Hexaware Technologies Limited

Hexaware Technologies reported Q3 CY25 revenues of US$395 million, marking a 3.3% sequential growth in USD terms and 3.4% in constant currency. The company's reported EBITDA margin improved by 30 basis points QoQ to 17.5%, aligning with the full-year guidance narrowed to 17.1-17.2%. Year-to-date Q3 EBITDA margin stood at 17.2%, indicating performance within the guided range of 17.1-17.4% for the year. This margin expansion was primarily driven by operational efficiencies (40 bps) and a favorable FX tailwind (110 bps), partially offset by higher license revenues (70 bps) and increased medical/travel expenses (50 bps).

The company announced the acquisition of CyberSolve, an IAM specialist, for an upfront payment of US$35 million, with an additional US$31.5 million linked to future performance over three years. CyberSolve's last year's revenue was US$26 million. Management expects the acquisition to be EPS accretive quickly, despite initial marginal dilution due to acquisition accounting. Deal momentum significantly picked up in Q3, with wins including a large consolidation deal with a US/Canadian bank, a booker work consolidation for a German insurer, and multiple Digital ITO outsourcing deals. The overall deal pipeline reached over US$3 billion, the largest ever, though it is expected to normalize^📎 in Q4 as decisions are made.

In Q3, Financial Services continued its strong performance with both sequential and YoY growth, projected to be the fastest-growing vertical for the year. Healthcare & Insurance (H&I) delivered double-digit sequential growth, though some of this was attributed to one-time^📎 license revenues. Manufacturing & Consumer (M&C) showed the fastest sequential growth, indicating a bottoming out of prior declines. Conversely, the High Tech, Products, and Platform (HTPS) vertical experienced sequential and YoY declines due to project closures and budget cuts, with choppiness anticipated for another 1-2 quarters. Geographically, all three regions—North America, Europe, and APAC—showed sequential growth, with North America expected to outperform overall company growth for the full year.

Hexaware continued to demonstrate strong operational metrics, adding 1,180 employees in Q3, with 750 in IT and 413 in BPS. This marks the ninth consecutive quarter of headcount additions. Attrition remained low, trending around 11-11.5%, which is among the best in the industry. Utilization rates stayed strong, consistently above 83%. The company's Days Sales Outstanding (DSO) remained healthy at 73 days, and the LTM Operating Cash Flow (OCF) to EBITDA conversion was 80%, exceeding the initial guidance of 70%.

Management anticipates Q4 CY25 to be a flattish quarter, impacted by regular seasonal headwinds like furloughs and calendar effects, compounded by a short-term headwind from the government shutdown. A significant concern is the current inability to enable H-1B visa transfers, which restricts on-site growth in certain accounts. Despite these near-term challenges, the demand environment is stabilizing, and the company expects CY26 to be better than the current year, with more detailed color to be provided next quarter. The HTPS vertical is expected to resume strong growth from Q1 CY26 after 1-2 quarters of choppiness.