Quess Corp Ltd (QUESS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (IIFL Capital): Ladies and gentlemen, good day, and welcome to Quess Corp Q2 FY '27 Earnings Conference Call hosted by IIFL Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Zabak from IIFL Capital. Thank you, and over to you, Mr. Zabak.
Siddharth Zabak (IIFL Capital): Thank you. Ladies and gentlemen, good morning, and thank you for joining us on the post Q2 and H1 FY '27 results conference call for Quess Corp Limited. It is my pleasure to introduce the senior management team at Quess Corp who are here with us today to discuss the results. We have Mr. Lohit Bhatia, Executive Director and Group
Siddharth Zabak (IIFL Capital): Group, Mr. Neeraj Jain, CFO, Mr. Kushal Maheshwari, Head of Investor Relations, Mr. Nitin Dave, CEO of Quess Staffing Solutions, and Mr. Kapil Joshi, CEO of Quess IT Staffing. We will begin the call with opening remarks by the management team and thereafter we will open the call for the Q&A session. I would like to now hand over the call to Mr. Kushal Maheshwari to take the proceedings forward. Thank you and over to you, Kushal.
Kushal Maheshwari (Quess Corp Ltd): Thank you, Siddharth. Good morning everyone and thank you for joining us for our Q2 and H1 FY '27 earnings call. The information, data, and outlook shared by the management during the call are forward-looking and subject to prevailing business conditions and government policies. All forward-looking statements are subject to economic growth or other risks faced by the company. Please refer to slide number two of the investor presentation for the safe harbor clause. With that safe harbor clause, I will now hand over the call to our ED and Group CEO, Mr. Lohit Bhatia, for his opening statements. Over to you, Lohit.
Lohit Bhatia (Quess Corp Ltd): Thank you, Kushal. Good morning everyone and thank you for joining us for Quess Corp's Q2 FY '27 earnings call. We are pleased to report a quarter of double-digit growth in revenue and profit. For Q2 FY '27, the consolidated revenue was 4,396 crores, up 15% year-on-year, 5% quarter-on-quarter. Adjusted EBITDA, which excludes the non-cash ESOP expense, was 92 crores, up 20% year-on-year, with a margin of 2.1%. PAT stood at 75 crores, up 44% year-on-year, with an EPS of ₹5. For the first half, the revenue was 8,578 crores, up 15%. The adjusted EBITDA was 178 crores, up 22%, and PAT was 157 crores, up 53%, with an EPS of 10.4 for first half of the year. Our return on equity has expanded to 25% on a trailing 12-month basis as on end of 30th September, from 20% in FY '26. Revenue in the first half includes a one-time increase of 298 crores from the new labor code, of which 120 crore was in Q2. Our balance sheet continues to remain strong, with a net cash position of 471 crores after paying the final dividend for the FY '26 in the month of August. Our cash collection in this quarter was the highest ever, crossing 5,000 crores. The Board has approved an interim dividend of ₹5 per share. Progress on our three priorities: when we started FY '27, we set out three priorities for ourselves. First, strengthen and grow our core businesses, Quess 1.0. Second, invest in technology for the future. And third, build a solid base for Quess 2.0. In H1 FY '27, we have made clear progress on all three tracks and we will update you on each of them every half-yearly. Priority one, strengthening and growing the core: all three core segments grew revenue year-on-year, general staffing up 15%, professional staffing up 13%, and overseas up 10%. We ended the quarter with around 504,000 associates, up 4% year-on-year, with a net addition in this quarter at 21,000 livelihoods that we provide. General Staffing delivered double-digit growth in revenue and operating profit with a stable margin profile. The revenue came in at 3,823 crores, up 15% YoY, and EBITDA was 57 crores, which is up 23% year-on-year. We added 20,857 associates on a net basis, backed by our highest ever sourcing of 56,570 6 associates, which is up 30% in Q1 and 14% for the same quarter last year.
Lohit Bhatia (Quess Corp Ltd): on year, along with value-added services and manufacturing, while growing our core volume segments of consumer, retail, telecom, and banking. Professional Staffing revenue grew 13% year-on-year to 254 crores. We continue to invest ahead of the curve in technology, sales, delivery, and new practices, and we expect these investments to start paying over the next coming quarters. The EBITDA came in at 27 crores, a margin of nearly 11% after absorbing these investments itself. GCCs contributed 71% by headcount and revenue. We signed a record 62 new contracts in H1, more than what we had signed in the entire fiscal year '26, and the quality of our mix keeps improving in IT Staffing. New clients added since FY '25 earning us nearly 1.8 times our average gross margin per associate, and about a quarter of our IT associates are now deployed in niche skills earning significantly higher GM PAPMs. Q2 also saw the highest gross margin in any quarter, with gross margin growing 12% year-on-year, 3% quarter-on-quarter. The gross margin in our PS business now stands at 20.5% against 17.5% 2 years ago. Overseas revenue was 318 crores, up 10% year-on-year, and EBITDA grew 23% YoY to 22 crores, with a margin improving to 6.9% from 6.2% in the previous quarter. Malaysian revenue grew 50%, Philippines grew 15%, and together, overseas added 33 new contracts. Priority two, investing in technology for future growth. Technology is now at the center of how we run Quess. We have 40 technology initiatives all underway, and three of them are now worth tracking and reporting. The Brain project, our AI-led sourcing engine. Since launch, The Brain has generated over 1.4 lakh candidate leads and about 24,700 offers. The Brain channel already accounts for about 13% of our General Staffing hiring at a much lower cost and faster time to service. We expect 35 to 40,000 offers from this channel in H2. QMS, our AI-led associate query management system, we rolled out Q QMS in Q2 and formally launched it for all the associates on October the 2nd. In the first 4 weeks itself, it has handled over 18,000 queries using AI robotics and bot, with more than one in five fully resolved by AI in a matter of minutes, which would earlier take 24 hours. Our aim is for AI to answer half of all queries by December and up to 80% by March 2027, with a much faster resolution for our associates. Project Confluence: we are moving for the full journey of a client sale to an associate offer letter and offer and onboarding to collections and cash onto one standard platform. Phase 1 will go live in January, further phases coming up in 2027. Priority three, building a solid base for Quess 2.0. Quess 2.0 is our strategy to build higher margin, dollar-linked growth alongside our volume engine. In H1, we laid the foundation on several fronts. Global corridors: we are building three tracks across GCC, international mobility, and digital-led mobility. Quess is a founding member of GSMAI, has signed an MOU with IOM, UN migration's division, and has mobilized 135 workers to the UAE so far in the first half of the year. Digital platforms: BCPL has turned EBITDA positive in Q2 after a burn of nearly 6 crores in the last financial year. Paying clients have grown from 14 in March to 54 in September across enterprises, MSMEs, and government. We are building an AI-enabled SaaS-based payroll module as we speak. Fractional workforce: we have signed our first
Lohit Bhatia (Quess Corp Ltd): our IT staffing business is now Quess IT Solutions, with senior practice leaders in cyber security, data and AI, and program management. We aim to land our first solutions project in second half of this year. People and ESG, Quess was ranked 40th among best workplaces and 32nd among best workplaces for women in the Great Place to Work Middle East 2026 ranking and won the National POSH Excellence Award 2026. Quess also holds a strong ESG rating of 66 out of 100 and CRISIL credit rating and ICRA, AA stable and A1 plus. To summarize, in Q2 FY '27, revenue grew 15% year-on-year, adjusted EBITDA 20%, and PAT 44%. With growth in all three core segments, a net cash balance of 471 crores, and an ROE of 25%, the clear progress on all three of our priorities is visible. In H2, we will focus on driving volume growth in general staffing, seeing return from our investments in Quess IT Solutions, scaling our technology initiatives, delivering on Quess 2.0 milestones, and expanding margins across segments with disciplined capital allocation. With that, I will hand over to Neeraj, our group CFO, to walk you through the financials in more detail. Thank you.
Neeraj Jain (Quess Corp Ltd): Thank you, Lohit. Good morning, everyone, and thank you for joining us for Quess Corp quarter two and H1 FY '27 earnings call. I will begin with our headline financial performance for the quarter and the first half, followed by a brief segment-wise review. Starting with the quarterly financial highlights, Q2 FY '27 has been a quarter of broad-based revenue growth with adjusted EBITDA and PAT growing faster than revenue, and a strong net cash balance sheet. Growth was visible across all three of our core segments, as Lohit highlighted. Consolidated revenue for the quarter stood at 4,396 crore, up 15% year-on-year and 5% quarter-on-quarter, led by general staffing, which grew 15% Y-o-Y, including a one-time revenue impact of 120 crores relating to the new labor code implementation. Professional staffing and overseas business grew 13% and 10% Y-o-Y, respectively. The total headcount rose to approximately 504,000, up 4% year-on-year and 5% quarter-on-quarter, a net addition of about 21,000 in the quarter. The operating margin of the business segments for the quarter was 106 crore, which is up by 18% year-on-year and 8% quarter-on-quarter. Adjusted EBITDA, which excludes the non-cash ESOP expense of 6 crore, was 92 crore, up 20% Y-o-Y and 7% quarter-on-quarter, with an adjusted margin of 2.1%, an expansion of 10 basis points year-on-year and 4 basis points quarter-on-quarter. As I mentioned, the labor code revenue is a pass-through with no impact on profitability. It actually dilutes our margin percentage to that extent. The reported EBITDA was 86 crore, up 12% Y-o-Y and 1% quarter-on-quarter, at a overall margin of 2%, excluding the labor code revenue. Reported PAT stood at 75 crore, up 44% year-on-year, with PAT margin of 1.7%, up 35 basis points year-on-year. Diluted earning per share was 5 rupees, up 45% year-on-year. The sequential decline in PAT reflects the one-time other income of 24 crore from the tax refund that we got in quarter one. Return on equity was 25% on trailing 12-month basis, expanding from 20% that we reported at the end of financial year FY '26. I will move to the H1 FY '27 numbers. For H1 FY '27, revenue was 8,578 crore, up 15% year-on-year compared to 7,483 crore in H1 FY '26. Adjusted EBITDA, excluding non-cash ESOP expense of 8 crore, was 178 crore, up 22% at a margin of 2.1%. Reported EBITDA was 170 crore, up 16%, PBT was 151 crore, up 37%, and PAT was 157 crore,
Neeraj Jain (Quess Corp Ltd): Our overall one-time labor code revenue impact for the first half was 298 crore. I'll move to balance sheet and capital allocation. We ended the quarter with a net cash position of 471 crore after paying the final dividend for FY '26 of about 45 crore during the quarter. The board has also approved an interim dividend of Rs. 5 per share. Cash collection exceeded 5,000 crore during the quarter and net operating cash flow for H1 was 348 crore, including the income tax refunds. Segment-wise financial performance. General Staffing continues to be the scale engine of the business providing stability, cash generation and a broad operating base. Revenues of 3,823 crore, up 15% YoY and 6% quarter-on-quarter. H1 revenue was 7,419 crore, which is up 15%. EBITDA of 57 crore, up 23% YoY and 11% quarter-on-quarter. The H1 EBITDA was 108 crore, up 18%. The construction vertical grew its EBITDA by 71% with a double-digit margin. Net headcount addition of 20,857 associates with 116 new contracts added during the quarter. Highest ever sourcing of 57,000 and highest ever cash collection of 4,285 crore in the quarter for our segment. DSO improved to 24 days from 26 days with AR stable at now 15 days, reflecting continued collection discipline. Professional Staffing remains a higher-margin segment for us, anchored in GCC and high-value technology roles. Revenue of 254 crore, up 13% YoY and 1% quarter-on-quarter. H1 revenue was 506 crore, up 8%. EBITDA of 27 crore, down 2% YoY and 4% quarter-on-quarter, with margins at 10.5% against 12.2% a year ago. H1 EBITDA was 55 crore, up 4%. However, our gross margin engine remains intact in the business. In fact, the gross margin has grown 12% YoY and 3% quarter-on-quarter, with gross margin percentage currently at 20.5% as against 17.5% two years ago. 27 new contracts added in the quarter, 62 overall in H1, with GCC at 71% of headcount and revenue, and quarter-end headcount of 7,566 after a net addition of 437. The EBITDA movement reflects our investment in technology, sales, delivery, and new practices. These investments are front-loaded, and the returns typically take 3 to 6-month window to start delivering. Overseas business delivered double-digit year-on-year growth in revenue and EBITDA, with EBITDA margins improving sequentially. Revenue of 318 crore, up 10% YoY and down 4% quarter-on-quarter. The H1 revenue was 651 crore, which is up by 13%. EBITDA of 22 crore, up 23% YoY and 7% quarter-on-quarter, at an overall margin of 6.9%, which is up from 6.2% in Q1. The H1 EBITDA was 43 crore, up 20%. We have added 33 new contracts during the quarter. The Middle East delivered a margin of 14.2% with flat revenues due to the geopolitical situation. Philippines grew revenue 15% YoY at a net margin of 10.5%, and Malaysia grew revenue 50% YoY. Our digital platforms business BCPL has now breakeven at the EBITDA level in Q2. Our deliberate investments in the platform over the last six quarters in building the technology is now beginning to show results. To summarize, Q2 FY '27 reflects double-digit revenue growth across all three core segments, adjusted EBITDA growth of 20%, PAT and EPS growth of 44%, and a strong net cash balance sheet of 471 crore, supported by a disciplined capital allocation policy. We will continue to make focused investments in technology to build digital assets across our business segments to generate higher margins. We remain confident that a growing general staffing base, a margin-accretive professional staffing and overseas portfolio, and a continued balance sheet discipline positions us well to deliver
Neeraj Jain (Quess Corp Ltd): sustainable, high-quality earnings growth throughout FY27. With that, I extend my warm greetings to you and your family for a very happy Diwali and a prosperous new year ahead. I will now hand it back to the moderator for Q&A.
Moderator (IIFL Capital): Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Siddharth Taparia with IIFL Capital. Please go ahead.
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