QUESS - Quess Corp Limited Share Price

During the Q1 FY26 earnings call, Quess Corp management provided an optimistic outlook for the company, emphasizing their momentum and strategic focus on growth. Management reported a revenue of INR 3,651 crores for the quarter, with an EBITDA of INR 70 crores, and a profit after tax (PAT) of INR 51 crores. The EBITDA margin improved to 1.9%, reflecting a sequential increase of 7 basis points. The total headcount stands at 461,531, reflecting a net addition of nearly 2,000 associates.

Key forward-looking points include:

1. Revenue Growth Initiatives: The management highlighted a strong pipeline with 42,000 open mandates, suggesting potential for increased headcount and revenue, particularly in the General Staffing segment, which added 79 new contracts.

2. Performance in Professional Staffing: This segment reported its best quarterly performance in over 15 years, with revenue of INR 244 crores and a double-digit EBITDA margin of 10.2%. Management is confident that favorable trends and the expansion into GCC (Global Capability Centers) will continue to support growth.

3. Digital Initiatives: The launch of "Origint" focuses on expanding the GCC ecosystem, providing end-to-end services for global enterprises. Management believes this service model will enhance margins.

4. Cash Flow and Debt Position: Quess ended the quarter with zero gross debt, indicating strong liquidity, and the focus will remain on improving cash conversion and profitability.

5. Labor Market Opportunities: With the approval of the employment-linked incentive scheme, management expects a shift from informal to formal employment, benefiting the staffing industry and potentially improving retention rates.

Overall, the management expressed a strong commitment to operational excellence and innovation, aiming to leverage growth opportunities while strengthening their position in the staffing industry.

Here are the major questions from the Q&A section of the earnings transcript, along with their detailed answers:

1. Question: "I'd like to understand whether the revenue growth and margin profile in professional staffing is sustainable? Or should we expect some moderation going ahead?" Answer: "I believe our growth and margin profile in professional staffing will remain sustainable. By focusing on niche areas, we've built capabilities to deliver in emerging technology. We're engaged with 157 GCCs, and the recent acquisition of new logos reflects robust demand. This strategic positioning is helping us maintain and potentially expand our margins."

2. Question: "Can you give a broad sense of how we expect growth acceleration in general staffing in associate terms as well as in revenue?" Answer: "We're anticipating a strong resurgence, especially as we approach festive seasons, with an open mandate of 42,000. While Q1 was tricky, the trends from June show increasing headcounts as we ramp up our recruiting capabilities. We expect this growth to positively impact our associate numbers and revenue as we progress through Q2."

3. Question: "Regarding the decline in associate to core ratio, how should we interpret this change?" Answer: "The decline to 307 reflects our cautious approach to capacity creation as we respond to seasonal demands. Our ramp-up in recruitment is strategic, aiming to seize upcoming opportunities. As we capture demand, we expect this ratio to stabilize and improve, contributing positively to our upcoming net additions."

4. Question: "Can you elaborate on the margin improvement expectations in general staffing?" Answer: "Margin improvements will depend on industry dynamics. We're focused on balancing flat and percentage fees, which can limit margin expansion. However, with anticipated economic recovery paired with our enhancements in open mandates and customer engagements, we expect to see better margins toward the second half of FY26."

5. Question: "What impact do you foresee from the recently approved employment-linked incentive scheme on the staffing industry?" Answer: "We expect the scheme will draw more informal labor into the formal space, enhancing retention, reducing attrition, and benefiting employers. It should lead to higher net additions in our labor market. While it's early for detailed predictions, its rollout will likely yield positive cash flow impacts by Q4 FY26."

6. Question: "What is your guidance for top line and margins for FY '26 or '27?" Answer: "We typically don't provide specific guidance for top lines but can discuss segment contributions. Professional staffing, reflects about 7% revenues and contributes 29% to EBITDA. The margin profile stands at 10.2%, indicating strong profitability, with growth expected to continue in this segment."

These answers capture the main points while adhering to character limits and ensuring clarity.