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1. Opening Hook
Last quarter, management told the street to brace for a soft quarter with contraction. This quarter, they reported revenue of $389 million, called it “a better quarter than we expected,” and moved on. Setting a low bar and then clearing it is a respectable sport, and Hexaware played it cleanly.
Revenue was largely flat. Volume added close to $3 million; calendar and furlough headwinds removed close to $3 million. The two cancelled each other out with the symmetry of a balanced ledger. Profitability is where the quarter actually lived: net profit of ₹352 Cr, up from ₹292 Cr the prior quarter.
The stock, meanwhile, has had its own year — down 38.9% over twelve months, then up 20.1% over the last three. The call was built almost entirely around one word, repeated until it lost its edges: AI. What management did with that word is the rest of this story.
2. At a Glance
- Revenue – $389M, largely flat. Volume giveth $3M, the furlough calendar taketh $3M away. Equilibrium achieved.
- Net profit – ₹352 Cr, up from ₹292 Cr QoQ. The profit line did the lifting the revenue line declined to do.
- Reported EBIT – 13%, up 570 bps sequentially. Normalized for last quarter’s one-timers, EBIT was flat. The headline jump that wasn’t, management said.
- License revenue – $11M, flat. Below the historical quarterly average of about $13M, management said.
- Cash – $220M, debt-free. The balance sheet remains the calmest room in the building.
- DSO – 75 days. Last quarter’s 67 days was called a high watermark; the tide rose another eight days anyway.
- Clients over $10M – now 34. Two added in the quarter.
3. Management’s Key Commentary
Six quotes, lightly decoded.
“We had a decent quarter on revenue, but we had a good quarter on profitability.” (The revenue was decent. The profitability was good. The grading curve is doing the rest.)
“We are hitting a phase of sustained growth.” (Announced on a quarter where revenue was largely flat. Sustained from a standing start.)
“At a minimum, we are reaffirming what we said last time, the floor of growth of 7.6%.” (A floor, reaffirmed, with the ceiling left politely unmentioned until Q2 results.)
“We are the first and probably still the only IT service provider to have a focused offering around getting customers to zero license.” (A $400 billion SaaS market spent a decade selling licenses. Management’s pitch is to help clients buy fewer of them.)
“Margins will improve through the year, especially in H2, and our exit rate will be higher than what it is for the full year.” (The good margins, like the good growth, live in H2 — that reliably distant neighbourhood.)
On the SMC acquisition earn-out, the CFO offered the quarter’s finest piece of framing:
“Close to $3 million was reversed out.”
The earn-out payable was close to $23 million; performance delivered close to $20 million; the $3 million shortfall arrived dressed as good news in other income. An asset missing its target by $3 million, narrated as the target being mostly hit. “Synergies” has explained every acquisition ever, and “reversal” is quietly auditioning for the same job.
On AI-led software work, the CEO was specific: 75 “delivery AI champions” in the FS vertical alone, with similar setups in each other vertical. The strategy is
