Firstsource Solutions Q1 FY27 earnings call

Firstsource Solutions Limited reported a strong Q1 FY27, marking its ninth consecutive quarter of double-digit year-on-year revenue growth and eleventh consecutive quarter of sequential growth. Revenue reached INR2,720 crores, representing a 22.9% YoY increase and 5.5% QoQ growth. The company's EBIT margin improved significantly to 12.4%, up 110 basis points YoY and 20 basis points QoQ. Adjusted net profit stood at INR220 crores, growing 31.2% YoY and 8.3% sequentially, with diluted EPS at INR2.36.

The quarter included a one-time^📎 exceptional charge^📎 of INR71.7 crores (INR56.3 crores net of taxes). This comprised INR35.7 crores (INR27.1 crores net of tax) related to a program termination with a healthcare client, which management is actively pursuing to recover. Additionally, INR28.4 crores (INR21.6 crores net of tax) was charged for indemnification of a regulatory penalty, with recovery efforts underway through an insurance claim. A positive fair value adjustment of INR7.6 crores was recognized for the Ascensos acquisition due to its strong performance.

Firstsource signed four large deals in Q1, marking the sixth consecutive quarter of securing four or more large deals, with the highest ACV intake in the last four quarters. These wins reflect the company's ability to combine deep industry expertise, digital capabilities, and AI-first automation. The company also added 12 new logos, including three strategic logos, defined as having potential for over $5 million in annual relationship value. Management noted that many wins are transformative and ramp up in phases, strengthening long-term growth visibility.

In constant currency, Banking and Financial Services (BFS) grew 14% YoY and 5% QoQ, driven by strong interest in intelligent operations and compliance. Healthcare revenues grew 11% YoY but declined 2% QoQ, attributed to a client-side decision rather than a systemic issue. CMT revenues grew 6% YoY and 9% QoQ, with management expecting normalization. Geographically, North America grew 8% YoY and was flat QoQ, while Europe saw 18% YoY and 6% QoQ growth. Australia's revenue doubled YoY, indicating strong regional performance.

The company continued to advance its 'Intelligence That Operates' strategy, leveraging AI across its operations to deliver measurable outcomes for clients. This includes AI-powered audit engines and GenAI tools for telecom clients, and AI platforms running for major mortgage lenders and health plans. Firstsource also emphasized its partner ecosystem, collaborating with hyperscalers like AWS and Google Cloud, and strategic partners like Zendesk and Cresta, to build AI-native solutions. Workforce headcount increased by 670 associates to 36,875, with voluntary attrition at 27.5%.

Despite the one-time^📎 exceptional charges^📎, Firstsource reaffirmed its FY27 guidance, expecting constant currency revenue growth of 10% to 13% and an EBIT margin band of 12.25% to 12.75%. Management noted that the strong pipeline and quick ramp-up of new deals are expected to offset the impact of the terminated healthcare contract. The company also reiterated its long-term goal of achieving an EBIT margin of 14% to 15% over the next two to three years, with an effective tax rate for FY27 projected between 22% and 24%.