Hexaware's Q4CY17 earnings were in-line with expectations with revenue coming in above estimates but margins were impacted by high employee costs. In an interview with CNBC-TV18, R Srikrishna, CEO of Hexaware Technologies spoke about the results and his outlook for the company.
Macroeconomics around the world are very solid, the demand environment is quite positive and that is reflected in our expectation for future, he said.
We had great 2017 and on the back of that, we expect double-digit growth again. We have guided for 10-12 percent revenue growth and equivalent EPS growth. So we expect our printability to be in-line with what it is for the full current year, he added.
We will grow EBITDA between 16.5 percent and 17.5 percent, we grew by 17.8 percent, said Srikrishna.
Expect 10-12 percent revenue growth for the calendar year 2018 (CY18), he further mentioned.
Below is the transcript of the interview.
Sonia: Can you tell us what the expectation is as we head into the new fiscal because this year seems like it has been decent for most technology companies, but in terms of demand, pricing pressures etc, what are the trends that you are looking at for the new fiscal?
A: Macroeconomic around the world are very solid. America has been good for a while, Europe has caught up. America is threatening to do even better than it did. So, the demand environment is quite positive and that is reflected in our expectation for future. You did say that we had a good 2017, we actually had a great 2017, we had I think the best performance in the industry – 15.5 percent revenue growth, 23.5 percent PAT growth, over 20 percent EPS growth for the year, so we actually had a great year and on the back of that we expect double digit growth again. We have guided for 10-12 percent revenue growth and equivalent EPS growth. So, we expect our profitability to be inline with what it is for the full current year.
Anuj: Just a word on Q4 and the margin performance, that was a bit disappointing because the market was expecting 16.6 percent but you delivered 15.8 percent. So, just for Q4 what was the issue?
A: We had guided for many quarters that we are going to have a troubled Q4. There are some of our clients which – one client was insourcing, some other client some project was going away. So, in spite of all that, ultimately the guidance we gave for the full year and we upped the guidance thrice for margin, is that we will grow EBITDA between 16.5-17.5 percent, we actually grew by 17.8 percent. So, the guidance we gave in Q3, we did better than that in Q4, so I am not quite sure where the expectations came from.
At, PAT level there was a one off on account of the US tax reforms, we had a little over a million dollars as a one off cost that we had to write off due to the US tax reforms. However going forward the tax reforms are positive for us but that is at a PAT level for Q4.
Latha: You sounded very positive about the US environment generally. What is the revenue guidance you have given for calendar 2018?
A: 10-12 percent.
Latha: Do you see an ability to bill higher or will this all be volume?
A: History for 2017 is that almost 95 percent of our revenue growth came from volume. Actually there was about 3 percent or so price reduction. Actually we see that as a positive because there has been price pressure and in the face of that price pressure if we did not have a price reduction, we see that as a positive.
Going forward we are going to see two different worlds, I think there is going to be a world of legacy services where there will continue to be little bit of price pressure and how we manage through that is going to be key for profitability. However there are going to be some newer services where we think we would be able to charge a premium.
Latha: What part is legacy, what part is non-legacy?
A: In each service line there is a legacy portion and there are new portions. If you look at application development which is our largest business – if you think of mainframe development support, that will be legacy but if you think of Cloud-First development or cloud based development or full-stack development, those will be more future facing.
Sonia: What is the exact amount of deal wins that you saw in Q4 and where does that take the total deals or the total order book to?
A: We announced Rs 1 per share in Q4 and that takes the total for the year to Rs 4 per share, this is apart from a buyback that we completed in February 2017. For 2018, we have announced that we will return Rs 8 per share and what the mix will be - whether it is dividend and whether we can or should do a buyback is something that we will announce in Q1 but we have said we are committed to returning Rs 8 per share in 2018.
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