Eclerx Services Net Income jumped on 58.0% and Revenue jumped on 39.5%

20-05-2016 • About Eclerx Services ($ECLERX) • By InTwits

Eclerx Services reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:

Eclerx Services is a fast growth stock: FY2016 revenue growth was 39.5%, 5 year revenue CAGR was 30.9% at FY2016 ROIC 48.4%
Eclerx Services has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.5%. At the same time it's a lot of higher than industry average of 3.2%.
CAPEX is quite volatile: ₹531m in FY2016, ₹614m in FY2015, ₹214m in FY2014, ₹267m in FY2013, ₹251m in FY2012
The company has highly profitable business model: ROIC is 48.4%

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

Revenue and profitability

The company's Revenue jumped on 39.5%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.67 pp from 3.1% to 3.8% in FY2016.

Net Income margin increased on 3.2 pp from 24.4% to 27.6% in FY2016.

Investments (CAPEX, working capital and M&A)

Eclerx Services's CAPEX/Revenue was 4.0% in FY2016. Eclerx Services showed almost no change in CAPEX/Revenue from FY2013 to FY2016. 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 (48.4%) and ROE (40.3%). ROIC increased on 7.4 pp from 41.0% to 48.4% in FY2016. ROE increased on 5.1 pp from 35.2% to 40.3% in FY2016.

Leverage (Debt)

Debt level is -0.7x Net Debt / EBITDA and 0.0x Debt / EBITDA. Debt surged while cash surged on 64.9%.

Eclerx Services has no short term refinancing risk: cash is higher than short term debt (9,278.0%).

Valuation and dividends

Eclerx Services's trades at EV/EBITDA 10.9x and P/E 15.5x while industy averages are 17.8x and 21.9x. Eclerx Services's EV/(EBITDA-CAPEX) is 12.3x with the industry average at 22.8x.

Financial and operational results

Eclerx Services ($ECLERX) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	4,729	6,605	8,410	9,421	13,143	39.5%
EBITDA	1,909	2,557	3,536	3,156	4,868	54.2%
Net Income	1,598	1,716	2,557	2,297	3,630	58.0%
Balance Sheet
Cash	1,348	1,209	2,387	1,976	3,258	64.9%
Short Term Debt	0	0	0	0	35
Long Term Debt	0	0	0	0	0
Cash flow
Capex	251	267	214	614	531	-13.5%
Ratios
Revenue growth	38.2%	39.7%	27.3%	12.0%	39.5%
EBITDA growth	-0.2%	33.9%	38.3%	-10.7%	54.2%

EBITDA Margin	40.4%	38.7%	42.0%	33.5%	37.0%	3.5%
Net Income Margin	33.8%	26.0%	30.4%	24.4%	27.6%	3.2%
CAPEX, % of revenue	5.3%	4.0%	2.5%	6.5%	4.0%	-2.5%

ROIC	61.1%	58.7%	62.4%	41.0%	48.4%	7.4%
ROE	55.0%	43.9%	49.8%	35.2%	40.3%	5.1%
Net Debt/EBITDA	-0.7x	-0.5x	-0.7x	-0.6x	-0.7x	-0.0x

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	FY2012	FY2013	FY2014	FY2015	FY2016
Vakrangee ($VAKRANGEE)	-	14.3%	26.2%	42.4%	14.8%
Hinduja Global Solutions ($HGS)	44.8%	27.6%	26.3%	12.1%	-
Firstsource Solutions ($FSL)	-	25.0%	10.2%	-2.3%	6.4%
Xchanging Solutions ($XCHANGING)	-62.2%	16.4%	18.0%	-2.6%	-
Allsec Technologies ($ALLSEC)	-	74.8%	-37.6%	-24.4%	54.7%
Median (5 companies)	-8.7%	25.0%	18.0%	-2.3%	14.8%
Eclerx Services ($ECLERX)	-	39.7%	27.3%	12.0%	39.5%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vakrangee ($VAKRANGEE)	17.8%	24.7%	27.4%	26.0%	25.8%
Firstsource Solutions ($FSL)	8.7%	9.9%	11.7%	12.5%	12.5%
Hinduja Global Solutions ($HGS)	11.9%	11.3%	13.0%	11.3%	-
Xchanging Solutions ($XCHANGING)	13.1%	10.1%	4.1%	10.0%	-
Tricom India ($TRICOM)	-	-	-	5.8%	-
Median (6 companies)	11.9%	11.3%	11.7%	10.6%	14.5%
Eclerx Services ($ECLERX)	40.4%	38.7%	42.0%	33.5%	37.0%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Hinduja Global Solutions ($HGS)	31.5%	7.2%	6.1%	5.8%	-
Firstsource Solutions ($FSL)	2.3%	1.4%	1.2%	1.5%	2.7%
Vakrangee ($VAKRANGEE)	27.7%	6.0%	11.7%	0.2%	0.4%
Median (3 companies)	6.6%	5.8%	5.9%	1.5%	1.5%
Eclerx Services ($ECLERX)	5.3%	4.0%	2.5%	6.5%	4.0%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vakrangee ($VAKRANGEE)	20.2%	21.3%	28.3%	36.4%	36.8%
Hinduja Global Solutions ($HGS)	8.1%	8.2%	12.4%	11.0%	-
Firstsource Solutions ($FSL)	4.0%	7.0%	9.0%	9.5%	10.3%
Xchanging Solutions ($XCHANGING)	8.3%	6.6%	2.2%	7.2%	-
Allsec Technologies ($ALLSEC)	-13.0%	19.9%	-40.1%	-26.5%	31.8%
Median (7 companies)	8.1%	7.0%	9.0%	9.5%	31.8%
Eclerx Services ($ECLERX)	61.1%	58.7%	62.4%	41.0%	48.4%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Firstsource Solutions ($FSL)	4.2x	4.2x	2.8x	2.5x	2.1x
Hinduja Global Solutions ($HGS)	0.8x	1.7x	1.5x	1.4x	-
Vakrangee ($VAKRANGEE)	1.9x	1.4x	0.9x	0.6x	0.2x
Tricom India ($TRICOM)	2.1x	4.6x	-	0.0x	-
Xchanging Solutions ($XCHANGING)	-0.8x	-2.8x	-6.2x	-3.9x	-
Median (5 companies)	1.3x	1.4x	1.2x	0.6x	0.2x
Eclerx Services ($ECLERX)	-0.7x	-0.5x	-0.7x	-0.6x	-0.7x

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.