- EBITDA Margin up 340 bps Q-o-Q at 18.7%; despite onsite wage hikes
- Profit after Tax up 54% Y-o-Y; Q3 2011 PAT margins at 17.7%
- Annual $ revenue guidance revised upwards to 32% Y-o-Y growth
Hexaware Q3 2011 revenue grew to $ 78.8 mn up 5.3% sequentially in $ terms (up 9.6% in terms INR to INR 3660 mn); at the upper end of the revenue guidance
- On a constant currency basis, Revenues came in at $ 79.2 mn, up 5.9% Q-o-Q sequentially, ahead of quarterly revenue guidanceF
Robust volume growth of 9.2% sequentially; the strategy of offshoring succeeds with offshore revenue mix going up by 300 bps Q-o-Q to 46.3%
EBIT margins improved 350 basis points further in Q3 2011 to 17.0%; despite the annual compensation increase for Overseas employees
Profit after Tax (PAT) grew to INR 647 mn up 7.4% Q-o-Q and up 54% Y-o-Y
12 new clients added in Q3 2011; cutting across all major focus areas
Global Headcount increased to 8,164 at the end of September 2011; 745 employees added during the quarter; Attrition declines sequentially to 14.7%
Company exceeds annual hiring plan of 1,500 in Sept '11; YTD addition at 1,653 of which 550 freshers; Intends to add 200 fresh graduate engineers in Q4 2011
Third Interim dividend of INR 1.00 per share (50%) declared for Q3 2011
Interim dividend cumulative for 9 months of 2011 is INR 2.50 per share (125%) on double the equity shares on account of 1:1 bonus issue compared with INR 0.60 per share (30%) interim dividend paid last
Mumbai – October 20, 2011: Hexaware Technologies Limited, a leading global provider of IT, BPO and consulting services has reported strong performance for the third quarter of the calendar year ended September 30, 2011.
Highlights of Quarter ended September 30, 2011
Revenue from operations increased to $ 78.8 mn (INR 3660 mn) in-line with the quarterly revenue guidance issued
- Q-o-Q increase of 5.3% in $ terms and 9.6% in INR terms
- Y-o-Y increase of 29% in $ terms and 30% in INR terms
- Q-o-Q increase of 5.9% in $ terms on a constant currency basis
Gross margins improved by 160 basis points Q-o-Q to 38.2%; up 470 bps Y-o-Y
EBITDA margins improved to 18.7%; up 340 basis points from Q2 2011
Operating Profit (EBIT) Margins continued its expansion to 17.0%; sequential increase of 350 basis points from 13.5% in Q2 2011
Profit after Tax increased to INR 647 mn; up 7.4% from INR 602 mn reported in Q2 2011
Days of Sales Outstanding (DSO) remained low at 57 days at the end of Q3 '11
12 new clients added during the quarter; 194 active clients at the end of Q3 2011
Global headcount increased to 8,164; net Q-o-Q addition of 745 during Q3 2011
"This was the sixth consecutive quarter of impressive revenue growth. Since the growth momentum is continuing we have revised the annual revenue guidance to 32% growth at $ 306m. Although we have seen margin expansion for five successive quarters, Hexaware still has several levers left to improve margins over the medium term. While we are mindful of the macro economic developments, based on feedback from our clients, we remain optimistic about our growth prospects." said Atul Nishar, Chairman, Hexaware Technologies Limited.
"This has been a satisfying quarter on multiple fronts such as healthy volume growth and continuous expansion in all profitability margin ratios. An across the board improvement in all operational metrics such as employee pyramid through steady inflow of fresh graduate engineers, higher realization and lower attrition provides us with a strong foundation to deliver sustainable healthy performances going forward.", remarked P. R. Chandrasekar, CEO and Vice Chairman, Hexaware Technologies Limited.
Q4 2011 Revenue Guidance
Revenue for Q4 2011 is likely to be in the range of $ 82.0 mn - $ 82.5 mn (exchange rates taken at 1 £ = 1.58 $ and 1 € = 1.38 $); a Q-o-Q increase of 4.0% to 4.7%
Third Interim Dividend
In line with the Dividend Policy announced earlier in the year, the Board of Directors declared a third interim dividend of INR 1.00 per share (50 %) on equity shares of INR 2 each. The record date is fixed as Friday, 4 November 2011 for determining the shareholders entitled for this third interim dividend.
With this declaration, the interim dividend for 2011 amounts to INR 2.50 per share (125 %) having already declared first interim dividend of INR 0.50 per share (25 %) at the end of Q1 2011 and the second interim dividend of INR 1.00 per share (50 %) at the end of Q2 2011 on equity shares of INR 2 each. This compares with INR 0.60 per share (30 %) interim dividend paid last year. In addition, the interim dividend paid this year is on double the equity capital on account of 1:1 bonus share issued in February 2011.
Financial Review
The financial metrics for Q3 2011:
Gross Margin increased by 160 basis points on a Q-o-Q basis sequentially to 38.2%
EBITDA Margin increased by 340 basis points to 18.7%; from 15.3% in Q2 2011
Operating Margin (EBIT) increased by 350 basis points to 17.0%; from 13.5% in Q2 2011
Profit after Tax Margin (PAT) stood at 17.7%; compared with 18.0% in Q2 2011
Corporate Update
Mr. Abhay Havaldar of General Atlantic was inducted as a Director to the Board of Hexaware Technologies Limited effective today following the resignation of the earlier company nominee Mr. Sunish Sharma.
Significant Business Updates
During the previous quarter, the Company added 12 new clients across all its key focus areas. Of these, 3 clients were added in the Travel and Transportation Vertical and 4 in Banking, Financial Services and Insurance (BFSI) domain. From a horizontal service line perspective, 5 clients were won in Enterprise Solutions space, 1 client added in Quality Assurance & Testing Services (QATS), 2 clients in Business Intelligence & Business Analytics (BI/ BA) horizontal, and 1 client in Business Process Outsourcing (BPO) space.
Of the 12 clients added in Q3 2011, 4 customers are based in Americas, 2 in Europe and 6 in Asia Pacific (APAC) region. For the quarter just completed, 64.7% of revenues originated from Americas, 28.4% from Europe, and the remaining 6.9% from the Asia Pacific region. The share of revenues from the new client wins stood at a healthy 6.5%.
The unwavering focus on account management and delivering customer delight has resulted in stronger client mining. The number of clients registering annual revenues in excess of $ 20 mn each increased to 3; 1 client in the $ 10 mn - $ 20 mn range, 8 clients in the $ 5 mn - $ 10 mn range, 39 clients in the $ 1 mn - $ 5 mn category and the clients with $ 1 mn+ increased further to 51 – all on a trailing twelve months basis. At the end of the quarter, the number of active clients improved to 194.
New R&D Initiatives
Hexaware had launched Rainmaker®, its private cloud service last year. Since then, the Company has further invested and significantly enhanced the functionalities towards providing flexible and easy-to-manage, secure, multi-tenant storage environment for meeting today's needs at the same time enabling the Company to build a scalable and efficient shared IT Infrastructure for future growth.
As a befitting recognition Hexaware has been awarded the CIO 100 and Efficient Enterprise Award for its Private cloud "Rainmaker®" by IDG India's CIO Magazine. Themed as "The Creative 100," the Award recognized Hexaware for its creative use of enterprise technologies to meet the organizations' business challenges.
Facility Updates
In line with the corporate road-map, Hexaware has been expanding its presence in its Green Campus expanding over 27 acres in Chennai SEZ. During the course of the current year, the workforce operating out of these SEZ facilities has increased from 1,400 in December 2010 to 2,530 in September 2011. Further, the SEZ campus at Nagpur, a Tier-II city, seats in excess of 350 employees employed by Caliber Point Business Solutions, 100% wholly owned subsidiary of Hexaware.
Hexaware is in the process of increasing its seating capacity by 300 in its global delivery center at Mumbai. Further Hexaware is expanding its presence in Pune to newer premises with a planned seating capacity of 700 personnel.
Foreign Exchange Cover
The Company has forward contracts worth $ 176.7 mn at an average rate of INR 47.89 and hedges worth € 10.4 mn at an average exchange rate of INR 70.48 maturing over the course of the next eight quarters (from October 2011 till September 2013).
Pricing
The average bill rate per hour for Q3 2011 increased sequentially $ 72.5 for onsite services and $ 23.0 for offshore locations.
Human Capital
Hexaware has been steadily ramping up its delivery capability to cater to the demand uptake visible in the market place. The global headcount at the end of Q3 2011 increased to 8,164; an addition of 745 employees from the previous quarter and an increase of 1,856 compared with September 2010. Technical personnel comprised 91.7% of the total work force. Attrition for Q3 2011 reduced further to 14.7%.
At the start of the year, the Company had indicated plans to add 1,500 personnel which would comprise at least 700 fresh graduate engineers from Campuses during 2011. In line with the previously stated recruitment plan, Hexaware inducted 280 fresh engineers during Q3 2011 on the back of 270 fresh engineers during H1 2011. These engineers are being inducted into the mainstream delivery operations in a steady stream after the successful conclusion of their training programs at Hexavarsity, the in-house Learning and Development University. The company intends to add 200 fresh engineers during Q4 2011.
Organization Development Initiative
Hexavarsity has implemented a new state of the art learning management system (LMS) for its global workforce to enable continuous learning and skill development. An upgraded competency development framework was recently launched to further raise the technology quotient of the company. In addition, several training programs targeting a better alignment to business needs are being conducted to enhance the client interaction skills of the employees.
Corporate Recognition
Hexaware has been conferred with the prestigious Golden Peacock Award for Excellence in Corporate Governance.
Hexaware was judged to have met the award's exacting criteria for applying the most robust structures, processes and procedures for corporate governance throughout its operations. The honour is especially relevant given that corporate governance best practices are considered key benchmarks by stakeholders who evaluate corporations.
Established by the Institute of Directors in 1992 and instituted to celebrate and honour the best organizations and recognize unique achievements in brand building, The Golden Peacock award is recognized worldwide as the hallmark of corporate excellence.
Awards and Recognition
Hexaware has been mentioned in a Gartner report ‘U.S. Healthcare Payers Should Assess ICD-10 Vendor Capabilities Against Three Issues' by Robert H. Booz and John-David Lovelock, 31st Aug 2011
Hexaware has been included as a sample vendor mentioned in a Gartner report ‘Hype Cycle for Business Process Services and Outsourcing, 2011' by TJ Singh, 29th July 2011
Hexaware has been included as a sample vendor mentioned in a Gartner report ‘Hype Cycle for Infrastructure Services and Outsourcing, 2011' by Rob Addy, 29th July 2011
Hexaware has been included as a sample vendor mentioned in a Gartner report ‘Hype Cycle for Application Services and Outsourcing, 2011' by Alex Soejarto, 26th July 2011
Hexaware has been included as a sample vendor mentioned in a Gartner report ‘Hype Cycle for Banking and Investment Services Core Applications and Architecture Technologies, 2011' by Kristin R. Moyer, 25th July 2011
The Hype Cycle is copyrighted 2011 by Gartner, Inc. and/its affiliates and is reused with permission. Hype Cycles are graphical representations of the relative maturity of technologies, IT methodologies and management disciplines. They are intended solely as a research tool, and not as a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
