Firstsource Solutions Ltd (NSE: FSL) Q1 2026 Earnings Call dated Jul. 30, 2025
Corporate Participants:
Unidentified Speaker
Ritesh Idnani — Managing Director and CEO
Dinesh Jain — Chief Financial Officer
Analysts:
Unidentified Participant
Girish Pai — Analyst
Shradha Agrawal — Analyst
Vibhor Singhal — Analyst
Jyoti Singh — Analyst
Dipesh Mehta — Analyst
Manik Taneja — Analyst
Rahul Jain — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to the Firstsource Solutions Limited Q1 FY ’26 earnings conference call. 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 0 on your touchtone phone. Please note that this conference is being recorded. On this call we have Mr. Ritesh Adnani, MD, and CEO and Mr. Dinesh Jain, CFO to provide an overview on company’s performance followed by Q and A.
Please note that some of these matters that we’ll discuss on this call, including the company’s business outlook, are forward looking and as such are subject to known and unknown risk. These uncertainties and risks are included, but not limited to what company has mentioned in its prospectus filed with SEBI and subsequent annual report that are available on its website.
I now hand the conference over to Mr. Ritesh Adnani. Thank you. And over to you sir.
Ritesh Idnani — Managing Director and CEO
Thank you. Hello everybody. Thank you for joining us today to discuss our financial results for the first quarter of FY26. Before I start with the discussion on our quarter performance, I would like to thank each one of our 34,495 first sourcers around the world whose passion and commitment to consistently deliver value to clients gave us a healthy start to FY26 and also keeps us on track to deliver another year of industry leading growth despite macroeconomic and geopolitical uncertainties. Our Q1 result reflects continued progress on our strategy refresh in the organization. Over the last seven quarters, our revenue grew 23.8% year on year and came in at rupees 22.2 billion.
In US dollar terms, the growth was 20.7% year on year and 3.6% quarter on quarter at 259 million US dollars in constant. Currency terms, our revenue grew 1.6% quarter. On quarter and 19.2% year on year. EBIT margin for the quarter was 11.3% up 10 basis points quarter on quarter and 30 basis points on a year. On year basis our net profit was rupees 1.7 billion and the diluted EPS for the quarter was rupees 2.4. This now marks seven consecutive quarters of sequential revenue growth and four consecutive quarters of margin expansion. Coming to the business highlights, let me start with deal wins. In Q1 we signed four large deals. As you are aware, we consider a deal with ACV over $5 million as a large deal.
Our total ACV intake in the quarter is amongst the highest over the last five quarters. Let me highlight a few of those deals. One of the leading dental health plans in the US selected FirstSource to transform their claims and contact center operations leveraging AI. FirstSource was also selected by one of the largest provider sponsored health plans to provide member contact services across multiple states and a leading regional medical center in the US chose FirstSource to provide consulting and RCM services to help them improve their billing and collections processes. During the quarter we also added 17 new logos.
This by far is the highest addition of new logos in a quarter over the last three years and along with continued traction in our large deal wins underlines the strength of our revamped go to market engine, our deep industry and functional capabilities and our ability to bring automation and AI into the mix that is helping us gain market share even. In an uncertain environment. What is more, the new logo addition is happening at a larger scale. The average deal size from the new logos has increased by 16% over the last four quarters. Our new client additions in Q1 include nine strategic logos. As I’ve stated in the past, we define a strategic logo as one where we see the potential for at least $5 million of annual revenue and we run a structured program to handhold and monitor such relationships to grow them at an accelerated pace. In fact, one of the large deals that we won in Q1 was from a strategic logo that we had added in Q3 of FY25.
I would also like to highlight that there has been a market shift in both the scale and profile of our large deal wins. Over the last five quarters. We have won deals that are multi tower sole source deals that have been proactively designed and deals that have nonlinear commercial constructs such as the BPAAS deal that we announced last quarter. To give you some more color, a combined ACV from such deals has increased by almost 5x and the average size of a large deal has increased by over 40% over this period. These deals have contributed meaningfully to the internal visibility of our long term growth markers and guide our optimism on sustaining top decile industry growth in FY26.
Despite the macro uncertainties, however, majority of them are not regular outsourcing deals but large transformative programs and hence have a staggered ramp up curve that is different from standard deals. Thus, their conversion into reported revenue happens over an extended period in time in a nonlinear manner. You may want to keep this in mind while building your annual revenue growth expectations. With that, let me now provide you a deep dive into our performance and outlook for each of our verticals starting with banking and financial services. In Q1 of FY26, our BFS vertical was flat quarter on quarter and grew 7% year on year in constant currency terms.
We added two new logos in this v ertical during the quarter. As I’ve highlighted earlier, we’ve invested over the last few quarters in strengthening our sales and solutions team in this vertical, especially in North America to broad based our presence in existing clients as well as expand our footprint into adjacent segments. We’re now taking a much wider capability portfolio to both clients and prospects and this has helped lower the macro dependency in the business. For example, while interest rates continue to remain elevated and remain an overhang in the mortgage market, our initiatives such as consulting led workshops to identify areas of cost takeout have helped us expand our market share especially amongst our monoliner customers.
We’re also partnering more closely with mid sized banks and fintech players as they step up investments in platform modernization and look to elevate the customer experience. In healthcare we saw a sequential growth of 2.3% and a year on year growth of 13.5%. We added eight new logos in this vertical and all our large deals in the quarter were in this vertical. Healthcare continues to be a strong and strategic growth vertical for us. Our broad execution footprint across the healthcare value chain and relationships with 12 of the top 15 health plans in the US put us in the leadership position to address our clients evolving needs.
While the sector is seeing regulatory and cost headwinds, client decision making has been steady and deal ramp ups are on track. We remain confident of an accelerating growth trajectory in this vertical supported by the visibility from recent large deal wins. Our CMT vertical delivered 6% growth quarter on quarter and 18% growth year on year in constant currency. We added seven new logos in Q1. This remains one of our fastest growing segments and driven by strong engagement with a lot of the technology companies in Silicon Valley across both our core offerings as well as newer non traditional solutions that support the integration of AI into their foundational models and their product ecosystems, we continue to see a well balanced pipeline there spanning both traditional media companies as well as Digital first and new age technology companies.
Lastly, coming to our diverse portfolio which comprises our retail and utilities business, we saw a 3% quarter on quarter decline in constant currency terms mainly due to seasonal softness in the utilities business. However, we see a healthy deal pipeline in this portfolio in both the retail and utilities verticals which should translate to a broad based growth in the coming q uarters From a geography perspective, North America grew at 5% quarter on quarter and 22% year on year in constant currency terms. We expect growth to remain healthy and broad based across our three core verticals. In North America, Europe was down 7% q uarter on quarter mainly due to seasonal s oftness in our UK centric utilities business. As we highlighted earlier, macroeconomic softness and regulatory changes in the UK have led to many clients to accelerate their shifts towards offshore and nearshore delivery locations over the last few quarters. We believe that a large part of this transition is now behind us and we expect the optical growth to normalize from Q2 onwards. While decision making has been elongated in the broader market, our pitch for transformational programs and nearshore delivery capabilities are resonating well with clients and prospects in the region. We added 17 new logos in Q1 and exited the quarter with a well qualified deal pipeline, the highest in our history.
Australia continues to perform well with strong growth on the back of ramp up deals. Ramp up in deals that we won in FY25. Overall we remain optimistic about our trajectory in this region. On the people front we had a closing headcount of 34,495 associates which is a decline of 156 versus the last quarter. We continue to ride shore our delivery headcount with close to 80% of gross hires at offshore and nearshore locations. In Q1 our trailing 12 month attrition rate declined further to 28.9% which translates to almost a 13 percentage point decline over the last 8 quarters.
I’m also proud to share that FirstSource was ranked amongst India’s top 100 best companies to work for in 2025 by the Great Place to Work and was also named Amongst the top 100 inspiring workplaces both in the US and UK. We were also named amongst the top 3 Indian employers in the UK by Grant Thornton. PERSOS also continues to be positively recognized by leading analysts for delivering strong client value and driving innovation through technology led solutions in our focus markets. Everest Group ranked us Amongst the top 25bps companies globally but more importantly recognized us as the fastest growing on an organic revenue basis.
ISG also featured us in the booming 15 based on the annual value of commercial contracts awarded over the last 12 months. Now for the third consecutive quarter. On the ESG front we achieved an A score in the Supplier engagement assessment from CDP. Earlier this month we also released our 2025 ESG report outlining our progress as well as our priorities across environmental, social and governance dimensions. As you may be aware we recently announced that we have signed an agreement to acquire Past Due Credit, a company headquartered in Scotland. The acquisition is subject to regulatory approvals and is expected to close in the current quarter.
As you know, we rank in the top three companies in the US debt collection market. However, our footprint in the UK debt collection market has been small. The proposed acquisition of PDC was done with an objective to plug this gap. The UK debt collection market has an addressable market market size of close to £2 billion and we believe it’s ready for digital disruption. PDC gives us a strong foothold to bring our technology and AI led digital collections capabilities to this market. They have strong relationships in the utilities, telecom, financial services and the public sector with minimal client overlap.
We see significant scope to take our larger service portfolio and our nearshore offshore delivery capabilities to PDC’s client base. I believe that PDC is a strong asset with deep client relationships. It has been growing its revenues at a double digit and has higher margins so it will be both margin accretive as well as EPS accretive. With that, let me now turn over the call to Dinesh to give you a detailed color on the quarterly and annual financials.
I will come back to talk about our progress on our strategic priorities as well as the outlook for FY26. Dinesh?
Dinesh Jain — Chief Financial Officer
Thank you Ritesh and hello everyone. Let me start by taking you through our quarterly financials. Revenue for Q1 came in at rupees 22.2 billion or US dollar 259 million. This implies a year on year growth of 23%, 23.8% in rupee term and 20.7% in dollar terms. In constant currency this translates to a year on year growth of 19.2%. Our operating profit stood at rupees 2.5 billion up 26.8% over Q1 FY25 and translate to a EBIT margin of 11.3% up 10bps sequentially and 30bps on the year on year basis which is within our guided band of 11.25% to 12%.
You will also notice a sharp 15% quarter on quarter jump in other operating costs. This is mainly due to the higher partners costs. As you are aware we are actively leveraging our partner ecosystem to pioneer new service offering and deliver values to the clients like the BPAJ deal we announced in Q4. So you will see part of our execution cost moving out of people cost to the other operating cost. Profit after tax came in at rupees 1.7 billion or 7.6% revenue for the quarter. Our profit after tax grew 25.2% year on year and 5.4% quarter on quarter on a reported basis.
The key highlight for the quarter was also our strong cash conversion. Our OCF to EBITDA was 102% highest in the last six quarter driven by improved working capital management. Normalization of CAPEX pushed FCF to PADD to also 196% again the highest in the last six quarters. Effective tax rate was 20.6% for Q1 which is within guided 19 to 20% range for FY26. DSO came down to 65 days in Q1 versus 70 days in the previous quarter. Our cash balance including Investment stood at Rs 3.1 billion at the end of the Q1. Our net debt stands at Rupees 11.2 billion as of 30 June 2025 versus 13.2 billion as of 31 March 2025 and Rupees 9.6 billion as of 30 June 2024.
We continue to invest in expanding our execution infrastructure in Q1. We added new seating capacities in Mumbai, Bangalore and Gurunga. Our hedge book as of 30th June 2025 was also as follows. We have coverage of GBP 88.5 million for the next 12 months with their average rate of 112 rupees to a pound and coverage of US$179 million with an average rate of 86.7 to the dollar. As Ritesh mentioned, we recently signed Share Purchase Agreement to acquire Part Q Credit Solutions in the uk. The acquisition is subject to FCA approval and should hopefully come through this course of this quarter.
Total consideration of GBP 22 million, which include the upfront payment that will be paid post the regulatory approval as well as the earnout that will be paid over next 12 months linked to the defined targets. This is all from my side .
I will hand over back to Ritesh for talk about the strategic priorities and outlook. Ritesh.
Ritesh Idnani — Managing Director and CEO
Thank you Dinesh. As you are well aware, enterprises today are navigating through twin challenges of a significantly elevated level of uncertainty in the global economic and geopolitical environment and a concurrent technology disruption that’s fundamentally altering how businesses operate, compete and create value. This convergence of unpredictability and transformation requires us to rethink traditional models, accelerate innovation cycles and build more agile operating structures. The UNBPO playbook that we introduced earlier this year is our blueprint of how the new order is taking shape and how we are preparing ourselves to succeed in it. UNBPO is not just about bringing Genai or agentic AI into our solutions and services.
Rather, it is a reimagination of the entire business model from every angle. The UNBPO approach blurs the line between services and software and creates the services as a software paradigm as technology gets infused in all parts of the services ecosystem through modular platforms, automation and AI driven workflows often delivered through nonlinear commercial constructs. From an addressable market perspective, services and software can no longer be seen as distinct buying categories. In fact, a leading research analyst, HfS, estimates the services as a software market as a 1.5 trillion. We are already putting this model into action. For instance, for a health plan in.
The US we have implemented a Genai. Powered automation solution with claims decision agents and copilots to completely redefine the claims. Operations landscape for all of their lines. Of business including Medicare, Medicaid and Marketplace. This is estimated to drive a meaningful cost save over the deal term even as we shift towards an outcome based commercial model. One of the largest building societies in. The world has partnered with us to completely reimagine its banking and services operations, economic crime prevention and customer support covering over 16 core processes and 99 sub processes.
Our UNBPO approach to design scalable workflows using AI automation and analytics is aimed at improving the net promoter score as well as bringing savings of over 50% over the next three years. One of the core elements of UNBPO is the re engineering of talent sourcing and deployment models. Traditional markers like headcount addition as a lead indicator of business demand are becoming less relevant. An optimization of the employee pyramid as a margin lever is being redefined as AI agents and a gig workforce get co deployed along with human agents and contract commercials shift from billing from time.
To output or outcome based structures. The recruitment process itself, which has historically been manual, time consuming and has high administration costs, needs to be reimagined. We have automated the entire process for volume hiring from automating job posting and parsing of candidate applications to doing initial AI based interviews and AI based assessment. All resulting in improved efficiency while ensuring. A seamless experience for candidates and recruiters alike. The pilots have shown up to 50% reduction in the hiring cycle time which implies lower associated costs.
We plan to have more than 2/3 of our volume hiring through this process by March 2026. Another foundational tenet of UNBPO is the orchestration of strategic partnerships to co create unique value propositions and pioneer new service offerings. Unlike the traditional model that uses partnerships primarily to fill skill gaps, at firstsource, we recognized this early. You may recall one of my first hires after joining the company was a leader dedicated to drive technology partnerships across the organization.
Since then we have onboarded more than 50 strategic partners to augment our capabilities both within our focus verticals as well as our horizontal offerings. These include hyperscalers on one hand, two innovative startups who help solve specific pain points and business problems for our customers. A great example of how we are bringing this all together is the 50 million plus ACV BPaaS deal that we announced last quarter with a mid market U.S. health plan. This is a highly integrated solution where we are orchestrating partnerships with more than eight different vendors to deliver an end to end claims administration service.
These initiatives are just a few examples of how UNBPO is not just a concept but a live working model that is already delivering tangible outcomes for our customers. We are systematically rewiring the way value is created and delivered in our industry. Importantly, this is seeing a strong inbound interest from clients and prospects and many of whom have asked for follow up workshops with their C suite leadership teams to explore the tenets and assess their readiness for the same. Overall, I am pleased with the progress we are making on our agenda to build a resilient and durable business with industry leading growth.
Our large deal wins have now been three or more for the past five quarters. We are adding new logos at an accelerated pace and we continue to improve on the mining of our existing client portfolio. At the same time, we’ve been diligent in ensuring that we fund our investments. In go to market initiatives and capability. Expansion through an identified set of cost rationalization programs.
As you can now see, Q1 is the fourth straight quarter of sequential margin expansion. This gives us the confidence to raise our revenue guidance for FY 26 to 13 to 15% in constant currency. This does not include any contribution from past due credit solutions. Since we are still awaiting regulatory approvals for the transaction, we continue to see our FY26 EBIT margin in the 11.25% to 12% band in FY26.
This concludes our opening remarks and we can now open the floor for questions. Operator, over to you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and one on the touch zone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question Ladies and gentlemen, we’ll wait for a moment while the question queue. As happens, the first question is from the line of Girish Bhai from Bank of Baroda Capital Markets. Please go ahead.
Girish Pai
Yeah, thanks for the opportunity. Ritesh, this increase in guidance at the lower end from 12% to 13% was it because Q1 turned out to be better than what you expected or is it that you’re expecting the next nine months to be better than what you were anticipating like three months back?
Ritesh Idnani
So look, I think as we have stated in the past as well, our guidance is based on a clear line. Of sight that we have to the business over FY26 and when we raise. The lower end of the guidance, clearly the way we have tried to do. This is it’s based on having a. Very clear line of sight to the lower end of the guidance. And as you’re aware the upper end of the guidance is based on how things such as pipeline conversion etc play. Out over the guided period. Our guidance also does not include any changes in the macro environment. But at the same time as you’re. Also aware, while we are not commenting. On specific numbers directionally, we do expect that the guidance assumes an accelerated growth trajectory.
Girish Pai
Okay, how are demand conditions today compared to say three months back? Are they worse, better or broadly the same?
Ritesh Idnani
So look, on one hand the macro uncertainty as well as the geopolitical environment continues to play out. So it’s not that we are seeing anything different out there. So I think that’s been a constant pretty much over the last several quarters. However, I think the proposition that we. Are taking to the market continues to resonate. I think the fact that we are able to present differentiated propositions and now particularly on the back of the UN. BPO playbook, which is almost creating a reset of how processes and workflows are reimagined in every corporation is creating demand.
And I think that’s presenting opportunity to us. So just to give you a flavor, right. We think there is going to be duality in terms of how different players in the market might perceive the current environment. But at this stage for us, if I just look at the lag indicators as well as the lead indicators, if I take the outcomes for Q1, we obviously had a very good quarter from. A new logo addition standpoint, 17 new logos, of which nine were strategic logos. Which is for us an all time high, what that does do is it broadens our client base and gives us a very solid foundation for growth.
At the same time we exited the quarter with a pipeline which is the highest in our history. Which gives us again a very strong set of deals to bank on in. The quarters ahead as well. And that gives us comfort and confidence in terms of what we are seeing. In the environment, but more importantly in. Our ability to differentiate in what might be still an uncertain macroeconomic environment.
Girish Pai
Just two last questions. One is the billion dollar mark has been achieved already, at least from a run rate perspective. Any new targets that you want to set for yourself, that is the third question. Fourth question is salary hike? When is that going to happen? And the quantum of the hike, would it be similar to what you had in the previous years?
Ritesh Idnani
No. Thanks for that question, Girish. I think. Look, firstly, as you’re aware, we reached our billion dollar aspiration four quarters in advance of what we had publicly guided. For us, in some sense this is. A proof point that our strategy refresh. Is in the right direction. And personally for me the focus is. Really on building a consistent, predictable and a high growth business model so that. We create a future proof organization. At the same time, we keep reviewing. Our internal long term aspirations internally. And I’ll be sharing any updates with you in due course as we are. Ready to discuss this in public itself. So that’s comment one on the wage hikes itself. As you’re aware, different players have responded to this in the marketplace in a variety of ways. From our vantage point. We will be. Having the annual wage hike in two phases this year. The first phase will cover junior employees. And will be effective from July 1. We will cover the middle and senior management in the next phase that will be effective from October 1, 2025. As you know, we typically absorb the. Impact of wage hikes. So from a margin perspective, you should still see a sequential margin expansion through the year.
Girish Pai
So on just this wage hike part were the wage hikes in the previous years were given altogether at one shot on the 1st of July and therefore this year’s wage hike split in two quarters. Is that a little different?
Ritesh Idnani
So last year we gave the wage hike all at one shot in July, on July 1 itself. Prior to that there was a little bit of variability in terms of how we did it. And this year I think just given the environment and what we are seeing, we’re just being, you know, we are staggering it across two phases, across the entire organization itself.
Girish Pai
Okay, thank you very much. I’ll come back.
operator
Thank you. The next question is from the line of Shraddha Agarwal from AM Securities. Please go ahead.
Ritesh Idnani
Hi Riteshrada, could you, do you mind speaking up a little Louder. Your voice is a little muted.
Shradha Agrawal
Going forward.
Ritesh Idnani
Yeah, Shraddha, could you speak up? We can barely hear you.
Shradha Agrawal
Can you hear me now?
Ritesh Idnani
Much better.
Shradha Agrawal
Yeah. So congratulations on a steady quarter. Itish. Once again and two questions. First is on your acquisitions policy. So in less than two years of time frame that you’ve been around, we’ve seen you doing three acquisitions already. So what is our policy on acquisitions going forward? And secondly, given that we have wage hikes coming through in 2Q and 3Q, so what is our confidence level on achieving our margin guidance for the year, given that start to the year, at least on margin front, has been a little tepid?
Ritesh Idnani
Yeah, no, thank you for the question, Shraddha. Look, there’s no change in our inorganic thesis itself, right? We have a dedicated corporate development team that actively keeps looking for opportunities that will enhance our capabilities, assist us in furthering the depth and domain that we already have, and bring in process or analytics to add significant value to our existing clients. Right. At the same time, we’ve had a very strong preference for companies that will be EBIT and EPS accretive, like what you saw with pds, with pdc.
At the same time, there’s no defined frequency or targets in terms of number of acquisitions itself. Right. What I think is critical for us is we will not look to do acquisitions for revenue sake, but it has to have a very clear value to us either in terms of plugging a capability gap or giving us distribution access in our chosen markets itself. So just from that vantage point, that’s the way we are approaching the entire.
Acquisition side of the house. Your second part of the question was with the wage hikes, does it have any bearing in terms of margins? No, we continue to retain the margin band. As you’re aware, we have 37 clear drivers that are there in the business and we feel very good about the progress that we are making on the same. And we feel that these will continue to yield results in the quarters to come. So we feel comfortable retaining the margin. Guidance that we had of 11.25 to 12. And at the same time, if you go back a year ago, one of the comments that I had made was that we will have a 50 to 75 basis point margin improvement every year starting FY26. We still continue to believe in the same.
Shradha Agrawal
This is coming from the context that much of the offshore shift is already in our base now. So incrementally going into second half of the year and with investments continuing on the last deal ramp up that we have signed in FY25. So what are the main margin levers that we have to pull up margins from? From the one Q number that we have reported?
Ritesh Idnani
Yeah. So first and foremost, I mean, if you go back in time, look, we still think that the onsite to offshore shift is still an opportunity for us. I don’t think we are completely done then, but at the same time we are also continuing to put work on optimizing our sourcing and staffing strategies. We’re clearly looking at the employee pyramid and how we staff our teams as well as technology. AI and automation is something that we are looking proactively across the lifecycle of the engagement to drive further efficiencies. We are also looking at opportunities where we can centralize and automate and offshore roles where AI and agentic AI workflows can come into play.
We are also identified opportunities where we can do more for less and not add any additional headcount. So I think each of these levers. In themselves is a part of those. 37 margin drivers that we have and I think that in turn gives us confidence in terms of meeting the guidance that we have provided.
Shradha Agrawal
Great. Sure. Thank you. And all the best. Thank you.
Ritesh Idnani
Thank you. Thank you, Shraddha.
operator
Thank you. The next question is from the line of before Singha from Novama Equities. Please go ahead.
Vibhor Singhal
Yeah. Hi, thanks for taking my question and congrats on a solid quarter once again. Ritesh, two questions from my side. One is the banking vertical was a bit soft this quarter. I know you mentioned it in your opening remarks, but just to dig deeper into that, anything that you would call out, what are the conversations in the sector like? And that was the flattish quarter in. This was more like a quarterly operation. Secondly, just wanted to take your comments on the overall industry landscape that we are looking at right now, given the context that one of our large competitors was acquired by a European firm very recently in a mega billion dollar deal.
So I mean what exactly is the prospect that we are looking at? I mean a company acquiring a large competitor in terms of size is the genai thing is becoming more and more beneficial for the BPO industry and that is where we see the value. Anything that you can give a color in that context would be really helpful.
Ritesh Idnani
Thanks for those questions. Vibod. Let me start by addressing the question on the financial services side and then I’ll come to the industry landscape and what we’re seeing. So look at our financial services vertical as almost, you know, two different storylines, right? One, in terms of what played out in North America and one in terms of what, what played out in Europe. If you look at our Europe revenue contribution that actually declined quarter on quarter and some of that is because of the difficult and uncertain environment that’s been out there, which we have been consistently calling out.
The net effect of that is there’s been a rebalancing of some of the work between onshore to nearshore and offshore and we pretty much believe that we are at the tail end of that. So that obviously has created a deflationary effect if you will. On the revenue side. We feel very good actually about the pipeline that we see in Europe with the banks building societies as well as the fintechs. So actually we are exiting the quarter with a very strong pipeline in Europe. North America has actually been very resilient for us. We’ve seen success both in front office as well as back office work as well as some of the newer segments that we’ve been focusing and putting effort in.
At the same time we’ve also benefited from expanding our footprint in some of our collections only accounts which was a key focus in the cross sell upsell side to expand into other service lines. So again actually the pipeline in North America on the financial services side is. Pretty healthy and strong. So we think that this quarter is. I wouldn’t read too much into the numbers or the growth there. We feel good about industry landscape. I mean I won’t comment specifically about the transaction itself but what I think you should look at it is if anything else it’s validating what we have been calling out with the UNBPO playbook. The traditional boundaries between IT and operations are blurring. The traditional boundaries between front office and back office are blurring. And some one of the things that I talked about in my opening comments about the entire services as a software playbook.
I think it’s a. Things like these are probably validation of where the industry I think is headed for as well. However, it doesn’t change any of the competitive dynamics for us. Firstly, I think our positioning through what we are doing with UNBPO is very distinct. We’re not trying to become a systems integrator or replicate the traditional IT+BPO model. Our focus is actually on reimagining the entire operations and process value chain by bringing AI modular platforms, outcome based models together to transform how clients buy and. Consume capabilities from us. And we are going to our clients and prospects with this differentiated value proposition and they’re clearly liking it. Secondly, clients actually value agility and co creation areas that we can move much faster than larger players. Our right size is clearly one of our core competitive advantages and you can see that both in the number and nature of our recent deals. One of the final things I will make as a comment is I think we are in the classic innovators dilemma play. And if you go back in time from a history standpoint, large players tend to be reluctant to cannibalize, they tend to play on defense and they are slower to respond.
And we believe size does not matter as much as relevance does. And therefore this opportunity actually is well suited for players of our size where we have the right depth of domain, the technology contextualized to the domain, the ability to drive business outcomes, and the nimbleness, agility and scrappiness to move at speed to solve complex business problems for our clients. And I think therefore you will see maybe combinations of this sort almost as a defensive play to try and account for lack of revenue growth otherwise.
Vibhor Singhal
Got it, Got it. So basically, I mean, even if, let’s say a large IT services company is looking at acquiring a BPO business, you don’t see that they are combined offering of services plus a bpo, you don’t see that as a threat to the pure BPO model that we continue to maintain. Given the size that you’re looking at, is that the right understanding that you’re trying to convey?
Ritesh Idnani
I think yes, that’s absolutely correct. And I want to draw your attention to, I think a couple of industry reports that came out. So I think Everest published a report last year where they called out the fact that the companies that are growing the fastest in the operations space are the pure play BPO players, not the integrated IT plus BPO players. And a lot of it I think will come down to depth of domain. I actually don’t think that players who don’t have anything to stand on will also grow. So pure play BPO players who are everything to everybody and therefore nothing to anybody will also struggle.
But I think if you have a clear competitive moat which is on the back of depth of domain, and then you’re able to use technology which is very specific to the domain, I think there is a very clear proposition to continue to win business and differentiate yourself in the marketplace.
Vibhor Singhal
Got it, Got it. Just one last bit of piece, if I could just care for an explanation. The headcount. Just trying to wrap my head around the headcount reduction. So in this quarter we had basically the offshore percentage gets a jump up. We had good growth in the revenues, but at the same time the headcount actually came down. I mean, just trying to understand how these dynamics work. I mean, if we had a higher offshoring, the headcount reduction looks to be a bit off place. Anything that you would want to comment on or any trend that we can draw from this.
Ritesh Idnani
Actually, you know, one of the things that we’ve now been saying consistently for the last few quarters before is the fact that the causality between revenue and headcount is increasingly going to get lesser and lesser as you get into more and more nonlinear commercial constructs itself. So you’re going to start seeing that. And even with our numbers, if you look at our reported currency, in the last three quarters, the revenue has gone up, our headcount has more or less been in the 34,000 and some change. And some of that is a function of what I think is going to play out more and more as we sign up for deals which have a very different commercial construct specific to the quarter that went by.
Two things. One is you saw our CMT vertical grew at a fairly rapid pace. In fact, it was the fastest growing vertical for us in the quarter. And if you look at a lot of the work that we do out there, particularly with clients in Silicon Valley, several of those pieces of work draw on a gig sourcing model. So you don’t need to hire permanent headcount to deliver the capabilities that are there. And so you can get the revenue, but you don’t necessarily need headcount in the same correlation. So some of that also played out.
Vibhor Singhal
Got it. Great. Thank you so much for answering my questions and wish you all the best.
Ritesh Idnani
Thanks. Thanks Vipot.
operator
Thank you. The next question is from the line of Jyoti Singh from Ariant Capital. Please go ahead.
Jyoti Singh
Yeah, thank you for the opportunity. So, just wanted to understand, like you discussed, a bit more about unbeep business, so how your UNVP strategy and AI investment are translating into deal wins or margin improvement. And also going forward, like what percentage of revenue today is influenced by digital AI transformation deals? And how do you see this evolving in the next 12 to 18 months? And another on the client responding on AI led productivity modeling, CX and ad collection and are pricing model changing as a result?
Ritesh Idnani
Yeah, so thank you for those questions. Jyoti, let me maybe take a step back since this is the first time we’ve been talking about the UNVPO playbook in a larger sense. If you look at the traditional outsourcing model, which was labor arbitrage over the last 25 years, it was built for headcount scale. It was built for process, it was built for predictability, it was built for standard services. However, the world around us does not exist in the same fashion. That’s not what clients are expecting today. Today’s clients associate headcount is not value, location is not capability.
Process is not progress. And if you go with those as the fundamental shifts that are there and tech arbitrage usurping whatever labor arbitrage did over the last 25 years, that’s the radical mindset shift that we are hoping to impact through the UNBPO playbook itself. That’s why we feel this is an opportunity to rewrite the rules of an industry that has operated in a certain way for the last three decades. What are we seeing as a consequence of that? I think most organizations and enterprises that we deal with recognize the fact that they need to change and they need to change fast, especially in an environment which is, which is moving very rapidly.
Because they know that every industry, not just the IT and BPO sector, etc. Every industry is going through its own innovators dilemma moment. And they know that if they do not change, that could mean that they become increasingly lesser competitive itself. And I think that’s the opportunity and which is why we feel that the UNBPO playbook is receiving such wide traction in the marketplace. So your third question was related to the CX and collection services. One of the things that’s always held us in good stead, if you take our collections business as a case in point, has been the fact that it has been largely outcome based in terms of the commercial construct that we have clients place a certain amount of debt with us.
Our revenues are linked to the amount of debt that we are able to collect. So there is clear skin in the game. We are able to bring in AI and ML in our digital collections platform to improve the propensity to pay. And all of these as a commercial construct are very different than billing for time, which 75% of the IT and BPO industry still does on a time and material basis. Same on the CX side. Our view is that we can more than. Only about 30 to 35% of this industry is outsourced today. Our view is that over the next five years the percentage of outsourcing will go up, but it will happen in a nonlinear fashion.
And that I think gives us the opportunity to bring in disruption at scale and at the same time improve share of wallet.
Jyoti Singh
Okay, thank you sir.
operator
Thank you. The next question is from the line of Dipesh Mehta from MK Global.
Dipesh Mehta
Please go ahead yeah, thanks for the opportunity. Am I audible?
Ritesh Idnani
Yes, Dipesh, you are.
Dinesh Jain
Yeah. So a couple of questions. First about the margin guidance. If you can give us some sense about what are the puts and stake for lower end and upper end the way we expect trajectory to play out. What are the variables which you consider to give the range. Second thing is about the PDC acquisition. Now that acquisition operated significantly higher margin than ours. Just want to understand because we do have a sizable collection business, whether our margin profile will be, let’s say, identical in the collection business. And if, let’s say margins are different, what explain the margin difference and whether it is replicable into our business to have that expansion in the margin.
That is Second question, third question is about healthcare margin. Now your healthcare margin is maybe fairly low compared to, let’s say if I look your historical last 5, 10 year average kind of thing. If you can provide some sense about the expected trajectory improvement. I understand because of some of the investment, the deal likely to ramp up in the over period of time, but just to understand pace of acceleration because it may surprise us positively, sometimes, sometimes negatively. So just want to understand how one should understanding. Thanks.
Ritesh Idnani
Got it. No, thank you for those questions, Dipesh. So look, at any point in time, there are always various puts and takes in the quarter itself. So as we look at how the margin piece plays out. But as I mentioned earlier, you know, we’ve got about 37 broad margin drivers. That’s what we’re tracking very closely. You’ve seen over the last seven, eight quarters, our onshore offshore mix has moved fairly meaningfully. 80% of the incremental headcount that we are doing still is offshore and nearshore. And we still see continued opportunities for that number to improve. So that can be a continued opportunity from a margin perspective.
We are also continuing to rationalize some of our facilities, particularly as we move work away from nearshore and onshore to the offshore facilities itself. And as that does, it frees up some of the rentals and lease capabilities that are there. We’re also looking at some of our low margin and some of the accounts that might not have been yielding the right kind of margin profile to see if we can go out there and improve margins where appropriate. That’s helping. We are backfilling for any attrition in. A very intelligent fashion.
So we are not going out there and just assuming that we can go out there and, and we should just go out there and automatically backfill, but instead relooking at every element from an OPS excellence standpoint. Whether it’s around the employee pyramid, the spans and then trying to see whether. There are opportunities, et cetera. So it’s a combination of all of these factors that play out at any point in time in any quarter and these I think give us a collective degree of comfort on expanding continue to. Expand the margins itself over the rest of the year. I didn’t get the second part of the question. I think your question was on collections. Right. Could you repeat that question if you don’t mind? Dipesh.
Dipesh Mehta
Yeah. So if I look to the PDC, the proposed acquisition, their margin profile is almost 2x of where we operate. I am referring to their last year performance. So question is two parts. First is whether our collection business operated similar margin profile. If answer is no, whether we can replicate the so what explained it as a superior margin of PDC and whether it is replicable.
Ritesh Idnani
Yeah. So firstly, you know, I don’t want to talk, you know, more about PDC just because A, we are still awaiting the regulatory approvals but what we will do is once the acquisition itself is close and we get the approval from the fca, I think we’ll come back and talk more specifics both in terms of the financials and what it would mean. So I would request that we hold off on that question till that point in time because I don’t think it’s fair for me to comment on something that’s still a transaction underway pending regulatory approval.
Dipesh Mehta
Yeah. But part of question you can answer whether our internal collection, we have a sizable collection business. Right. Focus on US market whether our margin profile would be similar.
Ritesh Idnani
It’s higher.
Dipesh Mehta
Understand. And maybe last part of the question, if you can answer for healthcare.
Ritesh Idnani
So I think one of the things to see with the healthcare business is particularly over the if you look at some of the wins that we’ve had, we’ve had a larger percentage of wins on the payer side of the business and historically the provider side of the. Business has had a higher margin profile. So some of the, some of the rebalancing of the portfolio that you’re seeing is probably what is causing the margin shifts quarter on quarter. But also as some of these deals are ramping up, there’s also the cost of growth that’s playing out as well for these deals.
So I think as this normalizes, you’ll see some of the margins also ticking up. I mean even take this quarter that went by all of our large deals happened in the healthcare portfolio. So there is going to be a cost of growth that plays out. But I think as we are looking. At this, some of those are the. Puts and takes that we’re looking at in a quarter to still continue to deliver margin expansion while accounting for some of the wins that play out.
Dipesh Mehta
Thank you Dipesh.
operator
Thank you. Ladies and gentlemen. In order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. The next question is from the line of Manik Taneja from Access Capital. Please go ahead.
Manik Taneja
I thank you for the opportunity. I hope I’m audible.
Ritesh Idnani
Yes. Yes, Manik.
Manik Taneja
So Ritesh, congratulations on the steady performance. I basically had question with regards to some of the recent industry developments wherein we’ve seen a couple of a few companies going private, some of them being acquired and given we’ve also been acquisitive in the recent year period. Just wanted to get your thoughts with regards to our MA strategy. Would we always look at smaller dug in acquisitions or given the opportunity that we have in international markets? All these assets are fairly cheap and given the multiples that we enjoy here in India. Would love to get your thoughts on this one.
Ritesh Idnani
So I think I kind of gave a little bit of a flavor of our approach towards ma. So it’s not. At the end of the day I’m very clear that we have to have a very strong organic growth business as well. M and A is incidental. It’s a dart on the board. If it sticks, great. That being said, what we have also said in terms of design principles for our inorganic thesis is we will not do acquisitions for revenue sake. Even if the multiples are low or very attractive or stuff like that. End of the day, we want to make sure that we are very prudent with our capital allocation.
Where we do acquisitions, it’s primarily for plugging capability gaps or for distribution access. And there we are continuously evaluating targets whether they are small tuck ins. They could also be larger in size. But we also want to be meaningful, that we also want to be prudent that we are doing stuff that fits in line with where we want to take the business itself. So it’s not an acquisition for acquisition sake?
Manik Taneja
Sure. The second one, while you called out 37 margin levers over the course of last 4 to 5 quarters, we’ve seen our on site offshore mix improve rapidly. But the margin expansion has been limited. Some of it is on account of investments that we continue to make. Would love to get your thoughts as to what’s the margin sensitivity to the one side offshore mix in our business?
Ritesh Idnani
No thanks Manik. Look, one Is we do expect that there is opportunity for the on site offshore mix to continue to improve. Even though we are sitting right now at about 80, 20 mix in terms of our headcount itself. I’m not getting into the specifics in terms of the sensitivity of a percentage point or what that moves. But what I can tell you is that a meaningful lever for us to unlock. It’s also you have to bear in mind last year for us was an investment year and that was something that we had very clearly called out as well.
And therefore you do not end up seeing the benefits of some of the on site to offshore mix reflected in the margins itself. But our view is that look, we’ve done done a substantial part of those investments. Some of the incremental stuff that’s there is around capability expansion, but again those are spread out. So we expect to meaningfully continue to expand margins, taking advantage of levers such as the onsite to offshore mix, taking advantage of what we are doing around, whether it’s around intelligent attrition, backfilling, rationalizing, spans, looking at automation, improving margins and low margin accounts, I think all of those levers and facilities, rationalization, each of these is kicking in and giving us benefits itself.
So which is why we feel comfortable with the guidance and continue to improve 50 to 75 basis points year on year.
Manik Taneja
Sure. Thank you. And all the rest of the future.
Ritesh Idnani
Thank you Manu.
operator
Thank you. The next question is from the line of Girish Bhai from Bob Capital Markets. Please go ahead.
Girish Pai
Yeah, thanks for the follow up opportunity. Just one question, Ritesh. You mentioned that headcount is no longer a lead indicator. You also mentioned that the deals that you won, they staggered and the conversion is going to happen over an extended period of time. So then for the external world, what are the things to look at to kind of try to guess or estimate how the growth would be or we’ll have to blindly depend on the guidance that the management is going to give.
Ritesh Idnani
So I think if you look at the parameters right, which are really a function of the health of the business. Itself. The guidance is obviously a very key indicator because again when we have provided a range out there, we’ve also been very clear to say that the lower end of the guidance is something that we have a very high order of certainty and visibility to. And the upper end of the guidance is linked to where we stand in. Pipeline, late stage of deals, likely order. Of conversion, those kinds of variables, et cetera. But that gives us at least that gives you to start with a starting point in terms of where the business is likely to net off.
And then you start looking at some of the other variables that are there which come into play. The size of the. If you look at the deal wins itself, the number of new logos we are adding, the cross sell upsell. That’s playing out because you’re starting to see a very clear movement in terms of the number of $1 million relationships, number of 5, 10, 20, $50 million relationships. So you know that as those things are playing out, that’s creating opportunity for potential growth and also increases the degree of confidence in the guidance itself. Right. So my sense is it’s really a combination of all of those things which eventually supplement what we are providing out. There, you know, in terms of numbers.
Girish Pai
Okay, thank you very much.
Ritesh Idnani
Thank you, Girish.
operator
Thank you. The next question is from the line of Rahul Jain from Dollar Capital. Please go ahead.
Rahul Jain
Hello. I hope my line is okay.
Ritesh Idnani
Yeah, Rahul, could you speak a little louder?
Rahul Jain
Yeah, yeah, yeah. Sorry for that. So my question specifically is that for the collection business, what I understand is that there is a larger component. So is this also relevant in this business or you think there is a lot of fixed component and outcome is just a smaller uptick on it. And the reason I’m asking this question is that if it.
Ritesh Idnani
I don’t want to comment on the specifics of the PDC business again, because we are in that pending regulatory approval period itself. So talking about the profile of the business and what characteristics it has may not be appropriate entirely. But what I would suffice to say is that, look, I think the way. The previous owners have built the business as well. There is an opportunity there where they’ve looked at how they can. Get more and more of their business. Also in an outcome basis itself. And at the same time, they’ve got. Some of the digital capabilities.
And I think those are areas where we can take the broader skill set that we have built as well as to the UK market. And that was actually one of the primary motivations for us to go there as well. So as you heard, I think somebody else asked the question, you know, our. Collections margin profile of our existing business before pdc, our margin profile is higher. So clearly, you know, that, you know, there could be some opportunities that could exist out there, but, you know, we have to get into the next phase and, you know, some of that will come into play once we complete the regulatory approval process.
Rahul Jain
But more generally, if you could just give color on the outcome base as part of the total pricing. Is there a way to look at the mix of pricing as a function of outcome based versus fixed base.
Ritesh Idnani
So what we are tracking today, you know, is. So let me start by saying more than 75% of the industry today builds on a time and material basis across. IT services and BPO. That’s the industry metric for us. More than 50% of our business comes from nonlinear commercial constructs. That’s the parallel to draw and that’s the metric that we are tracking to see how can we continue to take advantage of the leadership that we have in understanding nonlinear commercial constructs on the back of deep domain to continue to bolster and strengthen our leadership itself. But I want to give you those two markers to understand where the industry is at and where we are at relative to the industry.
Rahul Jain
Yeah, thanks for the input. I mean I just sorry to keep harping but what my understanding historically from our researchers is that the collection business were higher among our portfolio because of its function of the collection efficacy. But yes, I will take more input once you incorporate this entity. Thank you.
Ritesh Idnani
Thank you.
operator
Thank you very much ladies and gentlemen. We will take that as the last question. I would now like to hand the conference over to Mr. Ritesh Adnani for closing comments.
Ritesh Idnani
So firstly, thank you all for joining. The call and for your insightful questions. I just want to close with a few final comments. Our sales engine is working well. We had four large deal wins in Q1. That’s the fifth straight quarter of three or more deals. We added 17 new logos, our highest quarterly addition over the last three years. We are adding larger relationships and mining our existing relationships better. In the last four quarters we’ve added 41 clients with over a million dollars in revenue, 13 with over $5 million in revenue, four with over $10 million. Of revenue, and two with over $20 million in revenue.
The share of revenues from our top five as well as our top ten clients have come down by 5% and 8% respectively, reflecting the strength and the. Broad basing of the portfolio itself. Our longer term aspirations are intact despite the macro uncertainties. We have raised the lower end of our revenue growth guidance band. We believe that our FY26 revenue growth guidance of 13% to 15% should keep us in the top decile for the industry. We remain laser focused on improving our margins, continuing down the trajectory of having four consecutive quarters of margin expansion to. Improve our margins by more than 50. To 75 basis points each year and bring them in line with peers over the next three to four years.
This is all from our side and. We look forward to interacting with you. Again in the next quarter. Call. Thank you.
operator
Thank you. On behalf of Firstsource Solutions Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.