Quess Corp — Q2 FY26 earnings call

Call held 30 Oct 2025

Management summary

Quess Corp reported a strong Q2 FY26, achieving its highest ever quarterly EBITDA and maintaining robust operating cash flow conversion. The company demonstrated balanced growth across its General Staffing, Professional Staffing, and Overseas segments, with a strategic focus on high-margin businesses. Despite a prior NBFC ramp-down impacting YoY headcount comparisons, sequential growth and a healthy pipeline indicate continued momentum.

Highlights

  • Consolidated Revenue of ₹3,832 crores, up 3% YoY and 5% QoQ.

  • Highest ever quarterly EBITDA of ₹77 crores, up 11% YoY and 10% QoQ, with margins crossing 2%.

  • PAT stood at ₹52 crores, up 2% YoY and 2% QoQ, translating to an EPS of ₹3.5 per share.

  • Operating cash flow conversion at a healthy 109% for H1 FY26.

  • Added over 21,000 associates in Q2, bringing total associate count to 483,115, up 5% YoY.

  • Professional Staffing delivered highest ever EBITDA of ₹27 crores, up 37% YoY, with 12.2% margins.

  • Net cash balance of ₹273 crores after paying approximately ₹90 crores in dividends.

Key financials

2 periods

Headline

  • Revenue
    ₹3,832 Cr
    YoY +3% QoQ +5%
  • EBITDA
    ₹77 Cr
    YoY +11% QoQ +10%
  • EBITDA Margin
    2%
  • PAT
    ₹52 Cr
    YoY +2% QoQ +2%
  • EPS
    ₹3.5
    YoY +2% QoQ +2%
  • Net Cash Balance
    ₹273 Cr

H1

  • FY26 Revenue
    ₹7,483 Cr
    YoY +3%
  • FY26 EBITDA
    ₹146 Cr
    YoY +11%
  • FY26 PAT
    ₹103 Cr
    YoY +3%
  • FY26 OCF Conversion
    109%

What they filed

Q1 FY27: revenue up 14.5%, net profit up 60.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,705 4,019 3,656 3,651 3,832 +3%3,930 −2%3,892 +6%4,182 +15%
EBITDA69 62 67 70 77 +12%80 +29%86 +28%85 +21%
Net profit51 42 -95 51 52 +2%55 +31%64 +167%82 +61%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹3,831 Cr Total
  • General Staffing ₹3,317 Cr 86.6%
  • Overseas Business ₹290 Cr 7.6%
  • Professional Staffing ₹224 Cr 5.8%

Guidance & targets

Headcount

  • Net Additions Headcount · coming quarters (Q3, Q4 FY26) · High confidence 10,000-15,000
    Going forward, as we said that in H2, we should consider to deliver similar kind of growth in headcount. So with 21,000 that we delivered net adds in this quarter, going forward, at least we should do around 10,000 to 15,000 net adds in the coming quarters...

    — Kushal Maheshwari

  • YoY Growth Headcount · end of FY26 · Medium confidence Single-digit
    So I think we should be ending the year with a single digit growth in the headcount on a yearly basis.

    — Kushal Maheshwari

Finance Cost

  • Quarterly Finance Cost Finance Cost · coming quarters · High confidence ₹9-10 crores
    Going forward, we expect the finance cost to rationalize in the coming quarters. As we've guided to the street, the finance cost is expected to be around INR 9 crores to INR 10 crores on a quarterly basis...

    — Kushal Maheshwari

Profitability

  • Professional Staffing EBITDA Margin Profitability · going forward · High confidence Low-double digit
    So hopefully our EBITDA margin will be stable, a low-double digit going forward within the same lines what we had reported for last quarter.

    — Kapil Joshi

Working Capital

  • OCF Conversion (sustainable range) Working Capital · sustainable · Medium confidence 80-90%
    But otherwise, anyway, the range that we should be able to sustain be should be anywhere between about 80% to 90%.

    — Guruprasad Srinivasan

  • OCF EBITDA to OCF Conversion (full year) Working Capital · full year · High confidence 70%
    As we have guided to the street, for the full year we should be in the range of 70% for OCF EBITDA to OCF conversions?

    — Kushal Maheshwari

Tax Rate

  • Effective Tax Rate Tax Rate · new normal · High confidence 10-12%

    Previously 5% → 10-12%

    So on the modeling basis, I would advise you that the new tax rate or the tax incidence should be in the range of 10% to 12% as compared to previously, which was he had guided to 5%. But I think the new normal on the tax rate is around 10% for our business as the growth goes forward.

    — Kushal Maheshwari

Origint Business

  • Contribution to numbers Origint Business · by Q4 FY26 · Medium confidence Marginally contributing
    But by Q4 they will have slightly better contribution to the numbers.

    — Guruprasad Srinivasan

General Staffing

  • Headcount Growth General Staffing · next 3-5 years · High confidence Growing headcount YoY
    What we see is and what we have been doing is for the last 3 years, we've been adding about 50,000 headcount year-on-year. And you would be able to on a steady basis, deliver growing headcount year-on-year. So that is our thought process as far as next 3 to 5 years are concerned in the General Staffing business.

    — Nitin Dave

Overall Performance

  • H2 Performance Overall Performance · H2 FY26 · High confidence Repeat H1 performance
    Looking out into Q3, I would like to basically say that we would look at H2 rather than just simply Q3 because Q3 starts with Diwali and then goes into the season of Christmas and New Year's. So we are confident that we will be able to repeat our H1 performance into H2.

    — Lohit Bhatia

Risks & concerns

  • NBFC Ramp Down Impact on Headcount

    medium

    A ramp down of ~38,000 associates in Q4 FY25 by an NBFC client caused a marginal 5% YoY decline in overall headcount, impacting current YoY growth comparisons.

    Management acknowledged

  • Seasonality and Bonus Payouts

    low

    Diwali bonus pass-throughs (INR 120-150 crores) in Q3 FY26 for Collect & Pay business will cause a temporary blip in gross margins, but without yielding extra gross margin.

    Management acknowledged

  • Telecom Sector Slowdown

    low

    The telecom vertical, part of the CRT segment within General Staffing, is experiencing slower growth and declining hiring, impacting the overall CRT segment's growth.

    Management acknowledged

Q&A highlights

3 direct
General Staffing Headcount Growth and Seasonality Direct
As Guru said in his brief that the open mandate at this point of time is still 27,000. And that's where we'd like to focus our attention on, and on a continued basis deliver steady headcount growth quarter-on-quarter. So that's what the business is geared for.

Analysts questioned the sustainability of headcount additions and the impact of seasonality, to which management affirmed a mature sourcing engine and confidence in steady QoQ growth, supported by open mandates.

Asked by Deep Shah

Professional Staffing Margins and Revenue per Associate Direct
It is a -- MSP is a pass-through business where we manage client spend on workforce management and technology space. The headcount is not on our payroll. Okay. So what we have lost is only revenue, we didn't the headcount. And that is where if you calculate headcount it's the same and the revenue has dropped. I think that is where you see drop per associate, but actually our revenue -- only revenue has dropped - pass through revenue. And our per associate revenue is actually getting improved quarter-on-quarter, margin per associate is getting improved quarter-on-quarter.

Analysts were confused by declining revenue per associate despite margin expansion. Management clarified this was due to the sunset of a large MSP pass-through contract, which impacted revenue but not the profitability or actual per-associate metrics of their core Professional Staffing business.

Asked by Deep Shah, Dipesh Mehta

Operating Cash Flow (OCF) Conversion and Effective Tax Rate Direct
Dipesh, on your other question with regard to specific to OCF, see, it's not straight comparable because last year, we had a tax refund of about INR 129 crores. And this year, we are working on the period to get there. But where we are close to do is about 109%, which is exceptionally high considering few advanced salaries that we would have collected and paid just on the last year for Diwali and all of that. But otherwise, anyway, the range that we should be able to sustain be should be anywhere between about 80% to 90%.

The analyst noted a YoY decline in H1 OCF despite EBITDA growth. Management explained this was due to a one-off tax refund in the prior year, clarifying that current OCF conversion is strong and sustainable, and provided a revised, higher effective tax rate guidance for the future.

Asked by Dipesh Mehta

3 min read 6 chapters

Detailed narrative

Q2 FY26 Consolidated Performance Highlights

Quess Corp delivered a robust Q2 FY26, with consolidated revenue reaching ₹3,832 crores, marking a 3% year-on-year and 5% quarter-on-quarter increase. The company achieved its highest ever quarterly EBITDA of ₹77 crores, growing 11% YoY and 10% QoQ, with EBITDA margins crossing the 2% mark. PAT stood at ₹52 crores, up 2% YoY and QoQ, translating to an EPS of ₹3.5 per share. The H1 FY26 EBITDA to OCF conversion remained strong at 109%, underscoring disciplined cash flow management, and the company closed the quarter with a net cash balance of ₹273 crores.

General Staffing Drives Headcount Growth

The General Staffing segment reported a revenue of ₹3,317 crores, growing 6% YoY and 3% QoQ, contributing 86% to the total company revenue. It recorded its strongest quarter in six quarters with 21,283 net additions, driven by festive hiring in manufacturing, BFSI, consumer, retail, and telecom. The total associate count reached 470,337, with a robust sourcing engine onboarding over 55,000 associates. Despite a 23% YoY decline in segmental EBITDA to ₹46 crores, margins remained stable at approximately 1.4%, and DSO was maintained at 25 days.

Professional Staffing Achieves Record Profitability

Professional Staffing continued its strong performance, delivering a revenue of ₹224 crores, up 11% YoY, despite an 8% QoQ decline due to the sunset of a large MSP pass-through contract. The segment achieved its highest ever EBITDA of ₹27 crores, a 37% YoY and 10% QoQ increase, with double-digit EBITDA margins at 12.2%. This was attributed to sustained demand for skilled talent in higher-value areas and the rationalization of low-margin contracts. Approximately 73% of Professional Staffing headcount is now tied to GCC-led projects, particularly in digital and tech roles.

International Business and Digital Platforms Expansion

The Overseas business delivered a steady performance with revenue of ₹290 crores, up 3% YoY and 2% QoQ, and EBITDA of ₹18 crores, up 27% YoY, maintaining a 6.2% margin. Headcount grew 16% YoY to 5,730, with Middle East achieving its highest ever EBITDA of 12.8%. In Digital Platforms, Hamara Jobs now boasts over 12.6 million registered candidate profiles, solidifying its leadership in India's blue-collar recruitment. Taskmo, the gig workforce model, secured its first large-scale gig contract worth ₹5 crores, deploying 1,500 taskers nationwide.

Financial Management and Outlook

Management expects finance costs to rationalize to ₹9-10 crores quarterly in coming quarters. The effective tax rate is guided to be 10-12% as the new normal, up from a previous guidance of 5%, reflecting a higher contribution from high-margin businesses. For H2 FY26, the company anticipates similar growth to H1, with net additions of 10,000-15,000 associates in the coming quarters, aiming for single-digit YoY headcount growth by year-end. The OCF conversion is expected to be sustainable at 80-90% and 70% for the full year EBITDA to OCF conversion.

Strategic Focus on Margin Expansion and Diversification

Quess is strategically shifting its General Staffing mix towards higher-margin segments like manufacturing apprenticeship, which has 77,000 people and is growing 30%+ YoY. Emerging businesses like Value-Added Services (VAS) and construction, though currently contributing less than 8% to General Staffing, are expected to drive higher gross and EBITDA margins in the next 1-3 years. The company also noted a healthy pipeline of 27,000 open mandates in General Staffing and 1,300 in Professional Staffing, supporting future growth.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Services earnings calls