Eclerx Services Ltd

NSE:ECLERX

Earnings Call Transcript 2019-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the eClerx Services Limited Q1 FY '19 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rohitash Gupta from eClerx Services Limited. Thank you, and over to you, sir.

[Rohitash Gupta, Chief Financial Officer]

Thank you. Good evening, everyone, for joining eClerx earning call for the first fiscal quarter of FY '19 ending 30th June. In Q1, we saw sequential drop in dollar revenue by about 6% as most of the onetime projects executed in Q4 ended. On a Y-o-Y basis, which gives much more steady picture of our business, the dollar revenue of our onshore business grew by over 30% in Q1. On the other hand, the offshore revenue decreased on a reported basis, while it remains flattish once we exclude the revenues of cable clients that was rolled off at the end of last Q1. The overall quarterly Y-o-Y dollar revenue growth in Q1 was 1%, primarily due to onshore revenue growth. This Q1 was our third consecutive quarter with Y-o-Y USD revenue increase after 5 prior quarters of continuous Y-o-Y declines. We expect the trend of Y-o-Y dollar revenue increase to continue in the near term. INR operating revenues increased by 6% Y-o-Y, while decreased by 3% Q-o-Q to INR 3.519 billion. The operating margin for Q1 stood at INR 690 million, an increase of 2% sequentially. The operating margin in percentage terms increased by 90 bps sequentially, despite taking an impact of wage hike of about 200 bps and accommodating for lower dollar to INR hedge realization in last 8 quarters. Profit after tax in Q1 was at INR 602 million, witnessing a 7% decline since last quarter. In Q1 of FY '19, company has accounted a total of about INR 125 million under SEIS incentives, giving positive PAT impact of 3.3%. The SEIS accruals in Q1 almost completely offset the growth in Y-o-Y hedge realization rate. Company has also adopted new revenue standards of AS 115 since April 1 of this year. An impact due to adoption was assessed to be immaterial. We expect delivery and support costs to decrease in the near term due to several optimization initiatives in place, thus helping us to offset some impact of further drop in hedge realization rate on maturity in Q2 and also to adjust for a [flat] due to lesser SEIS accruals in Q2. Other income for the quarter increased by about INR 15 million due to revaluation and realized gain due to INR depreciation against USD. Other forward hedge book of about $148 million at average rate of INR 69.3, a rate that has increased by about [ 50% ] since last quarter, primarily due to recently booked hedges for FY '20 onwards.As I mentioned, operating margin percentage increased by 90 bps as delivery and support employee cost did not decrease commensurately to the revenue decline. And as we absorbed impacts of annual wage hikes, effective [indiscernible]. SG&A put together contributed to OPM increase of about 180 bps on sequential basis, while depreciation reduction also contributed to another 90 bps of OPM increase.We had about INR 6,067 million of cash and cash equivalent at the Q1 end, which was a very modest increase of about INR 65 million since Q4 end. The net operating cash flow has been negative this quarter due to increase in DSO in Q4 as well as Q1. Higher tax payouts, pending SEIS inflows and few large advanced payments, and we anticipate returning to normalcy in Q2.We have spent around INR 48 million on CapEx in Q1, which is lower by about INR 13 million from Q4 levels. We have spent about INR 12 million on various CSR activities during the quarter, and we are likely to see minor catch-up increase on CSR in near term. We have signed up 2 new facility leases, one in Fayetteville center for almost doubling our current capacity, and another one to consolidate our Pune footprint into a single building. The Pune consolidation will also end up increasing the total India seat count by about 8% to 9%, both due to increasing area being leased as well as due to space optimization effect.The Pune consolidation projected is likely to be EBITDA accretive from FY '20 onwards. The CapEx for both the initiatives put together will be about INR 300 million, and it will, therefore, increase over depreciation charge in FY '20. This CapEx will be in addition to our regular sustenance CapEx of about INR 50 million per quarter.The DSO was at 93 days in Q1, which has increased significantly over last couple of quarters. We are have also corrected the typo in the last Q4 deck. We have stated that Q4 DSO is 93 days instead of correct figure of 89 days. Most of the revenue concentration metrics have reverted to stable pre-Q4 levels as of short-term projects in CLX have completed in Q4. Most notable is the long-term increase of managed services and onshore revenues as part of our strategy, which have shown 300 bps and 700 bps of share increase in Q1 on Y-o-Y basis. We have added one more client in $5 million-plus category belonging to financial markets, and this is based on LTM revenues. While the number of clients between $0.5 million and $5 million based on LTM revenues have marginally increased by 1.The most significant go-live this quarter included a new customer interaction monitoring process for our Canadian cable client, followed by significant projection to Italian brands pertaining to e-commerce production. The consulting analytics business continued to grow in double digits on Y-o-Y basis. In terms of new logo wins, we have started working in Q1 with 4 new global 500 -- Global Fortune 500 clients, including a Canadian bank and 3 computer and electronics manufacturers from North America.At a service level of our newer service from customer operations vertical in India dispatch support for technicians continues to grow manyfold and is now covering about 30 different listed service providers to top 3 U.S. cable companies. Revenues of top 10 clients declined by about 5% Y-o-Y as we passed on some productivity gains to our continuous automation initiatives as well as a due to impact of cable client revenues that accrued in FY '18 Q1, but didn't accrue in this quarter.Emerging clients have shown a healthy increase of about 15% Y-o-Y constant currency growth. The emerging Y-o-Y growth rates as well as the dollar revenue from $0.5 million plus emerging clients have come down sequentially as most of the project revenue in Q4 came from these emerging clients.The company employees count has decreased Y-o-Y to 9,363, with most of the decrease coming from offshore delivery headcount. Our sales and business development staff counts, as well as support staff count has remained similar since the last quarter. The India attrition has increased sequentially, but decreased on Y-o-Y basis by about 20 bps to 14.6% in Q1.Our effective tax rate for Q1 has increased to about 31% as of our largest Pune unit came out of ancillary benefits early this year. While also one of our Mumbai affiliates has completed 5 years now.We are now revising our FY '19 onwards effective tax rate to be around 30%. There is typo in the deck and investor sheet related to constant currency revenue change this quarter and the correct number is decline of 5.7%. We will be releasing the updated pack to you after the call. With this, I hand over the call back for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Sandip Agarwal from Edelweiss.

[Sandip Kumar Agarwal, Vice President]

PD, I have a couple of questions. One, on the growth front, what you are seeing -- so this quarter, we understand that there is one-off kind of situation on the cable client, but what is your sense going forward although Rohitash made the comment that the scenario year-on-year growth quarter-on-quarter will improve. So can you give some indications since you people don't give any guidance, and it become extremely difficult to basically put a range of growth, but can you give some indication how do we see the business? What kind of growth we are talking about for FY '19? I'm not asking for a specific guidance but a direction at least. And secondly, on the margin front. I know you have always said that we are not much -- we are not seeing margins in the way others are looking, we are primarily looking at the absolutely EBIT growth. Now my question is do you maintain that stand that you know this year the EBIT growth will be substantially better than previous years? Or what direction can you give us there? And thirdly, do you think large part of our strategic decision-making has already been implemented in the business? And are we able to reap some benefits starting now? Or do you think still there is some more time, which we will invested?

[Priyadarshan D. Mundhra, Co]

Let me take your first and third questions and after I finish, I'll ask Rohitash to respond to the second question on margin. In terms of growth or what's happening with the business, I would say as Rohitash said, our onshore delivery work in increasing very, very quickly. Analytics being good growth. I think generally speaking, in all automation initiatives, we are seeing dollar traction with clients. I think the area where we see more revenue challenges is in the traditional offshore BPO business. So that's what's happening. I think as a result of lot of automation activity, it reduces the need for manual processing offshore and, therefore, the number of heads offshore and the consequent revenue comes down. Having said that, I think you're indicating that we expect this year as an FY '19 to give some year of growth for us on a top line basis. And I still think that, that's the right outlook. Now quarter-on-quarter, it's hard to predict and also I will say on the topic of guidance, we are still don't have specific idea where it will end up in the next quarter-over-quarter after that, so that's why we don't give a guidance. But I think generally speaking, we feel that the areas we have seen growth are the ones, which are existing for clients. I think that trend is still playing now. Now this is the response to your last question. Not all of these things have finished their journey in terms of migration plan, with automation opportunities, more onshore delivery. So I think things will -- it's part of a trend, which will continue in the next few quarter, but we should continue to see year-over-year dollar revenue growth. In terms of margin, I'll let Rohitash respond.

[Rohitash Gupta, Chief Financial Officer]

Hi, Sandip. So on the margin, there are two major factors playing here. The first one is around the hedge realization rates. If you take long-term view like Y-o-Y, then the hedge realization rate impact itself on the operating margin was about INR 12.5 crores on Y-o-Y basis. Obviously, we have some bit of a SEIS revenue to offset that impact. And the second impact is the whole onshore business growth. Again, if you see on Y-o-Y basis, 13% becoming almost 22%, 23%. And not only that, but also the upfront investment that we have to do in terms of building the management there and building the setup there. And also getting ready up for the second phase of expansion in Fayetteville I just described. All these things are bringing the margin down. Turning to when we will see the revival in a substantial way. It will depend on how much of offshore revenue growth we can generate via -- on the back of our onshore projects as well as the global delivery projects, which have mixed delivery across our multiple delivery centers. I think that is work in progress. And until that happens, the substantial increase in operating margin is unlikely.

[Sandip Kumar Agarwal, Vice President]

Okay. But just trying to understand, do you still maintain your stand that EBIT in absolute terms will grow quite substantially versus previous years?

[Rohitash Gupta, Chief Financial Officer]

So it is hard to say unless middle part of the year, we see some big projects, that obviously are currently in the various stages of discussion, come through. And also second is that if we are able to layer in hedges which are much more accretive now towards the end of the year, then Q4 can end very strong. But as we are currently booked at INR 68.7 rate, at current stage of booking, I don't think that lever is there, unless we do more hedging from now on for Q3, Q4.

[Operator]

[Operator Instructions] The next question is from the line of Sarvesh Gupta from Maximum Capital.

[Sarvesh Gupta]

So my first question is because of the rupee depreciation, what is the net benefit in this quarter on our bottom line?

[Rohitash Gupta, Chief Financial Officer]

So actually, the benefit is not very material in terms of spot movement because most of the revenue hedging, which happens, happens typically 12 to 18 months before a given quarter. So this quarter, almost $30 million to $35 million -- $30 million of revenue was converted at about INR 69.2. So that was the realized rate on the hedge revenue, which is almost 60%, 65% revenue of our total revenue. So does that answer your question?

[Sarvesh Gupta]

So you had booked it on your [bucket], INR 69.2 is it?

[Rohitash Gupta, Chief Financial Officer]

Correct. Because the pre-building rate -- spot rates would have been INR 64, INR 65 or something like that and you get some premiums. So that's how it becomes INR 68, INR 69.

[Sarvesh Gupta]

Understood. Also, can you talk about -- given that we continue to have almost 2/3 of our network in liquid cash, so can we expect the return of cash to the shareholders to continue like in previous years?

[Rohitash Gupta, Chief Financial Officer]

Yes. I think that we have announced in the last call as well as the stated direction in our Annual Report as well that we will like to distribute almost 50% of our cash in any given year, obviously over the long-term average basis. And if you remember, we have just completed buyback last quarter of about INR 258 crores. And we think that during some mix of dividends and buybacks to the extent it is allowed, we will continue to execute on that intent.

[Sarvesh Gupta]

Okay. Just, sir, finally, in the end, I don't -- I know that you don't give guidance, but any thoughts on terms of some sort of a double-digit EBIT growth in the coming quarters impact possible.

[Rohitash Gupta, Chief Financial Officer]

I think that is again dependent on the -- the previous question actually, which ties back to revenue growth and most notably, the offshore BPO revenue growth. And secondly, on how our ramp-ups in Fayetteville, et cetera play out to get that to some stable state. So if these 2 things happen and if the revenue booking -- or sorry, the hedge booking happens most substantially from now on at that active rate, we are likely to improve from here. But answering whether it will be double-digit is fairly tough and challenging at this point.

[Sarvesh Gupta]

So for the next year, I mean you are looking at what rate currently, sir?

[Rohitash Gupta, Chief Financial Officer]

So that we have disclosed in the packs. Let me just pull it out. So the FY '20 booking of about $58 million is at INR 70 to $1. And FY '21 is very minimal booking, but that's at INR 73.2.

[Operator]

The next question is from the line of Madhu Babu from Prabhudas Lilladher.

[Madhu Babu, IT Analyst]

Sir, within the BFS side, so I think -- so how are the things playing out between margin and capitals? Is it, I mean, because of the automation that incrementally the capitals are gaining share, I mean, how was the net new workflow?

[Priyadarshan D. Mundhra, Co]

Hi, this is PD. So I think actually when it comes to automation, I will generally say that firms like us have a little bit of an advantage in deploying robotics, and machine learning and things like that. Again, simply because they are bringing the same thing for multiple clients. So it allows us, perhaps, to more build experience and expertise in some of these areas. So if anything, I will say, automation put us [indiscernible] deliver for automation opportunities, put us to deliver for competitive advantage vis-a-vis the captive. Having said that, I want to reiterate my previous remarks that to the extent we automate possible process, it does result in revenue cannibalization because in our model, we still charge ultimately for manual work for most of the growth. So I think it's not an issue with respect to the captives, but it does put a near-term headwind to revenue growth.

[Madhu Babu, IT Analyst]

So what we could have got in a normal process maybe 3 years ago, that, are we really captivate -- will be able to repeat it using these books and all that? Is my understanding also, right? because the -- yes, the essential manpower has come down substantially.

[Priyadarshan D. Mundhra, Co]

Just to make myself clear. What I'm saying if there process has a potential of using RTA or machine learning or things like that. I think we actually can do a better job of implementing the new technology than the captives. But my point is that we do these things, because we are automating parts of the process, the total revenue for that growth comes down because there are less people required to do it.

[Madhu Babu, IT Analyst]

Yes. And what is the outlook in the 3 verticals, sir, for FY '19 overall in terms of the growth driver, BFS, digital and customer operations?

[Priyadarshan D. Mundhra, Co]

Well, I think we expect all 3 businesses to grow. Certainly, now, the cable business we had it half year last year, and we past disclosed, we lost a large client because of some corporate action. So this year, we don't have the same headwind, so we expect cable to grow. A lot of that growth may happen in our onshore delivery center, which is lower margin than the rest of the business. But I think from a top line perspective, cable should grow. On the digital side, we continue to see good demand for creative services, for analytics and for onshore consulting. So at the back of those 2 or 3 things, we expect digital to grow. And I think that would also drive the growth of our emerging accounts because to make sure the business has a large share of the emerging account portfolio. On the banking side also, I think we expect some growth there. I would say we feel that all 3 businesses should grow on a Y-o-Y basis. The magnitude will obviously differ, and it depends on individual outcomes on those 3 businesses, but we remain optimistic all 3 should grow this year.

[Madhu Babu, IT Analyst]

And onsite, at what level you expect it to stabilize as a percentage of revenue, sir? And whenever there's a drop in onsite utilization, how do we plan to buffer because ultimately we have quality base work, right, and we are ramping up the on-site headcount. So whenever there is a drop in the project, so how do to manage onsite utilization?

[Rohitash Gupta, Chief Financial Officer]

So I would just like to clarify. So when we say onshore, there are 2 distinct things actually. So one portion is the CLX business, which is part of digital. And then the other one is our own onshore centers that we have created ground up. For example, Fayetteville or the Austin analytics center, et cetera. So for the CLX business, it is project driven, all right. But most of the project-driven work is actually executed either through technology or a mix of technology and contractors. So it doesn't impact the utilization metrics so much. Coming to our native Fayetteville kind of centers. There the work is actually long terms. So we have to tackle the challenges, which are very similar to BPO business like attrition, et cetera, there as well but projects are quite long-term, very akin to BPO kind of landscape.

[Madhu Babu, IT Analyst]

And so the average rate for this quarter is coming around INR 70 even on that basis because of the SEIS revenues coming in the top line?

[Rohitash Gupta, Chief Financial Officer]

Yes, must be. Otherwise, the hedge realization rate as we had disclosed in the investor sheet is about INR 69.2 for this quarter on $13 million hedges that have matured.

[Operator]

[Operator Instructions] The next question is from the line of Pankaj Kapoor of JM Financial.

[Pankaj Kapoor]

Rohitash, last quarter, you had mentioned that the tax rate for FY '19 is likely to be somewhere around 25%, which, I guess, was factoring in some of the events coming out of [indiscernible]. So I'm just curious to understand what has led to within a quarter increasing it to 30%. And what really happened that you're not aware of in the last quarter.

[Rohitash Gupta, Chief Financial Officer]

Actually, Pankaj, it was not. It was not factoring those events. It was more of a blip for the things at the end of Q4. And the actual tax calculations, as you know, for a given quarter happen during the last tax payment date, which is typically around mid-June. So yes, those events were not factored.

[Pankaj Kapoor]

Okay. Fair enough. And just for the quarter, this time, what has led to the cash flow from operations turning up to be negative for us?

[Rohitash Gupta, Chief Financial Officer]

Well, I have given 2 or 3 examples already but just to give you one example. For example, the PBT will include SEIS income. But the cash flow of that came subsequent to the quarter end. So that could be one. Second, there's a slightly higher tax outflow as you just noted in the ETR also compared to last quarter. And there are certain large payments in advance, which are used the cash but subsequently being netted off post the quarter. And lastly, and most big item is actually the DSOs. So as you would have noted for last 2 quarters in -- consecutively, the DSOs have well [indiscernible]. And that has led to some bit of holdup of cash realization. And although some of it is already solved in July, but our original expectation was actually that these things will get solved before June, which didn't happen.

[Pankaj Kapoor]

Okay. So DSO, you expect the things to improve or as per the last -- let's say, you were mentioning -- you had mentioned that the levels could stay at the high level. So should we expect the DSOs will continue to be elevated for us, even in the coming -- the subsequent quarters?

[Rohitash Gupta, Chief Financial Officer]

No, I don't think so. Even given the current state, we don't think that the 90-plus DSOs are normal. We expect it in a very good case situation to be hitting around 85 days but normally, it should fluctuate between 85 days and 90 days.

[Pankaj Kapoor]

Okay. And given the last quarterly call, you had mentioned that the full year EBITDA margin of around what we had at around 26% or something, what we should be looking at on a medium-term basis to work with. And should [ there be ] quarter margins, which will significantly lower. So if I try to keep that similar level for FY '19 at 26%, 27%, we are talking about almost a 6 to 7 percentage point kind of expansion between first quarter to the -- in the next 3 quarters. So can you just help me what could the calculation of there -- some of the levers will play out? Or how much can we gain from those levers if the target is still holds.

[Rohitash Gupta, Chief Financial Officer]

So I already alluded to that in my opening remarks. So one example I gave is certain delivery and support structure optimization projects has been taken. And some of that will play out in next few quarters at best. That will give us some movement on the delivery and support costs compared to the Q1 level. And remember, Q1 has also the wage hike impact, so that also subsides through the year a little bit. And the biggest driver will be actually the offshore revenue growth, which as we discussed has been very flattish Y-o-Y, but all the signs are that growth should pick up.

[Pankaj Kapoor]

Is it fair to assume that both the top line growth and subsequently, the margin growth also is likely to be more in the second half? Or you expect that the acceleration could be delivered in the second quarter, itself? Obviously, the second quarter will be better given the low base that we had in 1Q, but do you think a sharp acceleration is something on a Y-o-Y basis we can notice more in the second half?

[Rohitash Gupta, Chief Financial Officer]

I mean, I would say yes to H2 being better than H1 but part of it will be feeling positive about the future, which you have -- which you don't have any solid grip on. But towards your comment for Q2, I can say that it shouldn't be very different in terms of margin outcomes.

[Operator]

[Operator Instructions] The next question is from the line Ruchi Burde from Bank of Baroda Capital Markets.

[Ruchi Burde, Research Analyst]

Most of my questions have been answered. Just wanted more clarity on the SEIS revenue -- SEIS incentive that we are giving, could you quantify this year, how -- I mean what amount of SEIS incentive should we be looking at? And this typically we booked to top line going ahead, but how much impact do you see?

[Rohitash Gupta, Chief Financial Officer]

So on a going forward basis, we are anticipating about 4 crores worth of SEIS incentives per quarter. So that's the kind of run rate expectation as of now going forward. And this is based on an accrual basis in other operating revenue line item. Yes, which you can call it operating revenue itself. I hope I answered the question.

[Ruchi Burde, Research Analyst]

Yes. And secondly, could you remind us about the cable client that you talked about? .

[Rohitash Gupta, Chief Financial Officer]

Yes. So that's an old event. I was just referring in the context of Y-o-Y growth. So this Q1 versus last Q1. So in last Q1, we had a cable client, which ended its business with us towards the end of Q1. So the full revenue of that client accrued in FY '18 Q1, which obviously was not present in FY '19 Q1. But that's an old event of last year.

[Ruchi Burde, Research Analyst]

And how do we see growth trajectory for top 10 clients from here onward?

[Rohitash Gupta, Chief Financial Officer]

So if you look at this time and again, because of this factor that I just discussed, the Y-o-Y growth looks a little muted than what it should be. If we exclude that particular client line that rolled off in FY '18 Q1 and reconstitute the top 10 then and top 10 now, I think the growth would have been 1% positive, a modest but still a positive, right? And I think that momentum should continue in the top 10 from Q2 onwards. So basically, they are expecting positive territory as opposed to negative territory that has been quite prevalent in the last few quarters on Y-o-Y basis.

[Ruchi Burde, Research Analyst]

And lastly, you talked about possibly consolidation in Pune. So now with that initiative, do you expect some cost, which might be running parallelly and which could be sitting in our books for the next couple of quarters.

[Rohitash Gupta, Chief Financial Officer]

Actually, our anticipation is that overlapping costs will be minimal and if any, will be in Q4. And from Q1 of next year onwards, we should be in positive [loan ]. So basically, our anticipation is that benefits will outweigh the increased rental because the area is more.

[Operator]

[Operator Instructions] The next question is from the line of Rahul Jain from Emkay Global.

[Rahul Jain, Senior Research Analyst]

So firstly, I want to understand is our positive commentary across segment is more driven by lack of negative rather than positive, which are driven by this because that is what we're not reflecting in to? Or is it to do with initial conversation with the customer or some pipelines, these are the factors that drives it?

[Priyadarshan D. Mundhra, Co]

So I can take that. I think you're right that positive outlook for the year is partly just lack of negative and I say more specific. I think in the last 2 financial years, there were a couple of events, specific events that affected us adversely. In terms of large drops in revenues from a couple of clients mostly due to corporate actins on their side. And we don't see that in FY '19 at least as of now, which leads us to be a little bit more optimistic for the year as a whole because I think in terms of pipeline, our pipeline is really as strong as what it was around the same time last year. So we believe that if we don't have negative events and we should continue to see revenue growth. So you're right. It is dedicated into the lack of large negatives.

[Rahul Jain, Senior Research Analyst]

Okay. And just to extension of that, so on the pipeline side, I think, any flavor you would give in terms of the bookings, in general, for us versus how it trends versus last year to get some sense on that. And secondly, we've been investing significantly on S&M, which is up like 20% last year and the run rate in Q1 is also good. So what are driving these? Are these more people or quality of investment that has gone into the resources or any other thing, which is driving this growth up? And how we see this translating into the areas of growth for us?

[Priyadarshan D. Mundhra, Co]

I'll let Rohitash respond to your second question on S&M. On your first question about bookings or new sales in our language. I think our new sales in [ Q2 ] are higher than the same new sales in Q1 last year. So, so far, to my earlier comments regarding both conversion as well as pipeline, these are stronger than they were last year. And I'll let Rohitash respond to your question on sales and marketing costs.

[Rohitash Gupta, Chief Financial Officer]

So the whole sales and marketing costs, including travel and salaries of immediate staff, is about 16% and has been there for the last 1 or 2 quarters also. So it's pretty stable, I would say.

[Rahul Jain, Senior Research Analyst]

So I mean to say the growth in the expense item, if you look at for the full year, it looks like a 15% kind of a growth on a 2%, 3% kind of rate top line change in last year, not for this quarter. So I was trying to correlate these to a full year growth kind of thought process.

[Rohitash Gupta, Chief Financial Officer]

Actually, most of the incentives for sales staff, including the account management staff are based on revenue outcomes. And so the variable pay is very, very tightly linked to the revenue outcomes and to the extent the revenue remained soft as we have seen in this quarter, I think that will be around this level of 16%. But if the revenue were to catch up, I think it will increase proportionately in absolute sense, which you're I think referring to.

[Rahul Jain, Senior Research Analyst]

Right. So this percentage should not give a much leverage to us even if we see a good growth for the year. This is what as a percentage should continue more for us?

[Rohitash Gupta, Chief Financial Officer]

Yes, because it's a proportion of revenue and most of the variable as well as even the headcount of people, which are required to cover that revenue our linearly linked almost. I think as a percentage, it should remain flattish. That's the recent outcome.

[Rahul Jain, Senior Research Analyst]

Okay. And lastly, if I may. Our depreciation number for the quarter was relatively lower. So what is the [indiscernible] on rate here? And I missed the CapEx comment, which you said in the opening remarks.

[Rohitash Gupta, Chief Financial Officer]

So on the depreciation, every year basically, as per the accounting standards, basically you take the written down value after the full year depreciation of last year. And then you do those fresh depreciation schedule on that. So Q1 is always lower. If you track back in the investors sheet, you will see the longer-term trend that Q1 has always been sharply less than the Q4. So that's point number one. Point number two, sorry, can you repeat what was the second question?

[Rahul Jain, Senior Research Analyst]

Just the CapEx. Yes.

[Rohitash Gupta, Chief Financial Officer]

Rate. So the subsequent CapEx is roughly about INR 5 crores a quarter. And that's what we anticipate to continue to rest of the quarter. The only additional commentary I made is that we have taken up these 2 new facility projects, one in U.S. and one in Pune. And that may cause additional onetime CapEx towards the end of this financial year of about INR 30 crores.

[Operator]

The next question is from the line of [ Adel Scheik], an individual investor.

[Unknown Attendee]

In terms of revenue, what should we expect from the new clients? I mean, what will be their contribution, the Canadian bank and the other 4?

[Priyadarshan D. Mundhra, Co]

I'll give a generic response. The new logo or our new client typically gives very minimal revenue in the first year. The only exception to that rule sometimes is a large cable or a banking client. And although we have those exceptions, but the 4 examples that I referred to, they were more in the smaller revenue zone. The only Canadian cable client that I referred to is probably our largest client right from the word go.

[Operator]

[Operator Instructions] There are no further questions. I now hand the conference over to the management for their closing comments.

[Rohitash Gupta, Chief Financial Officer]

Thank you, everyone, for joining us today on the Q1 call. Look forward to talking to you next quarter. Thank you.

[Operator]

Thank you. Ladies and gentlemen, on behalf of eClerx Services Limited, that concludes today's conference. Thank you for joining us, and you may now disconnect your lines. Thank you.