📉 The Financial Deep Dive
Hexaware Technologies has reported a strong performance for the full fiscal year 2025 (CY25), showcasing considerable growth and margin improvement. Total revenue for CY25 reached INR 134,304 million, a significant 12.2% increase year-on-year (YoY), driven by a 7.6% YoY growth in USD terms to USD 1,537.4 million (or 7.1% in constant currency). The company successfully expanded its EBITDA margin by 121 basis points (bps) YoY to 17.1%, with EBITDA standing at INR 22,997 million. This operational efficiency translated into a 16.6% YoY growth in Profit After Tax (PAT), which amounted to INR 13,683 million, and a 16.2% YoY increase in Basic Earnings Per Share (EPS) to INR 22.51.
However, the fourth quarter of CY25 (Q4CY25) presented a contrasting trend. While revenue grew by 10.3% YoY in INR terms to INR 34,782 million (USD 389 million, +4.5% YoY), PAT saw a considerable decline of 9.1% YoY to INR 2,916 million. Consequently, Basic EPS fell by 8.8% YoY to INR 4.79. An exceptional item, impacting CY25 results, was the INR 1,111 million charge related to new Labour Codes.
📊 The Quality of Earnings & Operations
The company's focus on cash flow conversion remained strong, with management citing over 75% conversion of operating cash flow to adjusted EBITDA. Operational metrics indicate a healthy IT utilization rate of 80.8% and a voluntary IT attrition rate of 11.0%. Notably, Hexaware added customers in the $100 million+ and $50 million+ revenue categories, underscoring its ability to secure larger client engagements.
🗣️ The Grill: Segmental Declines & Legal Notice
While overall growth is positive, the Q4 performance raises questions about profitability drivers. The decline in Q4 PAT, even with revenue growth, warrants closer scrutiny. Furthermore, the High-Tech and Professional Services segment experienced a sharp decline of 15.3% YoY in Q4CY25, contrasting with strong growth in Manufacturing & Consumer (+15.0% YoY), Banking (+15.1% YoY), and Travel & Transportation (+10.8% YoY). The company is also facing a legal notice from Natsoft Corporation and Updraft LLC, though management maintains it is without merit.
🚀 Strategic Moves and Outlook
Hexaware is actively pursuing growth through strategic acquisitions. The recent additions of SMC Squared LLC for GCC expertise and CyberSolve for AI-led cybersecurity capabilities are aimed at strengthening its market position. Progress is also being made on subsidiary mergers in the US, Netherlands, and India. Management is optimistic for CY26, anticipating accelerated deal wins from late CY25 and a strategic push with AI-driven service introductions. The company plans for monthly new service introductions and rapid customer deployment, emphasizing speed and agility. The balance sheet reflects this acquisition-led growth, with a substantial increase in Goodwill to INR 35,768 million.
🚩 Risks & Forward View
The primary risks include the continued performance of the struggling High-Tech and Professional Services segment, the successful integration of recent acquisitions, and the potential impact of the legal notice, despite management's confidence. Investors will be watching for sustained revenue acceleration, margin stability in Q4, and the successful execution of the AI-first strategy in the upcoming quarters. The company's ability to leverage its new acquisitions and expand its client base in higher-value segments will be critical.