Quess Corp Ltd

NSE:QUESS

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Quess Corp Limited Q1 FY '24 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

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

[Vidit Shah, analyst]

Thank you, Nirav. Ladies and gentlemen, good morning, and thank you for joining us on the post conference -- post results conference call for Quess Corp. It's my pleasure to introduce the senior management team of Quess who are with here -- who are here with us today to discuss the results. We have Mr. Guruprasad Srinivasan, ED and Group CEO; Mr. Kamal Pal Hoda, Group CFO; Mr. Kushal Maheshwari, Head-Investor Relations and Strategic Finance; Mr. Lohit Bhatia, President, Workforce Management; Mr. Pinaki Kar, President, Global Technology Solutions; and Mr. Sekhar Garisa, President of Product Led businesses. We'll begin the call with opening remarks by the management team. And thereafter, we'll open the call for the Q&A session.

I would like to now hand over the call to Mr. Kushal Maheshwari to take proceedings forward. Thank you, and over to you, Kushal.

[Kushal Maheshwari, executive]

Thank you, Vidit. Good morning, everyone, and thank you for joining our Q1 FY '24 earnings call. The information, data and outlook shared by the management during the call is forward-looking, but subject to prevailing business conditions and government policy. All forward-looking statements are subject to economic growth or other risks faced by the company. Please refer to Slide #2 of investor presentation for the safe harbor clause.

With that safe harbor, I will now hand over the call to our group CEO, Mr. Guruprasad.

[Srinivasan Guruprasad, executive]

Thank you, Kushal. Very good morning to everyone, and thanks for joining us today. Our consolidated Q1 revenue stood at INR 4,600 crores, which grew by 16% year-on-year and 4% quarter-on-quarter. Quarter 1 performance was in line with our annual operating plan. Global Technology Solutions platform had an excellent quarter as it crossed INR 100 crores EBITDA benchmark. The platform had delivered consistent growth in past 2 years with quarterly EBITDA increasing from INR 64 crores in Q1 FY '22 to INR 100 crores in Q1 FY '23 -- FY '24, sorry. In Q1 FY '24, we added around 14,800 headcount and closed the quarter with total employee strength of over 5,25,000. This is an increase of about 12% year-on-year and 3% quarter-on-quarter.

Sourcing contributed to 27% of new hiring, signifying our strength in the staffing industry in terms of our sourcing capability. The business environment was varied across sectors with key sectors such as IT and FMCG witnessing a slowdown in hiring while sectors like BFSI, telecom, manufacturing performing well with over 3,000 headcount additions in both the sectors. Our [indiscernible] platform continued to demonstrate growth with each of them recording double-digit revenue growth in Q1. The consolidated EBITDA for the quarter was INR 154 crores, which was impacted by the slowdown in permanent hiring. We acquired about 183 new customers in Q1 quarter, which would also help us to generate the growth in coming quarters.

Now let me talk about -- specific about all the platforms. To begin with, Workforce Management platform, the headcount in our Workforce platform reached 4,04,000, a 15% year-on-year increase with revenue growth by 17% year-on-year and 5% quarter-on-quarter. Coming to specific, in General Staffing business, we added 14,000 headcount during the quarter, led by BFSI, manufacturing and telecom with addition of about 57 customers in the quarter. Our vertical focus strategy has aided in BFSI crossing 100,000 benchmark by associate headcount.

Manufacturing, one of our focus vertical contributed to 50% of our new sales spends. Manufacturing and Industrial is now the third largest vertical in staffing. And to note, it is also more than doubling in headcount in 2 years, to 50,000. 70% of all our new deals have come from consolidation in the market, either from local contractors or first-time clients creating additional production capacities. The per associate per month gross margin profile, also known as PAPM stayed at an average range of about INR 670 to INR 700. We have invested in core recruiters to take advantage of upcoming festive season in coming months as we are seeing the mandate push coming up and temporarily, to that extent, temporarily our core to associate ratio has a slight drop. It is 1:469. So we are getting prepared for an upcoming season.

IT staffing. The Indian IT staffing selection business saw global headwind during the quarter. IT staffing business was able to mitigate the impact of slowdown by focusing on high-value segment. However, the permanent staffing vertical registered a slowdown with revenue decline over 30% quarter-on-quarter and 73% year-on-year. Our North American business, we made an investment of INR 11 crores last year. While we have ongoing contracts on hand, it is taking longer gestation period than expected to deliver the project results. We are assessing the market condition basis which we will take decision on changes to be made in our North American office.

Moving on to GTS platform. GTS had an excellent quarter with 21% EBITDA growth year-on-year and 5% quarter-on-quarter. This was mainly on account of revenue realization from robust order book generated over prior quarters. Deep account mining and intense execution and excellence. The highlight of platform are as follows: ConneQt continues to maintain its momentum with order book of INR 75 crores of ACV closed during the quarter, which predicts well to sustain the revenue momentum in the coming quarters. The growth momentum in CLM business of Allsec continues to drive by excellent 29% year-on-year growth in North America market in Q1. Our non-voice BPM business grew by 31% year-on-year, and collection business grew 33% year-on-year and F&A transaction, finance and account transaction processing business grew 59% year-on-year. This is a testament to our continuous investment in digital tools and innovation to solve the customer problem.

In Platform business, the HRO business in Allsec strengthened its market leadership with 3.7 million payslips processed during the quarter. which is a strong quarter growth of 3.2%, while North America-based Insurtech Platform business under MFX had an excellent sequential growth, quarter-on-quarter growth of 18% on account of strong order book in preceding quarters as well.

Going forward, the focus remains as follows: Specific to GTS, sustaining and accelerating the momentum of non-voice BPO in ConneQt and operational excellence margin expansion, leveraging on growth momentum in North America, market specifically for Allsec CLM business and creating full-fledged health care practice around the current anchor clients. Launch of new HRO product and platform over next 2 quarters to consolidate the market leadership and market expansion.

Coming to our OAM platform, we have registered a top line growth of 16%, while EBITDA grew by 3% quarter-on-quarter. The IFM business saw a revenue growth of 16% year-on-year and 4% quarter-on-quarter with major section contributing to the growth are manufacturing, BFSI and public infra and -- well, IFMS also added about 20 new logos during the quarter. Our focus continues as follows: Health care, public infra and industrial. These verticals accounted for over 60% of sales in Q1 FY '24, and we continue to build an early wins.

Food vertical saw a growth -- gross margin improvement of 35% year-on-year on back of improved operational efficiency in addition to also we added 6 new contracts with an ACV of INR 30 crores during the quarter. Security business saw a marginal decline in headcount in Q1 as we continue to pursue profitable growth. Going forward, the business will focus more on margin improvement by increasing the market share in the existing cluster with specific focus on top 10 cities. Our telecom active infra business had a good quarter for [ Vedanta ] through which the revenue growth was 46% and EBITDA growth by 57% compared to Q1 FY '22 and '23. As part of the 5G rollout continues to gain momentum, we expect this business to grow well in coming quarters.

Moving to product-led business. Foundit had a flattish growth in revenue during the quarter, with most of the customers not actively hiring for the positions. International markets, which contribute 35% of our business has been much more adversely impacted. Further, customer satisfaction metrics like retention rates, CSAT and NPS have improved quarter-on-quarter by improvement in product and the candidate data. The candidate engagement metrics have shown significant improvement in the quarter. The job posting are up by 56% quarter-on-quarter. New registrations are up by 42% quarter-on-quarter, and traffic is up by 27% quarter-on-quarter. Substantial progress has been made in product development with several features launched, including the first-gen AI-driven feature subscription-based skilling program, et cetera.

Moving on to a couple of general updates across Quess. At Quess, we have always believed in driving positive change in society and creating a meaningful difference in lives of our associates. I'm happy to report among the associates that joined us in Q1, 23% was female who came onboard. 35% have entered into formal workforce for first time. Median average age of 25, providing an entry-level employment for youth. To improve the associate experience, we continue to invest in center of excellence, focus on digital onboarding, digital compliances with capacity to manage large volumes of transaction to support our future growth across the group. Additionally, to provide learning and development opportunity for our core employees, we have partnered with leading higher learning institutes such as XLRI, ISB and Harvard, catering to employee ranging from recruiters to CXO.

The executive certification program in recruitment and selection by XLRI, first of its kind of program jointly developed by Quess and XLRI to bolster the country's recruiting engine. General management and executive program by ISB and Harvard are geared towards building future leadership pipeline and accelerate the transformation of senior executives into the skill leaders. Thus ensuring Quest will always have industry-led talent in the leadership position.

I would like to conclude by saying that the revenue and EBITDA improvement in Q1 against -- I mean, in Q1, against the macroeconomic headwinds have once again underlined all -- I mean once again, underlined our all-weather model -- all-weather business model. And again, with my closing comment that Q1 overall has been in line to our plan.

So with that, I'll now hand over to Kamal to brief you on the financials.

[Kamalpal Hoda, executive]

Thank you, Guru. Good morning, everybody, and thank you for joining us today. I extend a very warm welcome to everyone who has logged into this call. I hope you have had a chance to look at the investor presentation and financial results for quarter 1 which is aligned with SEBI's LODR requirement as reviewed by the statutory auditors.

Let me walk you through the quarter's financial performance. Revenue stands at INR 4,600 crores, an increase of 16% year-on-year and 4% quarter-on-quarter. Our net headcount increased by 15,000 quarter-on-quarter. We saw a healthy growth across all our platforms during the quarter. EBITDA stood at INR 154 crores, a nominal growth of 1.3% and 0.4% year-on-year and quarter-on-quarter, respectively. A few call-outs on dip in margins will be covered in platform-wise update subsequently.

Our committed cash management and debt repayment continued in the quarter, and this has resulted in an improvement in our DSO days by 3 days year-on-year and 1 day quarter-on-quarter, which now stands at 56 days. Correspondingly, our gross debt position has come down by INR 14 crores to INR 517 crores. For this quarter, our PAT saw a good increase quarter-on-quarter by 60% to INR 48 crores, which is in line with our AOP. This is on account of volume growth across major businesses, reduction in finance costs due to lower average debt utilization and one-off tax provisions taken in the last quarter.

Year-on-year, our PAT saw a reduction by 29%. This is on account of higher finance costs due to rising interest rates throughout last year, slowdown in the permanent recruitment space as highlighted by Guru, and additional investments in North America.

Moving on to Platform-wise updates, Workforce Management. Revenue for Workforce Management stands at INR 3,221 crores, a strong growth of 17% year-on-year and 5% quarter-on-quarter. Corresponding EBITDA stands at INR 83 crores, a decline of 12% year-on-year and 3% quarter-on-quarter, respectively. Margin depletion is on account of the below reasons: Continued slowdown seen in the permanent recruitment space, and delays in conversion of pipeline accounts in North America.

Coming to GTS. Revenue for this platform stands at INR 563 crores, a strong growth of 11% year-on-year and a dip of 1% quarter-on-quarter. Corresponding EBITDA stands at INR 100 crores growth of 21% year-on-year and 5% quarter-on-quarter, respectively. GTS achieving INR 100 crores run rate per quarter is a milestone achieved for the first time. BFSI sector continues to drive growth in ConneQt non-voice business. Margin mix of Allsec business took a positive change in quarter due to growth in DBS International business. International margin in this business now contributes close to 50% from 44% a year ago.

Moving on to operating asset management. Revenue stands at INR 690 crores, a growth of 16% year-on-year and 1% quarter-on-quarter. Correspondingly, EBITDA stands at INR 31 crores, a growth of 1% year-on-year and 3% quarter-on-quarter, respectively. EBITDA grew by 3% quarter-on-quarter despite seasonal drop in telecom and food business due to tight control on IDC and operational efficiencies. We have rationalized certain low-margin customers across businesses and same is reflected in drop in headcount.

Product-led business. revenue stands at INR 126 crores in product-led business, a growth of 8% year-on-year and 3% quarter-on-quarter. Corresponding negative EBITDA stands at INR 26 crores, further decline of 7% year-on-year and 27% quarter-on-quarter. Losses during the quarter attributable mainly towards higher marketing spend and merit inflation. Excluding noncash ESOP costs, product-led business losses stands at INR 21 crores.

Moving on to some corporate updates. Merger update on ConneQt, MFX and Greenpiece. As part of board's approval of scheme of amalgamation dated 7th July 2021, Quess had filed for approval of scheme with NCLT. Honorable NCLT has admitted the petition and next date of hearing is 11 August 2023. We expect this transaction to complete within this financial year.

Income tax updates. There is no change in our provision from last quarter. As mentioned in our previous quarterly call, for the year '17/'18, we have completed the DRP proceedings and for residual matters in the year '17-'18, our appeal is at ITAT, and the hearings are expected to commence in the current month. For financials, '18, '19 our matters are at DRP stage and hearing is yet to complete. Honorable DRP is expected to pass the order on or before September 2023. Please note that there is no change in the contingent liability of INR 74 crores on account of such proceedings as disclosed in the last quarter.

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

[Operator]

[Operator Instructions] The first question is from [ Raghuram ] from our [indiscernible] Ventures.

[Unknown Analyst]

This is Raghuram here. I wanted to ask a specific question on the Allsec CLM business that you mentioned. If you could give us some ACV numbers on the new contracts won last quarter and this quarter, that would help in putting a perspective on what kind of growth can be possible there?

[Srinivasan Guruprasad, executive]

Sure. Thanks, Raghuram. This is Guru here. So, I mean, as part of my speech when I was alluding to, Allsec has delivered a 29% year-on-year growth specifically in North America market in Q1. With the new set of leadership change there and the kind of focus that we have put in the sales program, we are seeing good set of winds coming from the health care sector in North America. And in line with that, our delivery center is backed up in Manila in Philippines. We have expanded the number of seats to cater to the center. I mean, while we wouldn't call out the specific customer base, but largely, it belongs to the health care sector. And we have added about almost 500 seaters to deliver to the customer to substantiate the customer delivery from Manila. Pinaki, you want to add any?

[Pinaki Kar, executive]

Yes, sure. As Guru has just now told the first 6 months, that we have consistently grown at 29% in North America business. And that is over the last few quarters. From an ACV perspective, we can tell that we are well poised that we have almost doubled the capacity of Manila center. And that is after getting the business. So we can have sort of a figure from there. It's a mix seats, we had. We increased capacity by another 600 seats. So that 600 seat, we are going to consume in the ensuing quarters.

And more importantly, the processes that we are handling in that particular anchor clients that we are alluding to is only 1 part of the [ oxygen ] value chain. Obviously it's based on performance, if you perform consistently as we have been doing, we get like further segments of that value chain. So without taking anything completely definitely forward-looking, we know it's all based on performance. At the same time, whatever the momentum that we have created in terms of the percentage growth, we should be able to sustain that.

[Unknown Analyst]

Okay. Just an additional question on the non-America CLM. Obviously, ConneQt, you gave some ACV numbers and growing at nearly 30% kind of -- is that something that, obviously, that seems to be a very similar kind of a case from a North American perspective? But also domestic business, is there any sort of Naozer Dalal having come from ConneQt. Is there some kind of sort of outlook that you can provide there?

[Pinaki Kar, executive]

Sure. Naozer Dalal coming for ConneQt may not have a correlation there because you are reading there. It was mainly domestic business. That's why he was doing that. Now he has come to mostly international business and he is doing very well. But strategically, what we do is that most of the ConneQt business is domestic by the nature of the business. Whereas Allsec, the business mix as such, there are only a few customers which we have restricted to that [indiscernible] domestic business, which we continue to sustain and grow because once we have got those 2 businesses, it doesn't make much sense to have a like a dual company strategy and confuse the customers in the marketplace. And from the Allsec perspective, if you do a slice and dice in terms of the operating margin that we get, it is like [ HRO ] gives the maximum margin followed by the international CLM business then comes the domestic CLM business, which comes [ hard in the back ].

So from Naozer Dalal and Allsec perspective, it is also in our interest collectively to push more HRO business and more international business because of the vehicle for that. Without compromising on the clients that we have got in the domestic business, of course. But if you ask in terms of priority, that is not -- or growing that business to Allsec will not be our strategic priority, that is the priority for ConneQt.

[Srinivasan Guruprasad, executive]

Just to add, Raghuram, we strongly believe in creating the leadership within and there will be more such movements in future as we develop leaders, internal leaders, doesn't mean that the definition of that entity would change. So they will still continue to focus what that entity is supposed to be aligned to their plan. So but it will create more synergy in terms of [indiscernible].

[Pinaki Kar, executive]

That's what I told, right? So based on the NTT, the strategic plan is that for that entity, irrespective of the leader who is there, we'll focus on the strategy for that particular entity, what it is good for. And the 3-year, 5-year plan, we have further entity. And the internal movement of the leadership that we do, it is a credential leadership bench and giving opportunities to internal leaders based on the performance and obviously, the [indiscernible] growth that we have shown, even if they move to adjacent floors, obviously, being in that flavor but they will do what is right for the strategy for that particular entity without any overhang of what we have done in the past.

[Operator]

Sorry, Raghuram, I request you to join the queue again for the follow-up question. [Operator Instructions]. Next question is from the line of Arvind Dureja from Bright Financial Management. Arvind, may I request you to unmute your line from your side and go ahead with the question, please?

[Arvind Dureja, analyst]

My question is regarding your target of achieving 20% ROE by FY '25. How do you plan to achieve it? Because, what I see, it seems to be a distant reality. So what are your plans?

[Kamalpal Hoda, executive]

Thanks, Arvind. Kamal Desai. Thanks for this question. So we are -- on a 20% ROE for FY '25 was an aspiration that we expect for ourselves prior to when COVID had hit us. From where we are right now, we have 2, 3 businesses which have to fire full throttle for us to achieve that target. So this year is a very important year for us from foundit perspective, where we are expecting this business to come to a breakeven space by the exit of this financial year. We have very similar expectations of becoming breakeven and then turning EBITDA positive within this financial year for our North American investments. So these 2 businesses should give us an upside in terms of both our EBITDA as well as the ROE and we need to take next 2, 2.5 years to reach to that number that we had set a target for ourselves.

[Arvind Dureja, analyst]

And the second question is you guided from this quarter onwards, the losses in platform business will start coming down. But if I compare from quarter-to-quarter, the EBITDA losses have increased. So what is the reason?

[Kamalpal Hoda, executive]

So the guidance, Arvind, was to exit this financial year with a breakeven in the product-led business, and we continue to stand with that guidance. The increase in the burn in the current quarter is as per the plan. So we are spending on marketing. We are spending on product and we are spending on the right fit for our business. To specific questions on the product like business, I'll ask Sekhar.

[Sekhar Garisa, executive]

Thanks, Kamal. I think Kamal -- like Kamal articulated, the plan is firmly in place to be able to achieve breakeven by the time we exit this financial year. Despite the external circumstances, we are sticking to the plan and the Q1 performance has been very much in line with the plan. So from here onwards, we would see the numbers playing out in the subsequent quarters where the EBITDA burn would come down and leading to a breakeven in Q4, but obviously has significant impact on the group financials. As of now, we are firmly within the plan, and the plan takes us to breakeven by end of the year.

[Operator]

The next question is from the line of Abhishek Nayak from Hexagon Asset Management.

[Abhishek Nayak, analyst]

My questions are pertaining to the Workforce Management segment. So first, as a book keeping question. Could you just tell me the EBITDA contribution from the general staffing segment? And secondly, on the North America staffing, you had mentioned that you wanted to break even by first half of FY '24. And you mentioned also that there's a pipeline delay in that. So what's your opinion on that, will you be able to achieve that target?

[Srinivasan Guruprasad, executive]

Thank you, Abhishek for your question. I'll just guide you to Lohit, our President of Workforce Management. He'll give you an answer on that. Lohit, over to you.

[Lohit Bhatia, executive]

The first part of your question is what's the contribution in this from the General Staffing India business that hovers around the 55% mark. General staffing during this period has done slightly better. And obviously, the North America burn has contributed to a slight decline in the international contribution and hence, general staffing from a near 50% contribution in EBITDA has inched upwards to about 55%. So that's your first part of the question.

So your second part of the question, as we had said in the previous calls as well, in the previous quarters as well, we want to guide towards a breakeven by the time we are exiting first half of the year. And as Guru also explained in his commentary and so did Kamal, by the time we are in the Q3, we should start seeing some positive trend. Just to give you some snippets of where we've reached in North America. We have 8 active large clients we're working with. We have 80 mandates and positions, which are already with us and these are margin accretive positions, all of them. We have 5 on boards, which are already with the team as far as the U.S. operations is concerned, and we are gearing up our delivery and our sales in such a manner that we are able to consistently add to that kitty of onboards and performance on a month-to-month basis.

[Abhishek Nayak, analyst]

Okay. That's very helpful. And just a general question as such. So you have mentioned in your presentation, you expect to give away 33% of your FCF back to the shareholders. So do you have an internal target for FCF for this financial year that you might be able to share with us?

[Kamalpal Hoda, executive]

Abhishek. So we have in the past also guided that we believe to do a 70% OCF from all our businesses on a consolidated basis. And then there is a stated dividend policy which you just mentioned, which we have not changed. So we continue to be guided by the same policy.

[Operator]

[Operator Instructions] The next question is from the line of Mohit Mehra from Guardian Capital.

[Mohit Mehra, analyst]

So I think the previous participant kind of on this, but what exactly is the plan for the product-led business? Because I was also under the impression that losses would go down sequentially. So how much losses are we comfortable underwriting? And let's say, we are not able to break even by the end of [ financial year ] what happens then?

[Srinivasan Guruprasad, executive]

Thank you for your question. I'll ask Sekhar to answer that.

[Sekhar Garisa, executive]

Yes. With respect to product-led business, specifically on foundit. The cost structure remains more or less constant now. The revenue growth will be the one which will be contributing to us breaking even. In terms of what you see between Q4 and Q1, the business has a cyclicality built into it. from Q1 to Q4 over the last 3 years, we typically see business going up by 70%. So while you will see that sequentially, it's remaining where it was compared to last quarter. Compared to last year same quarter, we did grow by more than 30%, and that growth rate will continue, which will -- in the quarter going forward, will bring the losses down all the way down to Q4 when we are expecting to breakeven. So it's as per plan, the cost structure has more or less stabilized. The revenue is the one that is going to go up in the subsequent quarter, which will result in breakeven.

The other good part is now given the growth over the last couple of years where we grew on a CAGR basis more than 50%, the revenue is now at a place where even if there are short-term fits in terms of externalities, we will be able to absorb. We are a company with more than $23 million, $25 million of revenue. So we should be able to absorb any short-term external shocks that we might be able to see even in the next few quarters.

[Mohit Mehra, analyst]

Can you give any numbers to how much loss are you comfortable underwriting? And for example, even if the revenues go up, that our marketing expenses go up more sharply and then it is causing us to burn cash. So any number we should expect?

[Sekhar Garisa, executive]

So the guidance you've laid out for the quarter from Q1 to Q4, which is in the range of about INR 50 crores to INR 60 crores. And we are firmly within that range for the entire product led business as a vertical. And in terms of your question around will the marketing cost vary, the cost structure, like I said, is more or less stabilized. The only variation you would see is whether we will grow revenue or not. And we are firmly on the track. Like I said, year-on-year between last year's Q1 and this year's Q1, we've seen more than 30% growth even in this market, and we expect this to only become better.

[Operator]

[Operator Instructions] Next question is from the line of Rishikesh Oza from RoboCapital.

[Rishikesh Oza, analyst]

Sir, my first question is with respect to the Workforce Management business. Sir, there could you like give any outlook on what EBITDA margins can we see going ahead, they have gone down this quarter?

[Srinivasan Guruprasad, executive]

Lohit, would you take this question?

[Lohit Bhatia, executive]

Sure. Rishikesh, so if you notice for the last 4 quarters, we've been trending between the 2.6% to 2.8% of the margin profile as far as Workforce Management is concerned. If you look between the Q4 to Q1, the bridge primarily has -- the decline has primarily come from the merit increases that we've given to 90% of our staff on 1st of April. That's contributed about INR 2 crores. Decline in the recruitment business with both Kamal and Guru alluded to, we know what's happening with the IT services and its impact, it used to be a high-margin business, the permanent recruitment business in IT. That's another INR 2-odd crores. The U.S. operations a negative INR 1 crore, INR 1.5 crores to that extent. If you add all of this up and you factor for the growth in the general staffing business, which is just shade under a 2% EBITDA margin business, GS has contributed INR 5 crore positive on Q-on-Q. So the above line items have given the decline, GS has given the addition but GS comes at a lower EBITDA margin profile. It definitely gives us better cash position because it's a 77% collect and pay business, and we continue to grow there.

Now how does this change? There are 3 things which changed. One, merit increases have already happened, so that stays. The recruitment solutions has already declined and come to a flat trajectory hereafter while we don't see a marked improvement in the IT services part of the economy for the next 1 to 2 quarters, we do not see any further decline whatsoever impacting our margins any which ways. U.S., the current burn is at its highest point. The start of the year generally has a high burn because you also have to take care of the medical insurances and the benefits for the employees which are deployed there for the entire financial year. And hereafter, as I was explaining in the first question that we are also seeing revenue increase so that burn goes down.

We should first come back to our original trajectory of 2.8% where we were and then inch upwards to a 3%, and as U.S. and the other assets start to perform, which is IT starts to perform, we should be able to cross above the 3% mark. At every stage, we are very clear what needs to be done to get that additional 20 basis point upwards, and I think that's a plan which the entire leadership team and the management teams have.

[Srinivasan Guruprasad, executive]

In addition to that, Rishikesh, we are also -- I don't take any hard stab on our cost side, setting up our center of excellence, making it much more robust to bring our cost to serve down. So big initiatives on cost side as well. So a combination of both, it should lead us to come back to 2.8% level and then moving -- marching towards 3% across Workforce.

[Rishikesh Oza, analyst]

And would it be fair to say this would take like a couple of quarters more to go back to 2.8% and then to 3%?

[Srinivasan Guruprasad, executive]

That's right. So yes, it would take at least about 2 quarters to get back to 2.8%.

[Rishikesh Oza, analyst]

Okay. Okay. Also for your product-led business, are we saying that from next quarter onwards, our EBITDA losses should now trend down?

[Srinivasan Guruprasad, executive]

Yes, it will start trimming down from this quarter onwards. Like I said, there's a glide path for the losses to go down from Q2 all the way to Q4 where we expect to break even.

[Rishikesh Oza, analyst]

Okay. And by Q4, it should break even is what we expect, right?

[Srinivasan Guruprasad, executive]

That's right.

[Operator]

[Operator Instructions]. Next question is from the line of Vidit Shah from IIFL Securities.

[Vidit Shah, analyst]

My first question was just a clarification on the North America board. Did you say it was about INR 4.5 crores?

[Kamalpal Hoda, executive]

That's right, Vidit, that's for the current quarter, it is close to INR 4.5 crores.

[Vidit Shah, analyst]

So let's say, it was INR 3 crores in the previous quarter, which has gone up by INR 1.5 crores despite us starting to build and winning about 8 large customers. So what is really increase on the cost side? And just trying to understand the dynamics of the business there?

[Lohit Bhatia, executive]

So Kamal, if I could come in. Vidit, this was about 3.8% last quarter and it's close to the high 4s this time. So it's a delta of about INR 1 crore difference right there. This difference as I was just explaining in the previous question. At the start of the year, you see a bullet payment, which goes towards insurance and the burden cost in U.S. ranges between 16% to 19%. That has to be taken at the start of the year itself. Though for the rest of the year, you will have your payroll cost for your core employees and everything. This is not just employees, it's also the employees' medical plan and family plan. Now in the case of a new business, this is more evident and more visible because it's a new business, it's a small revenue stream.

To your point on revenue, yes, you're absolutely right. The 8 customers in the 80 positions and the 5 onboards that I was talking about in the question prior to that. that, yes, has started yielding revenues, which you will start seeing from the Q2 and Q3 onwards as that revenue picks up pace, and this cost does not repeat in the second quarter. You will see this trending downwards and downwards quarter-on-quarter.

[Vidit Shah, analyst]

Got it. How much revenue are we doing in North America currently?

[Lohit Bhatia, executive]

At the moment, about under $20,000.

[Vidit Shah, analyst]

Understood. All right. And the second one was, we've added our call recruiter team for the upcoming festive season. So just if you could give me an outlook on what you expect in the upcoming festive season, given that there's a slowdown in IT and FMCG. Do you expect these just to recover? Or do you just expect a boost in retail and telecom and BFSI?

[Unknown Executive]

Thank you, for asking that question and thanks for bringing the focus back from just 1 business that we are investing in from WFM, which is North America. And yes, while I agree, a INR 4 crore, INR 5 crore burn in a quarter does not auger well for our kind of margin profile, but that's a medium- to long-term strategy for which we are investing. But coming back to the core businesses in WFM which are today doing well. I'll just take a couple of very key points, which should not get lost in all the communication that we are doing. One, we've crossed the 400,000 mark. No staffing company ever in India has achieved this milestone. We are again the first to accomplish this milestone. The second is that we continue to grow at about 54,000 for the last 1 year and close to about 15,000 for this year.

Our general staffing business alone has added 57 logos and IT has added over 13 logos. The kind of business that we are doing with both the vertical strategy as well as the margin strategy. Today, BFSI is over 100,000, retail is over 80,000, M&I is over 50,000 and telecom is very close to 50,000. So what we are looking at is Q1 always starts slow and then you build for Q2 and Q3. At this stage, we have a conscious call. Do we continue to invest in our systems, our processes, our technology and governance and compliances for the future, readying ourselves to become 0.5 million and eventually 1 million by workforce in years to come. Or do we pause just to deliver 20 basis point or 25 basis points higher?

We feel we still have a lot of market share and a lot of opportunity in the market to capture. Guru allude to again 1 point which should not get lost in translation. He said in the last 12 months, we've added 177,000 people who got a UAN for the first time. So as the largest in this industry, we are also seeing the formalization of the economy take place and many large projects and large customers asking for mandates and customers. The workforce management business within that, the GS business itself has delivered a healthy EBITDA growth quarter-on-quarter as well as year-on-year. So we feel that this is the right time for us to continue investing in that business. And I hope that answers to your very specific point, what do we feel for the next 6 months. Retail definitely is 1 that we are betting on. Manufacturing and industrial continues to be a bet for not just a quarter or a season, it will be for the next 3 to 5 years. We definitely expect telecom and banking financial services, where obviously NBFCs equally joined the growth during the season. So those are the industry segments.

On IT, IT services is slow, but I must tell you and report to you that our staffing business under digital consulting products, GCCs and financial services is actually doing fairly well, and the high-margin, high-ticket niche mandates are coming from there. So IT services is the only one where we feel that the pain could continue for somewhat time.

[Vidit Shah, analyst]

Got it. And just a clarification on that. Given that there's been a -- like this year, the season is delayed by a month or so would we expect 2Q margins to remain at these levels and a pick up only from 3Q in the general staffing India business? Or should we start expecting a recovery in the stand-alone general staffing business from the next quarter or so?

[Unknown Executive]

General staffing per se margin profile doesn't really change. What happens with general staffing is that you have higher EBITDA per se, EBIT contribution, but not so much of EBITDA margin contribution. You are absolutely right. Last year, both Dussehra and Diwali were in October. This time, Diwali is in mid of November or so. The conversations for ramp-up is definitely delayed by 2 weeks. Earlier, those conversations on onboard start from July end. This time, we are expecting them to start from the extended weekend of Independence Day and thereafter. At the same time, we also feel that we might get an extended 1 month of the season itself. Last year, the season sharply truncated on 31st of October with both Dussehra and Diwali happening in the same month. This time, Dussehra is in October and Diwali is in November. So hopefully, we should get an extended 1 month of the season as well. So it's a mixed bag. Margins may not change because of general staffing. Margins have to change because of U.S., because of international and because of professional staffing. I hope that clarifies the 2 dynamics.

[Vidit Shah, analyst]

So I meant like the core to associate efficiency will start improving given the festive season and that's why.

[Unknown Executive]

Yes, absolutely. Absolutely. That's absolutely right.

[Vidit Shah, analyst]

Okay. Just one last one from me on the product led businesses. I understand Monster has been flattish for the last couple of quarters -- foundit, sorry. That is 35% of the overall revenue. We have Digicare in there, which also has not really shown any growth in revenue or margins. So could you share your view on that business or what the strategy is out there?

[Unknown Executive]

Sure. So Digicare has been almost flat. And if you -- I mean, our strategy is as part of the portfolio restructuring and the thing we are putting more management bandwidth to do a deeper review with the business and we are seeing a kind of -- this is a season -- I mean Q2 is a season. Generally Q2 and Q3, if you look at -- I mean, the Digicare business performs extremely well. And that's -- it is more of a cyclic business. I mean, we are seeing the kind of uptick coming in for Q2 and Q3 for this business.

[Operator]

Next question is from the line of Vikrant Gupta from ICICI Prudential.

[Vikrant Gupta, analyst]

Am I audible?

[Unknown Executive]

Yes.

[Vikrant Gupta, analyst]

So I had a question on the general staffing business within our Workforce Management vertical. Slightly longer term, so I think over the last maybe 4 or 5 years, we see that our staffing headcount has moved from 190,000 to today almost 400,000. And over the same period, we've also seen our core to associate ratios move up from maybe 300 to 500 almost. So good headcount growth and efficiency gains as well. So could you provide a sense of what has been our general staffing EBITDA specifically over this 4- to 5-year period? How has it moved? Because at the consol level, the number is probably INR 300 crores 4, 5 years back. Today, it's around INR 345 crores, and that obviously has IT staffing as well. So I just wanted a sense of how the general staffing EBITDA has moved over the last 4, 5 years, given the strong headcount growth and the efficiency gains that you have achieved on the core to associate ratio.

[Srinivasan Guruprasad, executive]

Sure. Vikrant, I do some high-level note on this and really, I think for long term, the kind of planning that we have, would be happy to take it offline as well. Just to give you a little background, I think this is the business which has been consistently delivering fantastic CAGR for us. 77% of our accounts are collect and pay our cash flows are far superior in this business. The way it has evolved over a period of time, slowly we are having large vertical focus that it is getting into. So as I alluded in my speech, BFSI alone has crossed 100,000 by headcount. Telecom -- I mean, manufacturing and industries have crossed almost about 50,000 by headcount. And we have FMCD and FMCG going close to about 80,000 by headcount.

So I mean, while we have all this marching towards 100,000 at a point, Quess in itself was about -- I mean when we went for IPO, we got share over 100,000. So I mean the way we are, every strategy for each of this platform has to change. For example, it starts from the way we hire, the way we structure, the way we onboard. So we are building those digital frameworks and technology platform to assist each of this. For example, sourcing for BFSI is very different than sourcing for manufacturing. So there's much deeper plan that we are building for ourselves to gear up to -- we had this thinking when we touched 200,000, we were thinking how do we handle 400,000. So there is a deep thought process that we have put against each of this platform. It is going to be more of a vertical focus that would come into over a period of time.

So with that note, I will get Lohit to add some more points, but I would prefer this to take it offline and take it Lohit.

[Lohit Bhatia, executive]

So Vikrant, that's a good question. And like Guru explained, I think we will have to take you through the numbers in detail. But just to let you know, between Q1 '19 to Q1 '24 that we are reporting today. The EBITDA from the GS business alone has grown about 225%. And we are almost 180% higher than the nearest next competitor on a quarter-on-quarter basis as far as EBITDA from this business is concerned. I think it is clearly reflective in the overall numbers. What hasn't changed for this industry, and I think we have to be cognizant of that fact is that the gross margin at a PAPM level continues to remain in that INR 700 plus/minus INR 20 or INR 25 on either side.

The headline number has not changed. But what has changed for us is volume. What has changed for us is our cost, which we've kept it under check. And the GS business delivers close to 2/3 EBITDA from the overall gross margin that it makes. So at that run rate of delivering 2/3 of EBITDA from the gross margin that it makes increasing gross margin even while at this moment, the industry is not ready to accept a higher price -- per unit price, I think we are still able to deliver higher EBITDA quarter-on-quarter and year-on-year.

Now the other question on anybody's mind could be that will this industry ever accept a higher price. I think as long as consolidation does not completely take place in this industry, as long as more players do not become formal. And when I say formal, the reporting standards have to be same like or as good as a listed company, the audits, the governance, the compliances and everything has to become as good as any of the listed companies. I think that is where probably the industry will start to see a slight bit of a price increase. And eventually should start seeing improvement in that ratio as well. But today, if you were to ask me a question, do I plan based on a higher gross margin platform. No, plans are not based on that. Plans are based on everything else. But if that comes, that will come as a windfall gain whenever that starts to happen in our industry.

[Operator]

[Operator Instructions] Next question is from the line of Mukul Garg from Motilal Oswal.

[Mukul Garg, analyst]

I had 2 questions. Guru first, I wanted to understand a bit on the operating asset management side. There, the growth has continuously been moderating from a high of 30% plus mid of last year, now you are in mid-teens. Is most of the growth moderation in OAM coming because of the cost rationalization, which you guys are kind of doing for lower-margin customer? Or is there something which is kind of also impacting the industry growth visibility? And if you can just kind of drill down on whether it is something which is coming from soft service, hard service or security or is it across the board?

And the second, Sekhar, wanted to just get a little bit more sense on foundit. Your revenues have been -- haven't been kind of inching up, but if I look at the job postings, they have jumped quite dramatically this quarter, but the consumption has shrunk 8%. So exactly what is happening there? And if you can also share your sense of how gradually can the loss kind of reduction happen there?

[Srinivasan Guruprasad, executive]

Sure. So let me address the OAM platform and then followed by foundit. So Mukul, if you look at overall platform has delivered about 16% year-on-year growth. Last year, a couple of call-outs. We had announced in Q1 that we partially exited a large contract -- a key contract, and we have taken that impact during the year. The second area is specific to the security business. The way we are focusing on margin expansion in our IT staffing business, where headcount came -- I mean, the headcount came down, but our total absolute EBITDA contribution went up. It's the same strategy that we are adopting in our security business. We are letting go a few contracts which are really not rightly priced or rightly profitable. We are realigning while we have got our headcount down, we are able to -- we have recalibrated that during the year, and we have now at a steady state stable EBITDA contribution that is coming across the OAM, if you look at. We are on an average hovering around 30, 31 plus or minus with the impact that we have taken between the quarters.

There were a few contracts like infrastructure, Smart City project, which was also giving us some losses in between. So that has been concluded and 31st of August is when we will be completely handing over the project this year. So we always had some kind of impact in one or the other quarter, which brought in some level of instability. But now if you look at it, it is steady state, and telecom business there is also phenomenally doing well for us about -- I mean, they've achieved about 46% growth year-on-year backed on 5G push that is happening around the country. So with all of this where we are today, I can tell you, we have passed with all the variabilities that we had in the platform. It's a very steady-state revenue, and it should now start giving you the uptick.

Now coming back to the margin, we are about 4.4%. The platform is delivering about 4.4%. We strongly believe, and there are also benchmarks that this platform can go up 100 basis points, so it can deliver about 5.5% EBITDA. We are working towards that now in terms of cost optimization. If you look at the core to associate ratio is about 107. Anything above 100 is good in this segment. We have done a lot of work there to bring our cost to serve. We are focusing more on productivity and better procurement, better sweating of our assets that we have put there. So plus the sales team in itself. So we have added almost about 43 logos in Q1 itself. So same focus. First of all, coming out of all past variabilities that we had, plus the focus and focus on cost reduction should now definitely take us moving upward in this particular segment. So any question further, happy to take on OAM.

[Mukul Garg, analyst]

I think that's quite helpful.

[Unknown Executive]

I'll ask Sekhar to give you some color on foundit business.

[Sekhar Garisa, executive]

With respect to foundit, your question has 2 parts to it. One was around the operating metrics and possibly you're looking for linkage from operating metrics to how the revenues are playing out. As you know, we are a 2 sided marketplace, which has candidates on one side and recruiters on the other side. We track metrics on both sides. Some of those metrics are important from an engagement perspective, but the revenue is impacted disproportionately by other metrics. What you're seeing in terms of growth in candidate engagement [Technical Difficulty] Sorry. Yes. what we're going to do in this economy where the jobs have softened down a bit. And therefore, you would see that the consumption of inventory, which is essentially what recruiters are doing on the platform, which is in correlation with the hiring activity has come down. However, we also have to make sure that the candidates are engaged on the platform, despite lesser surge, which is being done by the recruiters.

Therefore, we run a specific program which brings in jobs into the platform from other sources as well. This is purely from an engagement or calibration perspective. And that's the number that you see because we went out of our way to get jobs onto the platform. Now job increments on the platform do not directly reflect on revenue because more than 90% of the recruiter side revenues actually come from our database product, which is as per the industry standard. So that's why you cannot correlate the increase in staff to revenues. What is happening across the industry is that the candidate metrics are showing improvement because more and more candidates are looking for suitable opportunities. Therefore, those numbers are going up. And we are also trying to cash in on the trend by making sure that we are giving them more reasons to be active on our platform.

On the recruiter side, the action is a little soften because the hiring activity is muted. That is what you see getting reflected in terms of reduction in search volume, which is a recruiter first volume. Specifically, your question around how would this play out over the next 2, 3 quarters boiling down to the breakeven target that you've taken, the cost structure, like I said, more or less is constant. The revenues would follow sales. The sales numbers still seem healthy.

Like I said, compared to the last quarter of the same year, we've grown about 52%, and we expect the same to continue and, in fact, become better over the next 3 quarters. As those sales numbers translate into revenues over the next 3 quarters with the constant cost structure, we should be able to trim down the EBITDA as per the plan boiling down to break in. We also have some very significant product launches lined up towards the end of this quarter, beginning of next quarter, through which also we see a significant revenue uptick happening. So all in all, Q1 is as per plan. The revenues will go up while the cost remains constant leading to a breakeven in Q4.

[Mukul Garg, analyst]

Understood. That's very helpful, Sekhar.

[Operator]

Ladies and gentlemen, we'll take that as the last question. I now hand the conference over to Mr. Guruprasad Srinivasan, for closing comments.

[Srinivasan Guruprasad, executive]

Thank you. I take this opportunity to thank each one of you for this interactive session. As I said, our Q1 went on by the plan that we had made, and we are really geared up for our Q2. So look forward. In case if you have any questions, do reach out to our Investor Relations team, and we look forward to stay in touch. Thank you so much for joining us today.

[Operator]

Thank you very much. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.