5.2%	6.2%	7.7%	1.5%
CAPEX, % of revenue	2.1%	2.3%	1.4%	1.2%	1.5%	0.4%
ROIC	7.0%	4.0%	7.0%	9.0%	9.5%	0.5%
ROE	9.7%	4.3%	9.3%	10.1%	11.2%	1.1%
Net Debt/EBITDA	4.3x	4.2x	4.2x	2.8x	2.5x	-0.3x

Revenue and profitability

The company's Revenue decreased on 2.3% in FY2015. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.89 pp from 11.7% to 12.5% in FY2015.

Net Income marign increased slightly on 1.5 pp from 6.2% to 7.7% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 the company had CAPEX/Revenue of 1.5%. Firstsource Solutions's CAPEX/Revenue decreased slightly on 0.81 pp from 2.3% in FY2012 to 1.5% in FY2015. For the last three years the average CAPEX/Revenue was 1.4%.

Return on investment

The company operates at low ROIC (9.49%) and ROE (11.21%). ROIC showed almost no change in FY2015. ROE increased slightly on 1.1 pp from 10.1% to 11.2% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 2.5x and Debt / EBITDA is 2.7x. Net Debt / EBITDA dropped on 0.3x from 2.8x to 2.5x in FY2015. Debt dropped on 13.4% in FY2015 while cash dropped on 56.7% in FY2015.

Management team

The company's CEO is Rajesh Subramaniam. Rajesh Subramaniam has 6 years tenure at the company.

Appendix 1: Peers in BPO/KPO

Below you can find Firstsource Solutions benchmarking vs. other companies in BPO/KPO industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eclerx Services ($ECLERX)	-69.1%	38.2%	39.7%	27.3%
Hinduja Global Solutions ($HGS)	-66.6%	44.8%	27.6%	26.3%
Vakrangee ($VAKRANGEE)	-72.2%	52.1%	14.3%	26.2%
Xchanging Solutions ($XCHANGING)	65.8%	-62.2%	16.4%	18.0%
Allsec Technologies ($ALLSEC)	-6.8%	15.5%	74.8%	-37.6%
Median (5 companies)	-66.6%	38.2%	27.6%	26.2%
Firstsource Solutions ($FSL)		12.1%	25.0%	10.2%	-2.3%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eclerx Services ($ECLERX)	55.9%	40.4%	38.7%	42.0%
Vakrangee ($VAKRANGEE)	15.6%	17.8%	24.7%	27.4%
Hinduja Global Solutions ($HGS)	14.6%	11.9%	11.3%	13.0%
Xchanging Solutions ($XCHANGING)	3.1%	13.1%	10.1%	4.1%
Allsec Technologies ($ALLSEC)	1.9%	-0.2%	11.4%	-13.5%
Median (5 companies)	14.6%	13.1%	11.4%	13.0%
Firstsource Solutions ($FSL)	14.5%	8.7%	9.9%	11.7%	12.5%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Vakrangee ($VAKRANGEE)	6.8%	27.7%	6.0%	11.7%
Hinduja Global Solutions ($HGS)	6.0%	31.5%	7.2%	6.1%
Allsec Technologies ($ALLSEC)	5.2%	6.6%	5.8%	5.9%
Eclerx Services ($ECLERX)	7.0%	5.3%	4.0%	2.5%
Xchanging Solutions ($XCHANGING)	2.5%	3.4%	2.0%	1.8%
Median (5 companies)	6.0%	6.6%	5.8%	5.9%
Firstsource Solutions ($FSL)	2.1%	2.3%	1.4%	1.2%	1.5%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eclerx Services ($ECLERX)	83.3%	61.1%	58.7%	62.4%
Vakrangee ($VAKRANGEE)	17.1%	20.2%	21.3%	28.3%
Hinduja Global Solutions ($HGS)	9.9%	8.1%	8.2%	12.4%
Xchanging Solutions ($XCHANGING)	1.4%	8.3%	6.6%	2.2%
Allsec Technologies ($ALLSEC)	-8.7%	-13.0%	19.9%	-40.1%
Median (7 companies)	11.9%	8.3%	8.2%	12.4%
Firstsource Solutions ($FSL)	7.0%	4.0%	7.0%	9.0%	9.5%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Hinduja Global Solutions ($HGS)	-3.0x	0.8x	1.7x	1.5x
Vakrangee ($VAKRANGEE)	1.1x	1.9x	1.4x	0.9x
Eclerx Services ($ECLERX)	-0.1x	-0.7x	-0.5x	-0.7x
Xchanging Solutions ($XCHANGING)	-1.2x	-0.8x	-2.8x	-6.2x
Median (4 companies)	-0.1x	0.3x	1.3x	0.1x
Firstsource Solutions ($FSL)	4.3x	4.2x	4.2x	2.8x	2.5x

Firstsource Solutions stock price chart

Firstsource Solutions financials

mln.	FY2010	FY2011	FY2012

Revenue	34,940	20,110	22,550
EBITDA	2,778	2,906	1,958
Net income	1,361	1,385	620.3
CAPEX	564.7	430.6	526.1
Debt	13,578	14,933	9,626
Cash	1,169	2,358	1,464

About Firstsource Solutions

Firstsource Solutions Limited provides customer-centric business process management solutions. It offers customer management services, such as business acquisition, customer account, customer loyalty, and differentiators; collection services, including financial, healthcare, and student loan collection; and data processing services that include back office outsourcing, transaction processing, and process re-engineering services. The company also provides consulting services comprising business transformation engineered around cost optimization, revenue growth, and customer experience enhancement. It products include First Customer Intelligence, which provides actionable insight for products, processes, channels, Web strategy, and agent performance; First Chat that enables person-to-person communication through live chat; First Smartomation, which provides a unified user-friendly interface to the contact center agents that simplifies the process; First Resolve, a remediation solution for FCA reportable complaints; and First WF Suite that provides consulting, managed, and WFO capability development services. The company serves banking and financial services, telecommunications and media, healthcare, insurance, and publishing industries. It operates in the United States, Canada, the United Kingdom, India, and internationally. The company was formerly known as ICICI Onesource Limited and changed its name to Firstsource Solutions Limited in 2006. Firstsource Solutions Limited was incorporated in 2001 and is based in Mumbai, India.