Quess Corp Ltd (QUESS) Q3 FY23 Earnings Concall Transcript

Quess Corp Ltd (NSE: QUESS) Q3 FY23 Earnings Concall dated Feb. 04, 2023

Corporate Participants:

Rajesh Padmashali — General Manager – Corporate Services

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Kamalpal Hoda — Chief Financial Officer

Lohit Bhatia — President – Workforce Management

Sekhar Garisa — Chief Executive Officer foundit

Pinaki Kar — President – Global Technology Solutions

Analysts:

Vidit Shah — IIFL Securities — Analyst

Darren Ng — Firth Investment Management — Analyst

Amit Khetan — Laburnum Capital — Analyst

Mukul Garg — Motilal Oswal Financial Services Ltd. — Analyst

Alok Deshpande — Nuvama Wealth — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Quess Corp Limited Q3 FY ’23 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vidit Shah from IIFL Securities. Thank you and over to you Mr. Shah.

Vidit Shah — IIFL Securities — Analyst

Thank you, Neerav. Ladies and gentlemen, good morning and thank you for joining us on the post results conference call of Quess Corp. It’s my pleasure to introduce the senior management team of Quess who are with us today to discuss the results. We have with us Mr. Guruprasad Srinivasan, Executive Director and Group CEO; Mr. Kamalpal Hoda, Group CFO; Mr. Lohit Bhatia, President, Workforce management; Mr. Pinaki Kar, President, Global Technology Solutions; and Mr. Sekhar Garisa, President, Emerging Businesses. 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 now like to hand over the call over to Mr. Rajesh Padmashali to take the proceedings forward. Thank you. Thank you and over to you, Rajesh.

Rajesh Padmashali — General Manager – Corporate Services

Thanks, Vidit. Good morning, everyone, and thank you for joining our earnings call today. The information and data shared by the management during the call could be forward-looking, but subject to prevailing business conditions and government policy. All forward-looking statements must be read in conjunction with the risks company faces.

I will now hand the call over to Group CEO, Guruprasad Srinivasan.

Guruprasad Srinivasan — Executive Director and Group CEO

Thank you, Rajesh. Very good morning to you all. [Technical Issues] Q3 FY ’23 result. And thank you for joining for us today. The business environment for the quarter was muted across all sectors with exception in segments like BFSI, Manufacturing and FMCG and FMCD where we continue to see some traction. We added over 80,000 headcount on year-on-year basis, a 20% increase. Please note, this number does not include an additional 35,700 FTEs, who are pay-rolled in the month of December who were not on our roles at the end of — by the end of the month. The backfills made during tough market environment in Q3 has again demonstrated our capability on solid hiring process that we have built over here.

At Quess, our major focus was on SG&A reduction across vertical. As a result, our SG&A declined to 5.7% of revenue from 6.2% of revenue in Q2 FY ’23. Even though the overall headcount stayed flat on quarter-on-quarter basis, Operating Asset Management saw a headcount increase of 3%. Our matured businesses have all continued to demonstrate growth, driving our consolidated revenues up by 21% year-on-year and 4% quarter-on-quarter basis. The consolidated EBITDA for the quarter was around INR145 crore, an 8% quarter-on-quarter increase. EBITDA margin increased by 10 basis points, driven by focus on cost reduction. This contributed to margin improvement across all three platforms. OCF EBITDA ratio was — at 45% for the quarter and 60% for nine-month FY ’23. We expect to achieve 70% OCF to EBITDA for FY ’23 on back of strong collections in Q4.

The sales engine continues to perform well. We acquired 203 new customers in Q3. The cross-sell engine continues to hum with 45 wins in Q3 and with an annual contract value of INR349 crores. For nine-month FY ’23, cross-sell team has won a total 70 contracts with an annual contract value of INR532 crores, which is what we added in entire FY ’22. Quess has also partnered with Boston Consulting Group to work on few strategic review and planning exercise with goal of sharpening our business and capital allocation parameters.

Now coming to platform-specific updates. Workforce Management. The platform posted a revenue growth of 4% quarter-on-quarter and 21% year-on-year. Workforce Management added over 100 new clients in the quarter, continuing to 100 plus customers in addition, continuously in a streak of seven quarters in a row. The demonstration of sales capability of our team in this challenging environment is quite commendable. Workforce Management headcount reached 379,000, an increase of 25% year-on-year.

Driven by over 50,000 headcount additions in H1 FY ’23, GS revenue, the General Staffing revenue grew by 7% quarter-on-quarter and 25% year-on-year. The business added 56 new logos in this quarter, taking the nine-month new client addition to 179 and the per associate per month gross margin profile stayed stable around INR690 per person range. Value-added services in General Staffing contributed 21% of General staffing gross margin against 19% in Q2 FY ’23. EBITDA from operations grew by 6% year-on-year and 9% quarter-on-quarter.

The EBITDA margin saw an improvement of 11 basis points quarter-on-quarter. This was largely attributable to the efficiency improvement in General Staffing, which achieved its highest-ever associate to core ratio of 1:459. In IT Staffing, unlike Q2, we have not carried a bench. In addition, IT Staffing business also saw a reduction in SG&A to the revenue ratio by 200 basis points versus Q2. This has contributed to the margin improvement. We will continue to focus on efficiency and building up on the margin gains made in Q3.

Moving on to Global Technology Solutions platform, the segment posted a highest revenue and EBITDA, revenue growing by 20% year-on-year, 6% quarter-on-quarter, while EBITDA grew by 3% year-on-year and 7% quarter-on-quarter. Conneqt had a highest-ever quarterly revenue at INR364 crores and AllSec crossed INR100 crore quarterly revenue landmark for the first time. Associate headcount across GTS crosses a milestone of 50,000. The Customer Lifecycle Management business in AllSec grew by an impressive 22% year-on-year based on the enhanced account mining and new logo addition across North America and India.

Non-voice BPO vertical grew by 29% year-on-year. The highlight of this segment was 37% year-on-year growth in the collection business, which is a validation to our investment in creating a solution-centric business, leveraging our digital tools. In platform-based business, that’s our HRO platform, AllSec business grew by 16.5% year-on-year as we processed 3.5 million payslips during the quarter. Our North American platform business under MFX grew by 10% quarter-on-quarter, leading to an impressive margin expansion.

Moving on to OAM platform, OAM registered a robust top line growth of 19% year-on-year and 6% [Phonetic] quarter-on-quarter. IFMS, that’s the Facility Management business saw a revenue growth of 19% year-on-year and 6% quarter-on-quarter, while EBITDA grew by 17% quarter-on-quarter. This increase was driven by 22 new logo additions. Number of meals served in our food business continues to move up, registering around 7.5% quarter-on-quarter growth, after growing by 5% quarter-on-quarter in Q2. This resulted in 12% quarter-on-quarter growth, increasing in Q3.

The continued focus on efficiency improvement through technology combined with economies of scale, have seen our associate to core ratio in our Facility Management business moving up from 95 to 100 in Q2. Terrier continues to ramp-up the headcount. I mean, the headcount addition stands at 22,000 with an increase of 5% quarter-on-quarter. As a result of business achieved revenue growth of 5% quarter-on-quarter. Terrier now holds PSARA licenses in 23 states and our application is under process in three states. Our India presence will drive the growth in this business. Vedang, our telecom platform, which focuses on active infra services business had its best of quarter in terms of revenue and EBITDA, achieving 9% increase in revenue and 4% increase in EBITDA on quarter-on-quarter basis. We expect strong trend to continue on the back of 5G rollout.

Moving on to product-led businesses where we continue to make significant process. We rebranded Monster into foundit to reflect our vision of transformation from job board to complete talent platform. The new brand identity was received very well by all stakeholders. Monster continues to log impressive number with sales crossing INR40 crore milestone. Sales and revenue growing by 40% and 23% year-on-year, respectively. Sales grew by 35% quarter-on-quarter sequentially, showing a robust growth even as the hiring scenario slowed down. The candidate traffic and engagement continues to be strong with six months active candidate base almost touching 18 million for the first time.

Customer acquisition continues to be healthy, with over 2,000 new customers’ contracts for last six quarters in a row. New product development has seen significant progress with launch of key AI-driven features on the product as well as a launch of our assistant platform, Skillist. Qjob saw an external customer count growth of 15% over quarter-on-quarter and the NPS continues to be the strong and best in the industry. The cash burn in this segment is as per our expectation and in line to the prior communication that we have made.

Coming to corporate updates, we closed Simpliance sale transaction. The transaction valued Simpliance at an enterprise value of INR120 crore against our original investment of INR4.5 crores for a 53% stake. I mean, this has contributed about INR53.5 crore to the profit before taxes in Q3. In line with our capital allocation policy, we have paid interim dividend of INR8 per share for FY ’23.

So, that was an overview of business. And now, I’ll pass on to Kamal. Kamal, to you.

Kamalpal Hoda — Chief Financial Officer

Thank you, Guru. I extend a very warm welcome to everyone who have logged on for my maiden analyst call. Let me now walk you through the Q3 financial performance. Our revenue in quarter three 4% compared to previous quarter and grew 21% on Y-on-Y basis. All these segments posted a decent top line growth. Our EBITDA in Q3 was down by 19% on a Y-on-Y basis to INR145 crores. This decline is due to the following reasons. Product-led business burn of INR30 crores, which is in line with our previous guidance, increase in SG&A cost by INR7 crores, contract renegotiations in IFMS business at the start of this financial year, impacting INR5 crores and investment in US Staffing business of INR3 crores. Our EBITDA in quarter three has grown up 8% on quarter-on-quarter basis, mainly due to growth in GTS and WFM segments.

Now to segment-wise updates starting with WFM. Segment revenue has grown by 4% quarter-on-quarter and 21% year-on year, driven majorly by General Staffing. GS business has added 56 new clients this quarter. As mentioned Guru, Manufacturing has been a bright spot with 50% of new clients coming from this sector. While the stress on IT Staffing continues, cost control measures coupled with productivity push and volume growth had the platform EBITDA grow by 8% quarter-on-quarter.

Coming to GTS, it has been the star performer this quarter. The segment has shown 6% revenue growth quarter-on-quarter and 20% year-on-year, mainly coming from BFSI and IT and ITeS. EBITDA for this segment has grown by 7% quarter-on-quarter and 3% Y-on-Y basis. Stable growth and healthy EBITDA margins from this platform reemphasizes our vision of being a full-fledged business services company.

Moving on to OAM, the platform registered a top line growth of 19% Y-on-Y and 6% Q-on-Q, due to continued demand in a few key sectors like BFSI, healthcare and manufacturing. Food business continues to grow as the education sector has opened up fully, reflecting growth in quarter-on-quarter. EBITDA Y-o-Y dipped due to key client contract renegotiation at the start of the financial year. In product-led business, in Q3, Monster was rebranded as foundit. This platform continues its cash burn as per our previous guidance. Receipts for foundit is up 40% on Y-on-Y basis.

Moving on, OCF stands at 47% of EBITDA, lower compared to previous quarter on account of few key collections moving into January due to year-end holidays in December. We see OCF coming back to our guidance of 70% on a full-year basis. During the current financial year, our gross debt has increased by 7% and it’s presently at INR632 crores. Our DSO has increased by one day during the quarter. Finance cost has gone up by 10% quarter-on-quarter on account of increased debt and rising interest rate scenario. We are confident of bringing this down in quarter four by reducing our average debt levels. Depreciation has gone up 3% quarter-on-quarter due to increase in lease rentals classified as depreciation under Ind AS 116. As part of corporate structure simplification, our divestment in Simpliance Technologies was completed in October 2022. Consolidated net profit of INR86 crores includes profit on sale of this investments to the tune of INR53 crores.

Income tax update. During the month of December 2022, the objections filed by us against the draft assessment order passed by the income tax department were heard by Dispute Resolution Panel, DRP and the same was disposed off. In line with the directives of the DRP, a final assessment order was passed by the Assessing Officer as on 30th January, 2023 for financial year ’17-’18. As an outcome of the order, we’ve received tax adjustment to the tune of INR198 crores, on which a tax liability of INR68 crores has been computed, which mainly pertains to two matters. That is 80JJAA deduction claim and depreciation on goodwill. Both these are industry-wide issues, not specific only to Quess and we intend to vigorously contest our position and we believe we can strongly defend through the legal process as defined under the act.

We are partnering with BCG to do a strategic review and planning exercise with a goal of sharpening our business and capital allocation priorities in order to drive strong and sustainable long-term value-creation. We expect this assignment to continue through the upcoming quarter four and Q1 of next year. Our focus for the next two quarters is going to be around reducing our SG&A cost, enhancing collections and bringing down DSO days and reducing our debt levels.

We thank you for all your continued support and I would like to now open the floor for questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Vidit Shah from IIFL Securities. Please go ahead.

Vidit Shah — IIFL Securities — Analyst

Hi, just one clarification on your opening comments. What was the growth in General Staffing headcount? Did you mention?

Guruprasad Srinivasan — Executive Director and Group CEO

Okay. Year-on-year General Staffing has increased by 25% year-on-year, that is stands at 379,000 as of 31st December.

Vidit Shah — IIFL Securities — Analyst

Got it. So, just a follow-up to that is, we continue to grow very significantly despite a higher base compared to some of our competitors and this has been observed quarter-after-quarter. So, just wanted to understand what stands us out versus the industry in the sense, are we able to price lower and win higher business given higher operating efficiencies in terms of core to associate and all of that, or is it just a better recruitment reach that allows us to grow much faster than the rest of the industry despite marketing?

Guruprasad Srinivasan — Executive Director and Group CEO

Sure, Vidit, so multiple things. One is of course the underlining for all of this is the kind of efficiency in hiring that we have built, the multiple channels that we have built over a period of time and Q3 was the most I would say the slowest quarter compared to last six quarters and even in such a situation, we were able to backfill about 36,000 people across group. The sheer capability comes in the kind of investments that we’ve made on our hiring platform.

So, whether it is channels that we have built or the kind of the efficiency and speed that we have built in hiring people plus the sheer reach of Quess across the geography, I mean throughout India. So, that definitely plays a role and how quicker and faster we can hire and onboard is something we are definitely ahead than anybody else in this segment. So, that sets us apart. Having said that, I mean, pricing is not always — pricing does not really I mean, to answer your question, it is not all about undermining the pricing, it’s the capability that we have built in terms of hiring. How we are able to differentiate ourselves in the market.

Lohit Bhatia — President – Workforce Management

Guru, if I may just add to that, the question which came in from Vidit. Hi, good morning, this is Lohit here. So, you asked a very pertinent question and which has been on every investor’s mind for the last I think couple of years now, since the last five, six years when our General Staffing became the number 1 in this segment and continues to grow. I think there are few investments over the years, which Quess has made and we continue to sharpen on that investment as far as our General Staffing India business is concerned.

One, clearly pointed out by Guru and Kamal also is sales. If you look at the number of sales, new wins in this year itself is 230. In Q3 itself, there have been 56 sales wins. Number 2, we’ve — every two to three years, we’ve looked at an industry segment, which would make us the market leader in the next two to three years. All of you being old time investors and tracking Quess would remember, till 2017, it used to be retail and consumer. In 2017, we had taken a very clear focus to be the number 1 in BFSI and today BFSI is over 100,000 people for us and our largest segment. And in the last 12 months, we’ve clearly focused on manufacturing and EMPI. Our growth in manufacturing segment and EMPI itself is 67% YTD in the last nine months itself and one of the fastest across all the segments that we work. So, sales clearly is one.

Number 2, which Guru again alluded to is our sourcing efficiency and the size of sourcing. See Quess has 96 offices across the country. It completely takes anybody else by storm when you have 450 recruiters out there and 96 offices. You couple that with the technology investments under our product-led business, namely the Qjobs, the Worq and the Dash, as they layer with our associates and our customers, we get a first-mover advantage and we get a massive addition to our operating size and our sourcing. And last but not the least, I think the processes. We spoke about five years ago that we made a small investment through Heptagon in process called POP, Paperless Onboarding Process.

Today, that is defined the entire industry itself. In less than seven minutes, anybody in any of the remote corners of the country gets onboarded to Quess and we don’t have dropout ratios because of that efficiency and that technology. And that is how we are able to add about 30,000 people and more every month as a gross add. So, I think these are the things which will continue to set us apart. Our teams continue to make these investments. As long as we keep bagging new customers, we’ll keep investing in technology, sourcing and sales.

Vidit Shah — IIFL Securities — Analyst

Okay, thanks. Thanks for the detailed clarification. The second question I had was on the Monster, if you could just clarify, out of the EBITDA loss of, let’s say, INR27 crores in 3Q in the product-led business segment, how much of this could be attributed to Monster?

Kamalpal Hoda — Chief Financial Officer

Kamal here. I will take this one. So, out of INR27 crores, INR25 crores pertains to foundit, public Monster.

Vidit Shah — IIFL Securities — Analyst

Sorry, yeah, got it. So, now that we’ve burnt a significant chunk of our externally this money in Monster — foundit, it’s been 3.5 [Phonetic] quarters that we’ve been doing this. What is the sense going forward? Are we close to raising more capital or is this likely to come to an end in the next couple of quarters and then, are we expecting it to breakeven soon?

Sekhar Garisa — Chief Executive Officer foundit

Hi, this is Sekhar here. We are well within our plan in terms of the operational burn on foundit. However, I would like to correct you that whatever external capital we’ve raised, we still have significant amount of capital in the bank and it is in line. We are well-capitalized with what we have in the bank for at least the next 18 months and the operational plan, both in terms of growth in sales and revenue as well as burn is in line with what we’ve shared earlier and as per the guidance shared earlier, we are expecting to breakeven by Q4 of next year.

Vidit Shah — IIFL Securities — Analyst

Okay. So, it’s fair to assume that this INR25-odd crores EBITDA loss or maybe a little lesser in cash burn due to ESOPs and all of that would continue for most of next year, as well?

Sekhar Garisa — Chief Executive Officer foundit

Would continue to go down and taper down to becoming a breakeven point by Q4 of next year.

Vidit Shah — IIFL Securities — Analyst

Okay, understood. And just one last point on the exceptional item and the tax claim that we’ve had. You mentioned the INR68 crore tax claim. Is it possible to break this down between how much is on account of the 80JJAA disallowance and how much on account of the depreciation on goodwill?

Kamalpal Hoda — Chief Financial Officer

Sure. Kamal, again. So, thanks for this question and let me answer this holistically because there’s also a question around contingent liability and the disclosure that we have done. So, this is for financial year ’17-’18 where we had gone through the DRP process. And as explained in my speech, what we are left now is only these two principal matters, which are again not specific to Quess. So, all matters pertaining to Quess got disposed off during the DRP hearings. The breakup of INR198 crores is INR68 crores on 80JJAA and INR121 crores, which is on depreciation of goodwill and the tax liability on that comes to INR68 crores. Against that, we’re sitting on a MAT credit of close to INR41 crores.

So, our contingent liability for this financial year comes to INR27 crores with, as per our previous guidance and as advised by our tax advisors, we had mentioned INR17 crores. So, the INR17 crores from a contingent liability disclosed earlier goes up to INR27 crores. What we disclosed in the financial statements, the contingent liability of INR74 crores, which includes contingent liability for financial year ’17-’18 and financial year ’18-’19, for which the DRP hearings are yet to commence, but going by order that we received for ’17-’18, we continue to — assume to continue to get the similar order for the next financial year, the contingent liability for the subsequent year is INR47 crores. So, both put together, is of INR74 crores, which we have disclosed in the financial statements.

Vidit Shah — IIFL Securities — Analyst

Okay. And we know what is the sense that you get for the subsequent financial years ’20-’21, ’21-’22 and even ’22-’23? I mean If the — if this assessment is — were to be upheld and even higher levels of court, what’s the tax outflow and maybe an expense to the P&L that one could likely see in the upcoming years?

Kamalpal Hoda — Chief Financial Officer

Sure. This is Kamal again. So, see for all subsequent financial years as of now since the assessments have not been done, we will not be able to quantify as to what we will get from the Income Tax Department. However, the settlements in our country is actually a multi-stage process. So, we’ve gone through the Assessing Officer, we’ve gone through the DRP. The next stage for us for this financial year for which we got the final order is we’re going to go through the tribunal process. They’re two positions, one of them is a settled Supreme Court position and we are very confident of receiving a positive order and the subsequent stage and the 80JJAA matter, it’s again something, which is an industry-wide matter and we believe that as per the advices from our tax consultants that we we have a strong merit in what positions we have taken.

To your question on cash outflow, we do not have any outflow exposure because considering the contingent liability, as well as the refunds that are outstanding with the department, even if for all subsequent years going up to the last financial year FY ’21-’22, the entire 80JJAA as well as depreciation of goodwill, if were to get base [Phonetic] out, we still have sufficient MAT credit and refunds spending. So, from a cash outflow perspective, we have zero exposure.

Vidit Shah — IIFL Securities — Analyst

Okay, got it. I’ll get back in queue. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Darren from Firth Investment Management. Please go ahead.

Darren Ng — Firth Investment Management — Analyst

I am Darren from Firth Investment. I have two questions. It’s mainly on the GTS segment. For GTS, may I ask what are the key drivers that led to the improvement in EBITDA margin for this quarter? And second question is, what the management outlook for the GTS EBITDA margin in financial year 2024 and 2025 as far as the assumption that are behind it? Thank you.

Guruprasad Srinivasan — Executive Director and Group CEO

Darren, can you please repeat the question?

Darren Ng — Firth Investment Management — Analyst

My first question is regarding the GTS segment. So, what were the key drivers that led to the improvement in EBITDA margin for this quarter?

Guruprasad Srinivasan — Executive Director and Group CEO

Okay. GTS as a platform, our EBITDA margin is 16%, that’s where we are currently at aggregate at a platform level. And the question is what are the drivers. Of course, under GTS we have three platform. The first one is Conneqt business services, which is Customer Lifecycle Management, domestic and then we have non-voice BPO and we have HRO platform. So, these are three businesses, which are stacked under GTS. Now domestic business operates at a average EBITDA margin of about between 14% to 15% and continues to have a fantastic outlook in terms of — we command second rank in terms of ranking in the business in the country. Our volumes have been substantially high. The growth in this business itself is I mean, we we are able to command at least about 20% year-on-year growth and sustain at that level.

When it comes to specific to non-voice BPO, what we focus is on the collection business, which is a kind of hybrid between digital and the physical collections of outstanding for various financial fintech institutes. There, we have been seeing a fantastic growth of about 29% year-on-year. And the third platform is HRO where we do the platform of payroll processing and outsourcing of payroll. There, payslips, number of payslips that we process is growing at 16.5% year-on-year. So again, a high-margin business, contributes close to about 20%-plus EBITDA margin. So, combination of all these three averages at 16% in terms of contribution.

Darren Ng — Firth Investment Management — Analyst

Understood. The second question [Speech Overlap], sorry.

Pinaki Kar — President – Global Technology Solutions

Hi, Darren, this is Pinaki Kar. Am I audible?

Operator

Sorry, but then your voice is coming little muffled. May I request you to speak through the handset.

Pinaki Kar — President – Global Technology Solutions

Yeah, can you hear me?

Operator

Yes, better than before. Thank you.

Guruprasad Srinivasan — Executive Director and Group CEO

Yes, Pinaki. Go ahead.

Pinaki Kar — President – Global Technology Solutions

Yeah. So, thanks, Guru. Just to add color to that. If you see the composition of the GTS business like this quarter, INR560 crore-odd, right. Out of that platform business is around INR90 crore, INR91 crore, which is at an essentially higher margin because there we have the marginal cost principles, right. So, more the volume increases because due to the platform nature of the thing, the incremental margin increases with incremental revenue. So, that can range from a high of 35% EBITDA for the HRO business to 25% to 28% for the insurtech platform, whereas the composition of the CLM business, there is around, currently, we do around INR330 crores of essentially voice business and the — INR230 crores of essentially voice business and rest are non-voice BPO, which are at higher-margin level. So, on the voice, it’s more of an efficiency gain, 14%, 15%, 16% within that range we keep depending on domestic versus international. International comes at — the North America business comes at 20% plus whereas the domestic comes at that kind of a range to give a blended mountain of that.

So, the bigger drivers here, to your question is, the more the volume in the platform business increases, obviously, the margin percentage goes up. The more from the — we see that F&A outsourcing or collection on the non-voice side of business increases, the operating margin goes up whereas the voice is more of an efficiency gain where we are the — actually the cost leaders in the industry, so overall, we get that land. And generally, you have seen over the last eight to 10 quarters, we have continued to increase margins and have to range between 16% to 18% at the — in that higher range. So, that’s the play that we have competition that we take and some quarter-wise fluctuation obviously is there based on like this quarter, we had a 37% year-on-year growth in the collection business, whereas rest of the business grew at 20% to 22% range. So, some fluctuation happens obviously in the margin based on that. Whereas in HRO platform, we had a 16.5% growth. In the quarter when HRO grows 25%, obviously the margin goes to that extent. Those were the main levers that were there. that.

Darren Ng — Firth Investment Management — Analyst

Got it, thank you. That’s very clear. So, I’ll just one final question on the WFM segment, I understand that Quess has been investing in the US Staffing business. I was wondering when is management looking to breakeven in that business segment? So as to start contributing as well as for the US Staffing business to start contributing to the margin?

Lohit Bhatia — President – Workforce Management

Hi, again, this is good morning, Lohit here. So, the US Staffing market was started by us in the summer of 2022. We’ve just had a little over two quarters of performance there. In the initial stage, up until the numbers that are in front of you, which is for the October-November-December Q3 financial year ’23, there is no revenue, which is booked and there is no revenue, which has proceeded into these numbers. However, as we have come into Q4, some of the customers which we had bagged in the last three months have started to convert into open orders and demands. Our units, which are delivery units are in India and Philippines have started to deliver against those. I’m glad to report to you that the first set of invoicing and billing has begun. But this would all fall into our results and our numbers for the Q4 period.

Like we mentioned in our last quarterly call, we are looking at a breakeven from this unit between this and the coming quarter, which would be the time by when our US operations would have seen one year. So, they see one year of operations around June of 2023. Before that we would attain our breakeven. You would know and we had spoken about this last time as well, the US Staffing market for WFM’s growth strategy is very, very integral and important for the medium-term, which is three to five years ahead of us, because not only it gives us large volume and revenue and top line, it also gives us a very healthy margin profile at the bottom line. So, we would start to see changing color in the new financial year as US starts to contribute to revenue streams.

I hope that answers.

Darren Ng — Firth Investment Management — Analyst

Yes, that’s helpful. Thank you so much. That’s all from my end.

Guruprasad Srinivasan — Executive Director and Group CEO

Thank you.

Operator

Thank you. [Operator Instructions] Next question is from the line of Amit Khetan from Laburnum Capital. Please go ahead. Amit, may I request you to unmute your line from your side and go ahead with your question, please.

Amit Khetan — Laburnum Capital — Analyst

Hi, can you hear me?

Operator

Yes.

Amit Khetan — Laburnum Capital — Analyst

Yeah, sorry. Good morning and thank you for the opportunity. Just two questions. One is on the Workforce Management, would it be possible to share the EBITDA split between the General Staffing, IT Staffing, overseas staffing, like you have for revenue, say for the nine-month period?

Lohit Bhatia — President – Workforce Management

Amit, we can send you the details over a one-on-one. However, having said that, at an EBITDA aggregate level, the General Staffing India business currently contributes 50% to the overall EBITDA of WFM, while balance 50% coming from Professional Staffing India, Professional Staffing International and others. Within international and India at the moment as you know, India IT is reeling under some degree of pressure. Hence, they are half of the contribution, which is coming from international.

I must also add at this moment, we are seeing a bit of a negative as we just explained in the last question, because of the investments made in US. US is yet to get to the point of breakeven. As that happens, international should further grow. And like has been mentioned in the last couple of calls, our focus at Quess and within WFM leadership team is that over a period of time on a healthy growing General Staffing, we should have General Staffing come down to about 40% whereas Professional Staffing and International Staffing take over the balance 60%, which is how the margin mix of WFM would change.

Amit Khetan — Laburnum Capital — Analyst

Got it. That’s very helpful. Second question was wanted a clarification on the IT issue. So, if I look at your listed competitor, Teamlease, right. They have — their income tax is pending only for FY ’22, while we have assessments pending from ’17, ’18 and which have been disallowed. Given that we are basically contesting on the same issues, why is it that our matter has been disallowed or while theirs has gone through?

Kamalpal Hoda — Chief Financial Officer

So, Kamal here. See, from an income tax point, comparing two companies, even you know sometimes comparing two assessment years becomes difficult because in income tax, each assessment year is since separately. We’ve gone through, like I explained in my previous answer also, we’ve gone through a multi-stage process here. So, for one of the years, the assessment is completed and we are going through the tribunal. For the second year, which is FY ’18-’19, we are into DRP and we expect the hearings to happen over period of next six months. And for ’19-’20, the assessment from the department itself has to get closed. I do not think that it is something to do with differentiation between how a competitor vis-a-vis, it’s just this is the queue that department takes each assessment year one after another.

Amit Khetan — Laburnum Capital — Analyst

Got it, got it. No, I was just wondering, because you know we have the same issue, right, Section 80JJAA and I understand if the goodwill part is a little different, but at least for this issue, we should have got the resolution like them.

Kamalpal Hoda — Chief Financial Officer

Yeah, so goodwill, depreciation on goodwill, again is something which is very clearly there in the law. The section allows depreciation on goodwill as a deductible expenditure up to financial year ’20-’21, which is where we have claimed it up to that year and subsequently, there was an amendment in the law which disallowed claiming this as a deduction, which we also done as an organization. The dispute areas for the periods prior where department is trying to do a retrospective application of an amendment, which came in financial year ’20-’21. And as explained, we are confident because there are settled judicial precedence going up to the Honorable Supreme Court level where such deductions have been allowed.

Amit Khetan — Laburnum Capital — Analyst

Got it. Thank you and all the best.

Kamalpal Hoda — Chief Financial Officer

Thank you, Amit.

Operator

Thank you. [Operator Instructions] Next question is from the line of Mukul Garg from Motilal Oswal. Please go ahead.

Mukul Garg — Motilal Oswal Financial Services Ltd. — Analyst

Hello. Yeah, I hope I’m audible.

Guruprasad Srinivasan — Executive Director and Group CEO

Yes, Mukul.

Mukul Garg — Motilal Oswal Financial Services Ltd. — Analyst

Yeah, so I had two questions. First for Guru and Lohit. Guru, you initially, in your initial commentary, you mentioned the demand environment kind of, being a bit, peaker. Can you do a bit of a crystal ball gazing in terms of how do you see the overall, especially for general staffing demand outlook in the very near-term, next three to six months? Will things be, continue to be a bit more muted or are you seeing signs of demand pickup or increased use of kind of general staffing setup being used by corporates across the country?

Guruprasad Srinivasan — Executive Director and Group CEO

Sure. So generally, the peak season for staffing start somewhere in the month of June and ends slightly later part of Diwali, which is, last year if you were to compare, Diwali used to be sometime, fell in sometime in second week or first week of November. And this time Diwali was early, so that contributed to little more quicker offloading for Q3. So, that’s one of the element which impacted the demand to come down. Second, the natural downsizing and the kind of hiring environment in itself, sentiment itself was down.

So again, the active industries were specifically, on BFSI, we did good set of hiring. Manufacturing, we actually, I mean our headcount is almost is crossing about 50,000 only in Manufacturing segment compared to previous year. FMCG and FMCD continue to grow. So, these were the segments, which really contributed to the kind of backfill of 35,000 headcount that we saw being you know offloaded and we were able to fulfill that through the backfills. Having said that, again, Q4 is I mean, the few segments, which I called out continues to stay active, that is Manufacturing and BFSI. With budget again reinforcing and reorienting investment into infrastructure, we see this particular segment continue to stay strong for coming year.

So, I mean there are large manufacturing centers which are being set-up. So, we are having early stage conversation with few set of customers. So, we are seeing good set of activity happening there. Barring that, logistic and supply chain was bit of a disappointment compared to Q1. I mean, there multiple ways of delivery and outsourcing that these companies are thinking and the captive last-mile delivery is slightly reducing. More of deployment are on to warehouses and sort centres. So that’s, that’s a bit of low demand, which is coming into. Telecom, of course, I think we will see little more getting active because 5G is going all over. So, that’s going to be another addition in the coming next two quarters.

Lohit, you want to add anything?

Lohit Bhatia — President – Workforce Management

Sure, Guru. Mukul, good question. And just to give you a color and Guru rightly explained, I think the highest point that we’ve seen during this year was in the month of August and September. At that point, the demand for just the general staffing India business had reached 26,000 open positions from all our customers put together. That kind of a demand we have never seen, obviously, you have to also agree that we are adding 300 customers every year. So, obviously, demand will keep growing.

Having said that, it has tapered off after that and like Guru rightly explained for October-November-December, I don’t want to repeat that. As we come into Q4 and we look at, let’s say January and the other months, we are looking at an open demand position of about 24,000, 25,000. So, if you were to say that where is it from a crystal ball [Technical Issues] Q4, it’s about 30%, 35% lower than the highest-ever. However, it continues to remain at historical highs if this itself continues to remain as an open position with us. That’s point number one. Point number two, and I think Guru very rightly mentioned about the budget and the capex spend again increased by 33%, the large mega manufacturing setups, which are coming in India and in those setups, we are expecting consolidated deals to be signed.

You must appreciate and I’m sure all of you agree to the fact that Quess is truly a business services entity. We can have people in a plant from the front gate with security services, manned guarding, surveillance security, we can give food services, we can provide janitorial services, we can provide assembly line workers, we can provide IT workers, we can provide all the HVAC and engineering support services and all. Today, the kind of conversations that our OAM and WFM teams are jointly doing are to bring customers, which wants mega suppliers and mega business services companies. And all of these services can be given under one situation. I think the medium-term, we are going to see a very different kind of deal flows happening, which is what we are within WFM, OAM and the other portfolio working extremely hard. At the right time, we would also let you know we are tailor-making these into products suites itself. But we would like to win a few deals before we start those announcements.

Mukul Garg — Motilal Oswal Financial Services Ltd. — Analyst

Great, very helpful. My second question was to Sekhar. Sekhar, two-part question. First on the business side, this quarter, most of your metrics, reported metrics were down versus last quarter, while you’re sales were up. How should we read them given that obviously the demand side has weakened considerably while supply side has obviously continued to ramp-up as people are let go? Should we expect a bit of a moderation in sales over the next few quarter, which down the line will have an impact on revenues or was the weakening, kind of queries or visits this quarter was a one-off?

Sekhar Garisa — Chief Executive Officer foundit

Thanks for the question. So, in terms of sales, I have addressed it in two parts. In terms of sales, we had a very good quarter. We grew by more than 40% year-on-year and more than 30% quarter-on-quarter. So, if the situation and externally was better, we could have done even higher numbers, but that is we are very, very aggressive numbers that we’ve achieved in this quarter. The impact of the slowdown is in some sectors and subsectors are still hiring robustly. The procurement cycles have become a little longer, that’s the only impact we are seeing as of now. But we fully expect based on what we see going forward as well that the sales momentum will continue.

On the candidate acquisition momentum our six-month candidate active base, which is the primary metric that the recruiters see before they buy continues to grow Q-on-Q. We had an impact because of the rebranding, because whatever organic strength you would have accumulated over years of running the domain will take two to three months to bounce back, so that’s a bit of a lull that you would have seen in some of the candidate traffic metrics. But the candidate active metric still continues to grow. We are closing on 18 million for the six-month active which is the highest-ever.

Going forward, we don’t expect the sales momentum to go down. All of our estimates in terms of sales growth, as well as our cost, are still very much in line with the guidance that we have provided. And if anything, we are doing much, much better, because as cost pressures come into the companies, they look to divert some of their spends from agency-based hiring to tool-based, which in fact should help some of us, some of our sales processes. So for us, from a — simply from founded perspective, we don’t expect too much of a deviation from what we we’ve put out so far.

On top of that, we also expect companies to look for more fresher hiring as well as more skill-based verifiable hiring. On both the fronts we have launched our platform for Zuno, which is doing very well. We’ve got 500 companies already using the platform and we also launched assessment platform, Skillit. So, from a product roadmap perspective, it’s very robust and all is good on foundit.

Mukul Garg — Motilal Oswal Financial Services Ltd. — Analyst

Right. And then just to kind of dig a bit deeper into the kind of cash burn expectations we have internally. How much of the fund, which you initially raised both from Quess, as well as external investors is there are right now which you kind of expect to last till Q4 of next fiscal? And were there any commitments, which we made to the investor while raising funds in terms of secondary follow-on fund raise or a public listing, which obviously is written into our agreements?

Guruprasad Srinivasan — Executive Director and Group CEO

Yeah. So, as you remember we’ve raised close to $20 million in the last round. At the end of the quarter, we still have more than INR100 crores left in the bank. You may also understand that this is a negative working capital business, it’s a prepaid business. So, as those sales numbers go up quarter-on-quarter, which is what has been happening for three quarters in succession. Our cash position will also be very positive and healthy.

So, we have more than INR100 crores still left in the bank, which in our current business plan projections is more than adequate for the next 18 months of operation and beyond as well, because starting Q4 of next year, we would be in, we would be breaking even and a positive EBITDA space. So, from that perspective, we’re extremely comfortable on cash. The decision on how we move on capitalization from here is completely dependent on what we want to do from accelerating our growth perspective but not mandated by any requirements from from operational cash for which we are adequately covered.

Mukul Garg — Motilal Oswal Financial Services Ltd. — Analyst

Right. So, there is no requirement for a fund raise in terms of timing?

Guruprasad Srinivasan — Executive Director and Group CEO

Not really. Based on what we have in the bank currently, we are comfortably placed.

Mukul Garg — Motilal Oswal Financial Services Ltd. — Analyst

Great. Thanks for taking my question. I’ll get back into the queue.

Operator

Thank you. Next question is from the line of Alok Deshpande from Nuvama. Please go ahead.

Alok Deshpande — Nuvama Wealth — Analyst

Yeah, thanks for the opportunity. Two questions. One, if you could give some sense on how is IT staffing environment currently? We know from what we hear from IT companies is that it’s sort of quiet subdued. But your sense on how IT staffing will probably pan out over the next couple of quarters, three quarters, that is one. And secondly, Lohit, about the US business, what do you think in a couple of years or three years’ time, what can be — where can we potentially reach in terms of revenue or EBITDA there?

Lohit Bhatia — President – Workforce Management

Okay. As far as the IT business is concerned, Alok, what you’ve been reading and what is being reported in the press is exactly what the scenario and the situation is there. As far as we watch our portfolio, the IT services business is down by about 60%. Now IT services business only takes care of, I mean, it only impacts big time in our RPO business and our permanent recruitment business. IT services in itself is not a very large play for us when it comes to our contract management and Quess IT Staffing Solutions business. So there the portfolio stability is very well hedged.

Now for the recruitment solutions, which is the permanent recruitment as well as RPO as well. You would remember in the last two quarters, we were saying that as we were getting the signs of a bit of a slowdown of lateral hires in the IT services companies, we had also started putting our efforts in non-IT as well as within IT, non-IT services. So, glad to report to you that from the bottom of where we were in IT services, we probably inched by about 5% to 10%. When I say bottomed, we were down 60%. So, we’ve just climbed 5% or 10% on that. However, non-IT business which at that point of time was barely 9% contribution to the entire business, today contributes about 26% of the business. So, non-IT is quickly galloping and taking space within the IT services.

We feel going ahead for two more quarters, which is Q4 and Q1, we should be watching this space very, very closely and continue to do what we are doing in the non-IT piece and strengthening our overall portfolio. So, that will continue to happen. Guru and Kamal, both mentioned on something related to cost. I think across the WFM portfolio, we are trying to see how can we become more cost-efficient and competitive. While we are one of the most cost-competitive and efficient organizations in this business, however, we would like to increase our efficiencies and productivity even further. So, across the entire portfolio that homework is also going on, which will also see some degree of improvements in Q4 and Q1.

Coming back to your question on US and where could we be three years from today. I’ll just give you a broad context, it’s very difficult to define what EBITDA might come three years from today, while our plans are for three to five years and which is why we’ve entered the market. So, India is staffing industry is now hovering around the 0.9% kind of a penetration, it has inched up from 0.6% in the last six years to 0.9%. I think the latest reports coming out of all the federation is hovering around this mark. It’s a $14 billion industry. The US market is a $160 billion industry. While India is growing at 21%, US is growing at 9% to 10%, so US still continues, at single-digits also continues to add one India staffing in its market every year.

The second data point. While lot of job losses are being spoken about and some of the large brands are also asking people to leave and it’s there in the public domain, the jobs opened for every American who’s qualified and is a white-collar IT worker is 1.8 times. That means for the number of candidates available in US to the number of jobs available, it’s the number of jobs are still 2 times of that. The third data point is that the business that we are getting into would do revenue [Indecipherable] of around $12,000 to $13,000 per associate per month and the market there does the gross margin of about 20%. So, if we are able to do between the 2,000 and 2,500 gross margin, I think you can very well anticipate and see what kind of numbers, both in terms of top line revenue and bottom line accretive, it could be towards the WFM platform.

I hope that helps with what was in your mind, Alok. Otherwise we can have a more in-depth one-on-one as well on this.

Alok Deshpande — Nuvama Wealth — Analyst

Sure. Sure.

Guruprasad Srinivasan — Executive Director and Group CEO

Just to add Alok, I think you also had a question on where is the demand that is coming from specific industry player and if I were to call out, it’s from auto, engineering, digital and 5G, telecom. So, these are the key active areas where we are doing technology hiring currently.

Alok Deshpande — Nuvama Wealth — Analyst

Sure, sure. Thanks, Lohit. Thanks, Guru. IT was very detailed. Lohit, just one clarification, you mentioned a part of is down 60%, now if you see the new, I mean, the way the businesses are classified now under various segments, so this 60% fall would come under the Professional Staffing sort of sub-segment or somewhere else?

Lohit Bhatia — President – Workforce Management

So, the 60% would come under the Professional Staffing, India’s sub sub-segment, which is recruitment services, which is lateral hirings, it’s permanent recruitment business, not the contract IT staffing business. Contract IT staffing business, as I mentioned, does not have a very high IT services exposure that continues to be reasonably well placed.

Alok Deshpande — Nuvama Wealth — Analyst

Okay. So, this is a small part of the 20% of the WFM if I read this correctly, right?

Lohit Bhatia — President – Workforce Management

That is right, but Alok, this is — permanent recruitment is a high-margin business. It’s a 30% gross margin business. So, when it shrinks, it creates a bit of issue across the margin profile. So, we’ve seen the worst of that. Now, we arising from there.

Alok Deshpande — Nuvama Wealth — Analyst

Sure. Understood. Thanks, Lohit. I’ll connect with you separately.

Lohit Bhatia — President – Workforce Management

Sure.

Operator

Thank you. I now hand the conference over to the management for closing comments.

Guruprasad Srinivasan — Executive Director and Group CEO

Thanks, Vidit. So, I take this opportunity to thank you all. It’s this community for your continued support and to us for our institution across. Going forward, our focus as always will continue to be on, focus on growth. We’ll not take our eyes off. Driving cost optimization across all platform. Corporate structure simplification and debt reduction. So, these are top priorities for us and thank you and thanks for joining this call. Look forward to interact with you all soon.

Operator

[Operator Closing Remarks]