Company Has Consciously Decided Against Giving An Annual Guidance: Hexaware Technologies | CNBC TV18

Summary

Hexaware Technologies shared their outlook for 2025, highlighting confidence in resilient growth despite market fluctuations. While avoiding specific guidance, the company emphasized strong performance through key consolidation deals with major clients, expected to ramp up in Q2 and fully impact by Q3. Europe's market, which makes up 18% of Hexaware’s business, is projected to improve, aligning with company averages in 2025. Additionally, the company aims to increase operating margins from 15.9% to 17% in 2025, with a target of 18-19% over the medium term, underlining strategic growth and profitability initiatives.

Takeaways

• 😀 Hexaware Technologies is confident about the resilience of 2025 despite uncertainties in the market due to changes in U.S. administration policies.
• 😀 The company anticipates improved performance in Q2 and Q3 of 2025, with major deals ramping up during these periods.
• 😀 Hexaware expects to achieve at least a 13% growth in 2025, building on the 13.7% growth seen in 2024.
• 😀 The company has refrained from offering specific financial guidance for 2025, preferring to focus on qualitative indicators due to market volatility.
• 😀 Hexaware’s long-term strategy is to adapt to changing market cycles rather than commit to short-term quantitative forecasts.
• 😀 The company is engaged in significant consolidation deals with two of its top three clients, with additional deals in the pipeline, which are expected to ramp up starting in Q2 2025.
• 😀 These consolidation deals will gradually contribute to Hexaware’s revenue, with full impact expected to reflect in Q3 of 2025.
• 😀 Europe's performance, which constitutes about 18% of Hexaware’s total revenue, has been slower, but growth is expected to improve and match the company average by 2025.
• 😀 Hexaware is targeting an improvement in operating margins, with expectations to increase from 15.9% in 2024 to 17% in 2025.
• 😀 Over the next 3–4 years, Hexaware anticipates its margins to continue rising, potentially reaching 18-19%.
• 😀 Despite the slowdown in Europe, the company remains optimistic about its future performance in the region and aims to further expand profitability.

Q & A

What is the general outlook for Hexaware Technologies in 2025?

Hexaware Technologies is confident about the outlook for 2025, despite macroeconomic challenges. They expect a progressive improvement through Q2 and Q3, with a focus on outperforming the industry. The company has mentioned that they are resilient to current changes in the U.S. administration and their order flow remains strong.

Why is Hexaware Technologies not providing specific guidance for 2025?

Hexaware has consciously decided not to provide specific guidance for 2025 to avoid committing to numbers amid ongoing uncertainty. While they are confident about the future, they believe it’s best not to give long-term forecasts, as the industry will go through various cycles.

What has been Hexaware's performance compared to the broader industry?

Hexaware Technologies has outperformed most companies in their industry. For example, in a difficult year (2024), Hexaware grew by 13.7%, while many of their competitors were in low single-digit growth.

Can you explain the nature of the consolidation deals mentioned by Hexaware's executives?

Hexaware is involved in significant consolidation deals with two of their top three clients. These deals are focused on large companies reducing the number of vendors they work with, thus increasing Hexaware's share of the spend. The impact will be gradual over 2-3 quarters.

When are the consolidation deals expected to start impacting Hexaware's financial performance?

The consolidation deals are expected to start impacting Hexaware’s performance in Q2 of the calendar year, with a more significant impact expected in Q3, which will reflect in the second half of the year.

What is the expected size of the consolidation deals?

The consolidation deals are described as significant, involving large customers with substantial spending power. Although the exact value isn’t specified, the incremental revenue from these deals is expected to be material.

How does Hexaware view the European market in terms of growth?

Hexaware has seen positive signs from the European market, despite it growing at a slower pace compared to the overall business. They expect Europe to perform better in 2025, with expectations to return to at least company average growth.

How has Hexaware’s European margin performed, and what are the expectations going forward?

Hexaware’s European margin was around 16% in the past. They expect a significant improvement in margins, targeting a 17%+ operating margin for 2025, with further improvement to 18.5-19% in the medium term (3-4 years).

What is Hexaware’s general approach to market cycles and guidance?

Hexaware believes in providing sufficient indicators and confidence about their business rather than specific guidance. Their approach is to adapt successfully to various market cycles, which they have done in the past.

Why does Hexaware refrain from providing long-term guidance, and how does this impact investors?

Hexaware refrains from providing long-term guidance because they believe future market conditions will be unpredictable, and providing a specific forecast may not be practical. While this helps avoid over-promising, it also ensures investors focus on the company’s ability to adapt to future changes.