Hexaware Technologies Ltd, a leading global provider of IT & BPO services and consulting, today reported financial results for the first quarter ended March 31, 2008.

The Quarter was marked by substantial improvements in the financial performance despite the slowing US economy. The Company achieved its revenue guidance and showed a marked improvement in its financial metrics excluding the impact of mark to market loss of Rs. 56.0 mn, in view of the changed accounting policy.

Highlights of Q1 ended March 31, 2008

* Revenue from operations at Rs. 2,669.5 mn – a 3.0% growth over preceding quarter
* Net Profit after Tax at Rs. 208.6 mn
* Gross Margins were 35.3% against 31.8% last quarter
* Adoption of the newly introduced Accounting Standard 30 resulted in Mark to Market losses of Rs. 56.0 mn
* Income from Investments reduced by Rs. 27.7 mn in Q1 ’08 compared to Q4 ’07
* Operating Margins excluding MTM loss were 9.6% vs. 4.6% last quarter; Operating Margins stood at 7.5% after incorporating mark to market losses
* 11 new clients added during the Quarter
* 177 active clients; 63 are Fortune / Global 500 corporations
* New order book added in Q1 ’08 was $ 42 mn
* Global headcount stood at 6,927

“At Hexaware, we have always given priority to both, enhancing the quality of clients and the depth of our relationship with them. This is reflected in the increase in the number of Fortune / Global 500 clients to 63 from 50, a year back. The number of million-dollar clients has also gone up to 56, up from 46 in Q1 ’07,” commented Atul Nishar, Executive Chairman, Hexaware Technologies Ltd.

“Q1 ’08 witnessed significant improvements in operational performance reflecting gains in all financial metrics over the preceding quarter. While the US slowdown had some impact on the order book addition, the current pipeline continues to grow and we are actively chasing 4 deals in the $ 25 – 100 mn range each. Our investments in a larger sales team with better focused go-to-market strategies have started paying dividends.” said Rusi Brij, Vice Chairman and CEO.

Guidance for Q2 ’08

The Company has guided that Q2 ’08 revenue is likely to be in the range of $ 71 mn – $ 72.5 mn, a growth of approximately 6-8% higher over Q1 ’08.

Operational Review

Of the 11 new clients acquired during the Quarter, 2 banking clients were added in the enterprise risk management space by RiskTech, while CaliberPoint added 1 client in the BPO segment. FocusFrame won 3 new clients in the Test Consulting and Business Technology Optimisation (BTO) space.

In the IT services business, 3 new clients were added in ERP and 2 in Application Management services.

The total number of active clients stood at 177, of which 63 belong to the Fortune 500 / Global 500 list.

The number of clients registering $1m+ in revenues recorded an increase from 54 in Q4 ’07 to 56, with 43 clients in the $1 – $5 mn category. The number of the clients in the $5 – $10 mn range has increased from 7 in the last quarter to 9 in this quarter, with another 4 clients billed over $10 mn each – on a trailing 12 months basis.

The financial ratios for the Quarter, before accounting for MTM loss are

* Gross margin at 35.3% vs. 31.8% in the previous quarter
* EBITDA margin at 11.9% vs. 7.0% in the last quarter
* Operating margin at 9.6% vs. 4.6% in Q4 ’07
* Net Profit after Tax margin was 9.9% compared to 8.4% in the prior quarter

The blended utilisation for the Quarter improved to 66.2%. 748 graduate trainees recruited during late H2 ’07 were added to the billable resource pool in Dec ’07.

Geography

Of the 11 new clients added this Quarter, 5 were from North America, 4 from APAC and 2 from Europe. 66.1% of revenues came from North America, with the European share improving further to 27.6%, and the balance 6.3% coming from the rest of the world.

While FocusFrame continues to grow in both NA and European markets, RiskTech has seen greater addition to its multi-million dollar pipeline from the APAC markets. The newly launched entity is rapidly emerging as the leading IT solutions provider in the Enterprise Risk Management micro-vertical in the APAC region.

The Mexico Delivery Center has grown to seat over 200 professionals serving both Hexaware and FocusFrame clients in the North American and Latin-American regions. The extensive presence of local operations of several US Fortune 500 corporations creates a new market opportunity for Hexaware’s ERP, Independent Testing and ADM solutions.

Significant Engagements

Hexaware has signed a large Peoplesoft Upgrade deal with a leading global telecom service provider. This engagement encompasses strategic consulting culminating in the implementation of multiple modules.

During the recently concluded quarter, RiskTech added a large bulge-bracket investment bank to its impressive client roster. Over the next 12 months, RiskTech would provide risk consulting and software services in Operational Risk domain to this client.

In Q1 ’08, Hexaware added a recognized leader in logistics with global transportation and warehousing capacities for integrated IT-BPO services. There are 8 clients now, to whom Hexaware is currently providing both IT and BPO services.

FocusFrame Inc. won an important Test strategy consulting and automated testing engagement with a multi-specialty integrated healthcare delivery provider in North America. In the first phase, FocusFrame is providing test governance strategy based on its internally developed IT Governance (ITG) framework.

Forex Cover

The Company currently has forward cover of $196 mn at an average rate of Rs. 40.38 per dollar spread over the next ten quarters. These forward covers are in line with Company approved hedge policy.

The Company has adopted the newly introduced Accounting Standard 30 in Q1 ’08. The mark to market loss provided therefore is Rs. 56.0 mn.

Pricing

The average billing rate per hour for the Quarter improved marginally to $68.55 for onsite services and to $23.78 for offshore projects. Pricing environment appears stable, with new deals signed at higher rates.

Human Resources
Global headcount at the end of Q1 ’08 stood at 6,927. The Company has also extended offers to 650 graduate engineers to join in the second half of this year. The recruitment campaign for graduate engineers expected to join in 2009 has commenced.

Technical personnel comprised 90.6% of the total work force. Attrition remained stable at 19.5% on an annualized basis.

The Company intends to provide an annual salary increase of 11-13% for offshore and 3-4% for onsite technical employees.

Infrastructure

The first phase of the Chennai Green Campus, an SEZ, is now partially operational and the company has a few hundred professionals working from the state-of-the-art facility since March ’08.

The Company has commenced construction work on its Nagpur SEZ land, and the campus is expected to be available for occupation by the end of ’08.

Awards and Recognition
Forrester rated Hexaware as one the IT providers in India with an impressive client list in Belgium and Germany.

Gartner listed Hexaware as one of the service providers in the Gartner Business Intelligence (BI), Performance Management (PM) and Information Management (IM) Service Vendor Guide.

Hexaware was also included in Gartner’s list of consulting and system integration (CSI) service providers in North America with focus in Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) segments. In addition, Gartner listed Hexaware as one of the major North American application-outsourcing service providers.

Sourced From: Adfactors Public Relations Pvt Ltd

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