Passionate Employees Innovative Services Investor Update Q1 2015 Mar 2015 Delighted Customers Hexaware Technologies. All rights reserved. www.hexaware.com
Safe harbor statement Certain statements on this presentation concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition 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 cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Hexaware has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry 2
www.hexaware.com Business Update Hexaware Technologies. All rights reserved.
Modest Growth in a Difficult Quarter Revenue (US$ Mn) 4.1% CQGR EBITDA (US$ Mn) 4.5% CQGR 7.5% 11.4% 14.4% 19.9% -20.2% -12.4% 1.8% 8.6% 110.0 114.5 114.9 94.8 102.0 98.8 100.1 95.9 22.4 23.5 22.5 22.9 20.6 17.9 18.8 20.4 Q2 Q3 Q4 Q1 Prior Year Current Year Q2 Q3 Q4 Q1 Prior Year Current Year PAT (US$ Mn) 1.6% CQGR -26.4% -10.1% -15.7% 17.3% 17.4 15.7 16.7 12.8 14.1 14.0 13.4 11.4 Profitability metrics: Margin reduction due to salary increments, forex losses, one-time costs, and higher SG&A} Q2 Q3 Q4 Q1 Prior Year Current Year YoY% 4
Increasing Depth in Client Relationships % QoQ YoY $20 - $30 $10 - $20 $ 20+ $30 - $50 $50 + Q4-2014 1 1 3 3 Q1-2015 1 1 3 4 Top 5 7.4% 34.4% Top 10 4.8% 31.2% Top 20 0.9% 25.9% $5 - $10 13 11 $1 - $5 40 42 > $ 1 61 62 Last twelve months revenue in US$ million 5
Return on Equity Return on Equity (ROE) 31% 29% 29% 29% 27% 27% 27% 25% 23% 21% 19% Q2 2014 Q3 2014 Q4 2014 Q1 2015 6
Shareholder Metrics Dividend Payout: well above industry Total Shareholder Returns: Stock price as at the end of each quarter end Dividend declared for the year Share Price Movement in 2014 370 12.0 10.0 11.1 9.5 320 312.6 8.0 270 6.0 5.4 4.0 2.0 2.0 220 170 158.3 201.2 199.7 0.0 2012 2013 2014 2015 120 Q2 2014 Q3 2014 Q4 2014 Q1 2015 7
Business Updates New Client Adds in Q1 2015 New Wins in Q1 2015 Geography Client Add # Americas 4 Europe 3 Asia Pacific 3 1) Large Domain led Development Project in Capital Markets 2) Implementation and Roll-out of Enterprise HCM Applications 3) Data Migration for a leading insurance provider New Booking TCV of $ 30 Mn during Q1 8
Employee Metrics Utilization is improving Net addition during the quarter (incl. trainees): 84 Employee Attrition: Upward trend but significant effort to contain yielding results. Technical Utilization Employee Attrition 75.0% 74.6% 18.0% 16.6% 74.0% 73.0% 72.9% 73.0% 73.6% 16.0% 14.0% 12.9% 12.7% 12.8% 12.7% 13.0% 14.1% 72.0% 71.0% 70.0% 70.9% 71.8% 70.8% 70.3% 12.0% 10.0% 8.0% 6.0% 11.0% 69.0% 4.0% 2.0% 68.0% Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 0.0% Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 9
Vertical Split Effective 1st Jan 2015 - Previous period restated % Q1 FY 15 Q4 FY 14 Q3 FY 14 Q2 FY 14 Q1 FY 14 FY 14 Banking and Financial 37.4 36.9 36.3 33.4 32.3 34.8 Services Travel & Transportation 16.5 15.6 16.1 18.3 18.0 16.9 Healthcare & Insurance 15.6 15.5 15.9 16.8 17.5 16.4 Manufacturing, Consumer & others 30.5 32.0 31.7 31.5 32.2 31.9 Total 100.0 100.0 100.0 100.0 100.0 100.0 As of 2014 - As reported earlier % Q4 FY 14 Q3 FY 14 Q2 FY 14 Q1 FY 14 FY 14 Banking and Financial 39.0 38.9 36.5 34.8 37.5 Services Travel & Transportation 17.5 17.7 19.2 19.4 18.4 Healthcare & Insurance 13.9 13.5 14.3 15.4 14.2 Manufacturing & Others 29.6 29.9 30.0 30.4 29.9 Total 100.0 100.0 100.0 100.0 100.0 10
Service Lines Split Effective 1st Jan 2015 - Previous period restated % Q1 FY 15 Q4 FY 14 Q3 FY 14 Q2 FY 14 Q1 FY 14 FY 14 Application Development & 37.6 36.4 36.8 36.3 37.5 36.7 Maintenance (ADM) Enterprise Solutions 15.5 16.6 17.1 18.6 18.1 17.6 Testing / QATS (Quality 20.7 20.9 20.2 19.9 21.1 20.5 Assurance and Testing Services) Business Intelligence & 15.4 15.4 15.2 14.3 13.4 14.7 Analytics Business Process Services 4.8 4.3 4.2 4.0 3.7 4.1 (BPS) Infrastructure Management Services (IMS) 6.0 6.4 6.5 6.9 6.2 6.4 Total 100.0 100.0 100.0 100.0 100.0 100.0 As of 2014 - As reported earlier % Q4 FY 14 Q3 FY 14 Q2 FY 14 Q1 FY 14 FY 14 Application Development & 33.3 34.8 36.9 36.6 35.3 Maintenance (ADM) Enterprise Solutions 29.5 29.3 28.4 29.7 29.2 Quality Assurance and 11.3 11.0 11.8 12.6 11.6 Testing Services(QATS) / Testing Business Intelligence & 12.1 11.5 10.9 10.8 11.3 Analytics Business Process Services 4.3 4.2 4.1 3.8 4.1 (BPS) Infrastructure Management Services (IMS) 9.5 9.2 7.9 6.5 8.5 Total 100.0 100.0 100.0 100.0 100.0 11
Geographies Effective 1st Jan 2015 - Previous period restated % Q1 FY 15 Q4 FY 14 Q3 FY 14 Q2 FY 14 Q1 FY 14 FY 14 Americas 80.8 78.8 78.8 78.7 78.1 78.6 Europe 13.1 15.1 14.3 14.2 14.3 14.5 Asia Pacific 6.1 6.1 6.9 7.1 7.6 6.9 Total 100.0 100.0 100.0 100.0 100.0 100.0 As of 2014 - As reported earlier % Q4 FY 14 Q3 FY 14 Q2 FY 14 Q1 FY 14 FY 14 Americas 64.2 64.6 64.9 64.5 64.6 Europe 29.5 28.1 27.4 28.1 28.3 Asia Pacific 6.3 7.3 7.7 7.4 7.1 Total 100.0 100.0 100.0 100.0 100.0 12
Awards & Recognition During the last quarter, Hexaware was recognized as the 100 MOST TALENTED GLOBAL HR LEADERS during World HRD Congress held by CHRO ASIA. Hexaware has won the ICAI Award for Excellence in Reporting for the second consecutive year. Hexaware has been mentioned in different Gartner reports during Q1 2015. These reports are titled: 1. Market Trends: SAP Service Provider Opportunities in a Postmodern ERP World 2. Market Guide for Midmarket SAP Service Providers 3. The Gartner CRM Vendor Guide, 2015 4. Market Guide for Higher Education Student Information Systems 5. Market Share: IT Services, 2014 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. 13
www.hexaware.com Financial Update Hexaware Technologies. All rights reserved.
Revenue Walk Q1 2015(JFM) Revenue in US$ terms at $ 114.9 mn; up 0.3% QoQ; & up 19.9 % YoY Constant currency growth is 1.6% INR Revenue for the quarter at INR 713 crores; up 0.2% QoQ; and 21.1 % YoY 15
Revenue Q4 14 Volume Calendar Mix FX - Bill Rates Revenue Q1 15 USD Mn---------------> Revenue Analysis - QoQ 0.0% Volume Growth 115 114.54 1.12 1.84 114.91 114 (0.07) 113 (1.07) (1.45) 112 111 110 Increases Decreases 109 108 107 16
EBITDA Margin Walk EBITDA margin for the quarter was 17.8%, 220 bps lower than last quarter Gross margin for Q1 2015 at 35.7%; lower by 170bps Increment: (60) bps Visa Cost : (68) bps Other cost increase: (42) bps SG&A at 17.9% for Q1 2015 vs 17.5 % last quarter mainly due to increase in S&M investment, TAX Effective Tax Rates: 21.2 % for Q1 2015 vs. 22.5% in Q4 2014 17
Forex Gains/(Losses) Forex loss of $2.2Mn this quarter vs loss of $2.4Mn in Q4 14. Loss in forex mainly on account of old partial term hedges. All outstanding partial term hedges were converted to full term hedges in Q4 14. Forex gain of approx. $ 0.5Mn expected in Q2 15 @ INR exchange rate of 62.50. Forex gain of approx. $ 1.6Mn expected in Q3 15 @ INR exchange rate of 62.50. 18
Balance Sheet Update Cash and Cash Equivalents* at US$ 56.3 Mn (INR 3,521 Mn) DSO for Q1 2015 at 51 days, 77 days including unbilled First interim dividend: INR 2.0 per share (100%) Dividend Payout including taxes INR 724.8 mn ($ 11.60 Mn) Dividend Payout Ratio: 87% Capital Expenditure For the quarter (Q1 2015): INR 339 Mn Q2 Plan for Chennai SEZ: INR 442 Mn *includes Restricted cash balances and balances in Mutual funds 19
Passionate Employees Innovative Services Delighted Customers Thank you We look forward to meeting you at our Investor Day on 5 th August.