Firstsource Solutions Ltd Q3 FY26 Earnings Call Summary

Summary

Firstsource Solutions Ltd - Q3 FY26 Earnings Call Summary Tuesday, February 03, 2026 5:00 PM IST

Event Participants

Executives 2 Dinesh Jain (CFO), Ritesh Idnani (MD & CEO)

Analysts 6 Abhishek Bhandari (Nomura), Ankur Pant (IIFL Capital Services), Dipesh Mehta (Emkay Global), Girish Pai (BOB Capital Markets), Manik Taneja (Axis Capital), Shraddha Agarwal (AMSEC), Sushovon (Anand Rathi), Vibhor Singhal (Nuvama Equities)

Financials & KPIs

Geographic & Segment Commentary

• Banking and Financial Services (BFS): Revenue grew 9% YoY (flat QoQ in CC). Momentum is driven by regulatory compliance and cost efficiency; the mortgage segment remains stable through consulting-led AI optimization despite high interest rates.
• Healthcare: Grew 6% YoY (flat QoQ in CC). Management is rationalizing low-margin provider accounts (impacting growth by ~50 bps for FY26) while focusing on high-growth clinical and utilization management via the TeleMedik acquisition.
• Communications, Media & Technology (CMT): Revenue grew 14% YoY and 2% QoQ. While seasonally soft due to the holiday period, growth is sustained by AI integration services for consumer tech clients and three large deal wins this quarter.
• Diverse Portfolio (UK Utilities/Retail): Delivered 21% YoY and 37% QoQ growth in CC. Performance was bolstered by seasonal retail strength and the integration of Pastdue Credit, with plans to replicate these capabilities in the North American market.
• North America & Europe: North America grew 13% YoY in CC, with new sales presence established in Canada. Europe grew 2% YoY in CC, impacted by a strategic shift from onshore to nearshore delivery (South Africa), though the pipeline has expanded by 40% over four quarters.

Company-Specific & Strategic Commentary

• UnBPO Strategy: Over 50% of business is now non-linear/outcome-based. This tech-first approach is driving large deal wins (13 in 9M FY26) and attracting new logos.
• Acquisition Integration: Pastdue Credit (UK) added ~2% to YoY CC growth and provides a springboard for utility sector growth. TeleMedik (Puerto Rico) strengthens the payer segment with a US-territory cost advantage for Medicaid services.
• Offshoring Pivot: UK onshore headcount decreased by 40% YoY as work transitioned to South Africa (headcount +50%). Offshoring mix improved to 43.4% of total revenue.
• Strategic Logos: Added 9 new logos in Q3 (5 strategic). The company has successfully scaled 60% of strategic logos added in the last two years to a $5M+ annual run rate.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Business Diversification

• Question: How does lower government healthcare spending impact demand? (Vibhor Singhal)
• Answer: While Medicare Advantage rate caps pressure payer margins, they act as a tailwind for offshoring and transformational cost-reduction programs. Puerto Rico (TeleMedik) offers a unique US-territory cost advantage for Medicaid work (Ritesh Idnani).

Mortgage and Banking

• Question: Are we seeing a revival in the mortgage business? (Vibhor Singhal)
• Answer: Growth is stable without macro support. Meaningful refinance “green shoots” require rates to drop near 5%, as 88% of existing mortgages are currently below that level (Ritesh Idnani).

Margin Trajectory

• Question: Will incremental gains be reinvested or flow to margins? (Abhishek Bhandari)
• Answer: The company remains committed to 50-75 bps of annual expansion through FY28. Efficiency gains are funding necessary AI and platform investments without diluting margin targets (Ritesh Idnani).

Account Rationalization

• Question: What is the impact of trimming healthcare provider accounts? (Dipesh Mehta)
• Answer: Trimming low-margin, low-growth “tail” accounts impacted Q3 by ~$2M and will affect FY26 growth by ~50 bps, but it structurally improves the long-term margin profile (Ritesh Idnani).

Key Takeaway

Firstsource delivered a resilient Q3 FY26, marked by 10.6% CC revenue growth and a 40 bps sequential EBIT margin expansion to 11.9%. The company successfully integrated Pastdue Credit and announced the TeleMedik acquisition to bolster its Healthcare and Utilities segments. Strategic focus on “UnBPO” and offshore delivery (now 43.4% of revenue) has driven 13 large deal wins in the first nine months of the fiscal year, nearly double the pace of FY24. While the company is intentionally rationalizing low-margin healthcare accounts—moderating the organic growth outlook—the raised EBIT margin guidance of 11.5%-12.0% reflects strong operational execution. Management remains confident in an accelerated Q4 performance, targeting 14.5%-15.5% total CC growth for the full year. Firstsource is well-positioned to navigate regulatory shifts in the US by leveraging its expanded geographic footprint and tech-led service model.