Investor Update Q3 2014€¦ · 11.05.2014 · – “Hype Cycle for Business Process Services and...

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© Hexaware Technologies. All rights reserved.

Investor UpdateQ3 2014

2© Hexaware Technologies. All rights reserved. | www.hexaware.com

Safe harbor statement

Certain statements on this presentation concerning our future growth prospects areforward-looking statements, which involve a number of risks, and uncertainties that couldcause actual results to differ materially from those in such forward-looking statements. Therisks and uncertainties relating to these statements include, but are not limited to, risks anduncertainties regarding fluctuations in earnings, our ability to manage growth, intensecompetition in IT services including those factors which may affect our cost advantage,wage increases, our ability to attract and retain highly skilled professionals, time and costoverruns on fixed-price, fixed-time frame contracts, client concentration, restrictions onimmigration, our ability to manage our international operations, reduced demand fortechnology in our key focus areas, disruptions in telecommunication networks, our abilityto successfully complete and integrate potential acquisitions, liability for damages on ourservice contracts, the success of the companies in which Hexaware has made strategicinvestments, withdrawal of governmental fiscal incentives, political instability, legalrestrictions on raising capital or acquiring companies outside India, and unauthorized useof our intellectual property and general economic conditions affecting our industry

www.hexaware.com


Business Update


Revenue: Healthy QoQ growth in Q3 2014Profitability metrics: Margin expansion QoQ across the board:Gross Margin, EBITDA Margin and PAT Margin

Healthy broad-base revenue growthProfitability metrics outgrow revenue

36.8% 36.2% 37.3%

19.3%16.6%

18.0%

11.9% 12.5% 12.8%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Q1 2014 Q2 2014 Q3 2014

Gross Margin EBITDA PAT

95.9

102.0

110.0

90.0

95.0

100.0

105.0

110.0

115.0

Q1 2014 Q2 2014 Q3 2014

7.1% CQGR

Focus is on improving sustainability of the performance


Progress made in Client Size

$10 - $20

$5 - $10

$1 - $5

> $1

$ 20+

Last twelve months revenue in US$ million

53

37

8

5

3

61

42

11

4

4

Q3 2013 Q3 2014• 1 client > $ 50 m+• 1 client > $ 30 m+


Consistent Return on Equity

24%

26%

28%

20%

21%

22%

23%

24%

25%

26%

27%

28%

29%

Q1 2014 Q2 2014 Q3 2014

Return on Equity (RoE)


Dividend Payout: well above industry 2014 includes the interim dividend of the first three quarters alone [ ` 3.00 + ` 1.60 + ` 2.35 = ` 6.95]

Total Shareholder Returns: Stock price as at the end of each quarter end in 2014

Shareholder Metrics

131.9

150.5 158.3

201.2

100.0

120.0

140.0

160.0

180.0

200.0

220.0

Q4 2013 Q1 2014 Q2 2014 Q3 2014

Share Price Movement in 2014

4.00

5.40

11.10

6.95

-

2.00

4.00

6.00

8.00

10.00

12.00

2011 2012 2013 2014*

Dividend declared for the year

*YTD 9M 2014


New Client Adds in Q3 2014 New Wins in Q3 2014

1) Data Management in Capital Markets2) End to End ownership of Enterprise

Financial Applications3) MRO Analytics; Data Migration and

Application Modernization for Airlines

Business Updates

Geography Client Add #Americas 4Europe 3Asia Pacific 3


Utilization in a narrow bandNet addition during the year 2014: 843Includes trainees; 45% of net additions in 2014 are fresh graduate engineers

Employee Attrition: well below industry Attrition has remained in the 12% - 13% band for more than a year now

Employee Metrics: Promising

68.0%

69.0%

70.0%

71.0%

72.0%

73.0%

74.0%

75.0%

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

Technical Utilization

10%

11%

12%13% 13% 13%

13%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

Employee Attrition


Awards & Recognition

• Hexaware BPS has won the award for ‘Operational Excellence and Quality in BPO Industry’ category at the recentsummit for Asia Pacific HRM Congress Awards, 2014. This award aims to honor organizations who have significantlyimpacted or influenced the society, the corporate world, and the HR Community in the area of Human Development.Recipients of these Awards are role models with unquestionable integrity

• Hexaware BPS was recognized at the National Awards for Excellence in Outsourcing & BPO 2014 for “Best Finance &Accounts Outsourcing Team”. This award demonstrates the company’s creativity and ability to sustain a competitiveadvantage, providing business transformation and achieving value. It also recognizes organizations and Individuals tobe a benchmark in terms of best practices and business excellence

• Hexaware has been ranked as an “Emerging Player” in the Everest report titled “Independent Testing Services ITOutsourcing (ITO) Service Providers’ Assessment”, the first of its kind for Independent Testing Services, by analystsJimit Arora, Yugal Joshi, Chirajeet Sengupta, Ashwin Venkatesan and Sivaram S

• Hexaware has been mentioned as one of the sample vendors in different Gartner reports during Q3 2014. These reports are titled:

– “Hype Cycle for Business Process Services and Outsourcing, 2014”– “Hype Cycle for IT Infrastructure and Outsourcing Services, 2014” – “Hype Cycle for Application Services, 2014”– “Hype Cycle for Bank Operations Innovation, 2014”

www.hexaware.com


Financial Update


Revenue Walk

• Q3 2014 Revenue in US$ terms at $ 110 mn; up 7.9% QoQ; & up 11.4 % YoY

– Volume growth: 6.6%

– Foreign Exchange Impact: - 0.64% (cross currency headwind: 64 basis points)

• ` Revenue for the quarter at ` 671 crores; up 9.9% QoQ; and 8.0 % YoY


Profit Margin Walk• EBITDA margin for the quarter was 18.0%; up 140 bps from 16.6% in Q2 2014

• Gross margin for Q3 2014 at 37.3%; up110 bps from Q2 2014– Bill rate: +113 bps– Offshore Increment: (52) bps– FX Gains and other factors: +49 bps

• SG&A at 19.3% for Q3 2014 vs 19.6 % last quarter, improved by 30 bps

• Foreign Exchange Margins Impact: + 39 bps (Direct and SG&A) due to ` depreciation

• Forex Hedges: Loss of $ 560k this quarter vs profit of $ 165k last quarter.

• Effective Tax Rates: 20.6% for Q3 2014 vs. 22.9% in Q2 2014


Balance Sheet Update

• Cash and Cash Equivalents at US$ 67.80 mn ( ` 4,187 mn)

• DSO for Q3 2014 at 47 days, 68 days including unbilled.

• Third interim dividend: – ` 2.35 per share ( 117.5%)– Dividend Payout including taxes ` 851.6 mn ($ 13.79 Mn)– Dividend Payout Ratio: 99%

• Capital Expenditure– For the quarter (Q3 2014): ` 269 mn– For the first nine months: ` 475 mn– Q4 Plan for Chennai SEZ: ` 300 mn

© Hexaware Technologies. All rights reserved. | www.hexaware.com

© 2014 Hexaware Technologies Limited. All rights reserved. For internal circulation only.

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Investor Update�Q3 2014Safe harbor statementBusiness UpdateHealthy broad-base revenue growth�Profitability metrics outgrow revenueProgress made in Client Size Consistent Return on EquityShareholder MetricsBusiness UpdatesEmployee Metrics: PromisingAwards & RecognitionFinancial UpdateRevenue WalkProfit Margin WalkBalance Sheet UpdateSlide Number 15

Investor Update Q3 2014€¦ · 11.05.2014 · – “Hype Cycle for Business Process Services and...

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