Eclerx Services reports 186% CAPEX growth and 12.0% Revenue growth

25-05-2015 • About Eclerx Services ($ECLERX) • By InTwits

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

Eclerx Services has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.1%. At the same time it's in pair with industry average of 5.5%.
CAPEX is quite volatile: 614 in FY2015, 214 in FY2014, 267 in FY2013, 251 in FY2012, 240 in FY2011
The company has highly profitable business model: ROIC is at 41.0%

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

Eclerx Services ($ECLERX) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	3,421	4,729	6,605	8,410	9,421	12.0%
EBITDA	1,913	1,909	2,557	3,536	3,156	-10.7%
Net Income	1,224	1,598	1,716	2,557	2,297	-10.2%
Balance Sheet
Cash	186	1,348	1,209	2,387	1,976	-17.2%
Short Term Debt	0	0	0	0	0
Long Term Debt	0	0	0	0	0
Cash flow
Capex	240	251	267	214	614	186.3%
Ratios
Revenue growth	-69.1%	38.2%	39.7%	27.3%	12.0%
EBITDA growth	89.9%	-0.2%	33.9%	38.3%	-10.7%
EBITDA Margin	55.9%	40.4%	38.7%	42.0%	33.5%	-8.5%
Net Income Margin	35.8%	33.8%	26.0%	30.4%	24.4%	-6.0%
CAPEX, % of revenue	7.0%	5.3%	4.0%	2.5%	6.5%	4.0%
ROIC	83.3%	61.1%	58.7%	62.4%	41.0%	-21.5%
ROE	55.9%	55.0%	43.9%	49.8%	35.2%	-14.5%
Net Debt/EBITDA	-0.1x	-0.7x	-0.5x	-0.7x	-0.6x	0.0x

Revenue and profitability

The company's Revenue jumped on 12.0% in FY2015. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 8.5 pp from 42.0% to 33.5% in FY2015.

Net Income marign decreased on 6.0 pp from 30.4% to 24.4% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 the company had CAPEX/Revenue of 6.5%. CAPEX/Revenue increased slightly on 1.2 pp from 5.3% in FY2012 to 6.5% in FY2015. It's average level of CAPEX/Revenue for the last three years was 4.4%.

Return on investment

The company operates at high and attractive ROIC (40.95%) and ROE (35.23%). ROIC dropped on 21.5 pp from 62.4% to 41.0% in FY2015. ROE dropped on 14.5 pp from 49.8% to 35.2% in FY2015.

Leverage (Debt)

The company has no debt. Cash dropped on 17.2% in FY2015.

Valuation

The company's trades at EV/EBITDA 14.0x and P/E 20.0x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 17.3x with the industry average at 4.7x.

Appendix 1: Peers in BPO/KPO

Below we provide Eclerx Services benchmarking against other companies in BPO/KPO industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Hinduja Global Solutions ($HGS)		44.8%	27.6%	26.3%	12.1%
Vakrangee ($VAKRANGEE)	-72.2%	52.1%	14.3%	26.2%
Xchanging Solutions ($XCHANGING)	65.8%	-62.2%	16.4%	18.0%
Firstsource Solutions ($FSL)		12.1%	25.0%	10.2%	-2.3%
Allsec Technologies ($ALLSEC)		15.5%	74.8%	-37.6%	-24.4%
Median (5 companies)	-3.2%	15.5%	25.0%	18.0%	-2.3%
Eclerx Services ($ECLERX)		38.2%	39.7%	27.3%	12.0%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Vakrangee ($VAKRANGEE)	15.6%	17.8%	24.7%	27.4%
Hinduja Global Solutions ($HGS)	14.6%	11.9%	11.3%	13.0%	11.3%
Firstsource Solutions ($FSL)	14.5%	8.7%	9.9%	11.7%	12.5%
Xchanging Solutions ($XCHANGING)	3.1%	13.1%	10.1%	4.1%
Allsec Technologies ($ALLSEC)	1.9%	-0.2%	11.4%	-13.5%	-6.1%
Median (5 companies)	14.5%	11.9%	11.3%	11.7%	11.3%
Eclerx Services ($ECLERX)	55.9%	40.4%	38.7%	42.0%	33.5%

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%	5.8%
Allsec Technologies ($ALLSEC)	5.2%	6.6%	5.8%	5.9%
Xchanging Solutions ($XCHANGING)	2.5%	3.4%	2.0%	1.8%
Firstsource Solutions ($FSL)	2.1%	2.3%	1.4%	1.2%	1.5%
Median (5 companies)	5.2%	6.6%	5.8%	5.9%	3.7%
Eclerx Services ($ECLERX)	7.0%	5.3%	4.0%	2.5%	6.5%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Vakrangee ($VAKRANGEE)	17.1%	20.2%	21.3%	28.3%
Hinduja Global Solutions ($HGS)	9.9%	8.1%	8.2%	12.4%	11.0%
Firstsource Solutions ($FSL)	7.0%	4.0%	7.0%	9.0%	9.5%
Xchanging Solutions ($XCHANGING)	1.4%	8.3%	6.6%	2.2%
Allsec Technologies ($ALLSEC)	-8.7%	-13.0%	19.9%	-40.1%	-26.5%
Median (7 companies)	9.9%	8.1%	7.0%	9.0%	9.5%
Eclerx Services ($ECLERX)	83.3%	61.1%	58.7%	62.4%	41.0%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Firstsource Solutions ($FSL)	4.3x	4.2x	4.2x	2.8x	2.5x
Hinduja Global Solutions ($HGS)	-3.0x	0.8x	1.7x	1.5x	1.4x
Vakrangee ($VAKRANGEE)	1.1x	1.9x	1.4x	0.9x
Xchanging Solutions ($XCHANGING)	-1.2x	-0.8x	-2.8x	-6.2x
Median (4 companies)	-0.0x	1.3x	1.4x	1.2x	2.0x
Eclerx Services ($ECLERX)	-0.1x	-0.7x	-0.5x	-0.7x	-0.6x

Eclerx Services stock price chart

Eclerx Services financials

mln.	FY2010	FY2011	FY2012

Revenue	11,065	3,421	4,729
EBITDA	1,007	1,913	1,909
Net income	735.4	1,224	1,598
CAPEX	89.510	240.0	251.3
Debt	0.000	0.000	0.000
Cash	320.6	185.7	1,348

About Eclerx Services

eClerx Services Limited provides data analytics and process outsourcing services in the Asia Pacific, the United Kingdom, the United States, and Europe. The company offers reference data management services, such as product reference data, client on-boarding and data management, taxonomy data, and know your customer services; and risk and control services, including document risk review, operational risk reporting, and reconciliation services. It also provides middle office services, such as trade support, trade affirmation and validation, position reconciliation, and reporting and control services; back office services, including confirmations, settlements, asset servicing, tax operations, and performance reporting services; and finance and accounting services comprising product and expense line control, billing and brokerage, and support services. In addition, the company provides ancillary services, such as systems and data migration, technical fund on-boarding, regulatory and compliance support, and research and analysis services; and supports various asset class coverage services, including cash securities, listed and OTC derivatives, foreign exchange, and commodities. Further, it offers commerce and content services comprising content and digital asset management, search services and demand generation, content migration, and customer experience and quality assurance services; data management services, such as customer and product data, supplier and partner data, sales and customer care data, data integration, data stewardship/data quality/data governance, and master data management services; analytics, insights, and reporting services; and quality and monitoring, technical, and work order accuracy services. It serves financial services, broadband, cable and telecom, ecommerce and retail, high tech, industrial manufacturing and distribution, software, media and entertainment, and travel companies. The company was founded in 2000 and is based in Mumbai, India.