HCL Technologies - third quarter fiscal year 2020 results

Noida, India, January 17th, 2020

Revenue at US$ 2,543 mn; up 2.3% QoQ & 15.5% YoY Revenue in constant currency up 2.1% QoQ & 16.4% YoY Net Income at US$ 426 mn; up 13.4% QoQ & 17.2% YoY

Amount i US dollars (Million)

Key Highlights (for the quarter ending December 2019)

• Quarterly revenue exceeds US$ 2.5 bn mark, exceeding the US$ 10 bn annualized revenue run rate. EBIT exceeded US$ 0.5 bn milestone this quarter.
• HCL Technologies is happy to have secured “A -” credit rating with Stable Outlook from Standard & Poor’s (S&P Global). The rating reflects that S&P expects the company to maintain its market position and strong operating cash flows over the next 12-24 months. Further, S&P expects HCL to remain prudent in its growth spending, shareholders’ distribution and maintain adequate surplus cash over this period.
• HCL’s strong growth at 16.4% YoY in constant currency, led by double digit growth across Segments. Products & Platforms 72.8%, IT and Business Services 10.4%, Engineering and R&D Services 12.8% (on YoY Constant Currency basis).
• Margins: EBITDA at 24.7%; EBIT at 20.2%.
• Operating Cash Flow (OCF) at US$ 709 mn for the quarter; OCF / Net Income conversion at 109% on YTD basis.
• Free Cash Flow (FCF) at US$ 657 mn for the quarter; FCF / EBITDA conversion at 61% on YTD basis.
• Net Cash of US$ 1.1 bn at end of December 2019.
• Dividend of ` 2/- per share on double the number of shares post bonus issue; 68th consecutive quarter of dividend pay out.

FY’20 Guidance

• Revenue: FY'20 Revenues are expected to grow between 16.5% to 17.0% in Constant Currency.
• Revenue Guidance is based on FY’19 (April to March) average exchange rates. The above constant currency guidance translates to 15.2% to 15.7% in US$ terms based on December 31, 2019 rates.
• Operating Margin (EBIT): FY’20 expected Operating Margin (EBIT) range is from 19.0% to 19.5%.

“We have stepped into the new decade of innovation and reinvention. It is time to re-emphasize our focus on emerging technologies and prepare ourselves for the next phase of disruption. It must be our utmost goal to build technologies that strengthen the ecosystem, benefit all stakeholders and create better opportunities in the value chain. We also remain dedicated to our unwavering commitment towards creating a diversified and sustainable community.” said Shiv Nadar, Chairman & Chief Strategy Officer, HCL Technologies Ltd.

“We continue our stellar performance over the years and have now crossed a revenue run rate of US$ 10 bn this quarter. Our revenues have grown 16.4% YoY in constant currency and we have delivered a strong 20.2% EBIT. Within two quarters of its inception, HCL Software has already onboarded 4,600 customers. I am pleased that our results continue to validate and reinforce our growth, profitability and investment strategies.” said C Vijayakumar, President & CEO, HCL Technologies.

“We have delivered best-in-class 16.4% revenue growth in constant currency. EBITDA margin at 24.7% expanded 152 bps, and EBIT margin at 20.2% expanded 68 bps on YoY basis. OCF as percentage of Net Income at 109% on YTD basis demonstrates the expected improvement in Cash Flows we have been guiding over the past few quarters. This is also evident by LTM Cash EPS now at ` 48.6, up by robust 20.6% on YoY basis. Cash generation this quarter has been extremely strong, with Operating Cash flow above US$ 700 mn and Free Cash Flow above US$ 650 mn. Net Cash is now at US$ 1.1 bn. We are also happy to have secured “A -” credit rating, with Stable Outlook, from S&P Global.”, said Prateek Aggarwal, CFO, HCL Technologies Ltd.

As organizations embark into the new decade of their transformational journeys, it is essential to create stronger relationships and sustainable solutions. Through its deep-domain industry expertise, customer-centricity and entrepreneurial culture of ideapreneurship™, HCL empowers global enterprises with technology for the next decade today, and enables businesses to transform themselves into next-gen enterprises.

• Mr. Shiv Nadar, Founder and Chairman, HCL and Shiv Nadar Foundation, was felicitated by Business Today with the "Best CEO - Lifetime Achievement Award". He was recognized by the jury for the rapid strides made by the HCL group of companies under his leadership, and his contributions to society through Shiv Nadar Foundation.
• The Hurun Research Institute ranked Mr. Shiv Nadar, Founder and Chairman, HCL and Shiv Nadar Foundation, as the most generous philanthropist of India, for the  third  consecutive  year. With a  total  of  INR 8.3  bn (US$ 120 mn) in FY 18 -19, his contributions constitute close to 20% of all the donations made by the Top 100 ranked philanthropists in India.
• HCL signed 12 transformational deals in Q3 FY’20, led by key industry verticals of Hi-Tech, Manufacturing and Financial Services.
• HCL Software continued its operational momentum in Q3 as it onboarded more than 1,700 partners and completed over 5,000 total sales transactions. HCL Software continues to invest in products and has announced several product releases. The most notable launch in the quarter was Domino v11, representing a milestone in HCL’s commitment to modernize and innovate the Domino ecosystem, and transform over 10 million enterprise- grade apps powering business for more than 15,000 customers.
• HCL announced the general availability of HCL Digital Experience (DX) 9.5. It was founded on the former IBM WebSphere Portal and IBM Web Content Manager software, a recognized and proven digital experience management platform. Using HCL DX, organizations can seamlessly blend digital content, transactional applications and data into compelling and personalized digital experiences delivered to virtually any digital touchpoint.
• HCL completed the acquisition of Sankalp Semiconductor (Sankalp), an advanced technology design services provider offering comprehensive digital and mixed signal System-on-a-Chip (SoC) services and solutions from concept to prototype, in the semiconductor space. Sankalp’s capabilities, combined with HCL’s existing strengths, will help HCL sustain its leadership position in the semiconductor space within the Engineering and R&D Services industry. This strategic acquisition will enable HCL to further expand into newer market-domains, especially in analog and mixed signal design.
• HCL celebrated ten years of success and innovation in France. Coinciding with the ten-year anniversary, HCL has opened a new, state-of-the-art office in Paris, to support further growth in the region. In addition, HCL held a number of other events to celebrate its anniversary, including the launch of a unique advocacy-led program: Digital Disruption Decoded. This program brought together international experts from leading organizations, local universities and government to jointly discuss and deliberate on the role of society and economy in the digital age.
• HCL announced the opening of two new technology delivery centers in Lithuania. These state-of-the-art centers provide leading-edge technology and digital transformation capabilities and services to clients in the Baltic, Nordic and Benelux regions. This is one of the largest technology hubs of HCL in the European region, providing end-to-end infrastructure and application development management services to its near-shore clients.
• Continuing its tradition of ideapreneurship™ and a culture of innovation, HCL filed eight patents this quarter in the areas of IoT, data processing, infrastructure, and software. Six patents were granted in Q3, which were filed in the areas of internet protocol assisting framework, instrument tracking, software development environment lifecycle, cloud computing, application development lifecycle and medical developments.
• At HCL, ideapreneurs innovate and collaborate with each other and with customers to seed, nurture and harvest ideas so that these ideas generate value for customers. This quarter, ideapreneurs delivered customer- endorsed value worth US$ 150M. Over 2,100 ideas were generated and 928 implemented.

• More than 200 global investors and analysts interacted with HCL’s C-suite and business leadership during the Analyst Day 2019 - Accelerate, for a deep dive into factors driving the brand’s industry leading growth, as well as insight into strategic roadmap and expanding capabilities to sustain market momentum – as the technology partner of choice for enterprises seeking transformation for the next decade.
• Creating a sustainable balance in gender diversity has always been a focus at HCL. As of December 31, 2019, women represented 27% of the global workforce.
• HCL won the NASSCOM Corporate Award for “Excellence in Gender Inclusion”. This award highlights HCL’s best practices for gender inclusion to support organizational vision and create positive outcomes. NASSCOM Corporate Award for Excellence in Gender Inclusion has been instituted to recognize and honour organizations that have institutionalized robust and successful programs for driving and sustaining gender diversity initiatives, policies and processes, as well as enable employees to contribute towards the success of their enterprise across all levels.
• HCL was recognized as International Women's Day (IWD) 2019 Best Practice Winner. Over 300 groups entered the IWD 2019 Best Practice Competition showcasing their impressive achievements and explaining how they engaged audiences and communities to help accelerate women's equality. HCL is one of the 18 companies across the globe, which has received this award in 2019, joining previous winners as members in the International Women’s Day Best Practice Hall of Fame.

• HCL prides itself in employing people from different geographies and nationalities, creating a unique fabric of values and traditions. As of December 31, 2019 HCL, employed ideapreneurs from 153 nationalities spread across 45 countries.
• HCL was named one of the best 50 companies globally as per the People Capital Index (PCI), 2019. People Capital Index (PCI) is a study inspired by the Human Capital Index published by the World Economic Forums (WEF). It is an indicator of employee perception on how well the organization is developing their people capital.
• HCL was felicitated with the silver award at the Brandon Hall Group Excellence Awards for its Recruitment Automation program called Techruit – Hiring Made Easy, in the category of “Best Advance in Talent Acquisition Technology”.

Google Cloud

• HCL launched a dedicated Google Cloud Business Unit to accelerate enterprise cloud adoption. The new extensive and strategic partnership between HCL and Google Cloud will help organizations advance their digital transformation agendas powered by Google Cloud Platform and Google Cloud solutions
• Together, the companies’ joint investments will focus on helping customers advance their digital transformations through solutions covering:
  • SAP workload and application migration to Google Cloud Partnership (GCP)
  • Hybrid and multi-cloud deployments with Google Cloud’s Anthos
  • Adoption of leading Google Cloud data, AI, and ML solutions in areas like e-commerce, supply chain, and marketing
  • Application and data center modernization
  • Workplace transformation and collaboration with G Suite
  • DevSecOps and service orchestration

Microsoft Azure

• HCL ERS product Glovius Cloud was certified and optimized to run on Azure and has been listed on Azure Marketplace and Appsource as a SaaS offering.
• HCL joined hands with Microsoft to jointly invest in building Next Generation Digital Transformation propositions and solutions around Quantum Computing and Connected Automotive Vehicle.
• As an Azure Expert MSP, HCL was shortlisted for the Microsoft funded GTM program for Azure VMware Solution (AVS) to seamlessly migrate, extend and run existing VMware workloads from on-premises environments to Azure.

Amazon Web Services

• AWS recently launched AWS Outposts, their Hybrid Cloud offering. HCL was selected as the Launch Consulting Partners for strategy and technology advisory services to migrate and run customer’s workload on Outposts.

IBM Cloud and Red Hat

• IBM Cloud and HCL announced a collaboration at VMworld Europe, 2019 through which HCL can better leverage IBM Cloud’s automated VMware solution stack, providing benefits to mutual clients. The collaboration will help clients migrate and modernize VMware workloads on IBM’s public cloud and quickly modernize their business-critical workloads. HCL will also work with IBM to transform and modernize VMware applications with Kubernetes and containers, leveraging Red Hat OpenShift on IBM’s public cloud.
• HCL inaugurated an IBM & Red Hat Cloud Native lab in Dallas to empower the next generation of cloud native users with a curated set of solutions, tutorials, best practices and more.

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About HCL Technologies

HCL Technologies (HCL) empowers global enterprises with technology for the next decade today. HCL’s Mode 1-2-3 strategy, through its deep-domain industry expertise, customer-centricity and entrepreneurial culture of ideapreneurship™ enables businesses to transform into next-gen enterprises.

HCL offers its services and products through three business units - IT and Business Services (ITBS), Engineering and R&D Services (ERS) and Products & Platforms (P&P). ITBS enables global enterprises to transform their businesses through offerings in areas of Applications, Infrastructure, Digital Process Operations and next generational digital transformation solutions. ERS offers engineering services and solutions in all aspects of product development and platform engineering. Under P&P, HCL provides modernized software products to global clients for their technology and industry-specific requirements. Through its cutting-edge co-innovation labs, global delivery capabilities and broad global network, HCL delivers holistic services in various industry verticals, categorized under Financial Services, Manufacturing, Technology & Services, Telecom & Media, Retail & CPG, Life Sciences & Healthcare and Public Services.

As a leading global technology company, HCL takes pride in its diversity, social responsibility, sustainability and education initiatives. As of 12 months ended December 31, 2019, HCL has a consolidated revenue of US$ 9.7 billion and its 149,000 ideapreneurs operate out of 45 countries. For more information, visit www.hcltech.com

Safe Harbour Statement

Certain statements in this release are forward-looking statements, which involve a number of risks, uncertainties, assumptions and other factors that could cause actual results to differ materially from those in such forward-looking statements. All statements, other than statements of historical fact are statements that could be deemed forward looking statements, including but not limited to the statements containing the words 'planned', 'expects', 'believes', 'strategy', 'opportunity', 'anticipates', 'hopes' or other similar words. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding impact of pending regulatory proceedings, fluctuations in earnings, our ability to manage growth, intense competition in IT services, Business Process Outsourcing and consulting services including those factors which may affect our cost advantage, wage increases in India, customer acceptances of our services, products and fee structures, our ability to attract and retain highly skilled professionals, our ability to integrate acquired assets in a cost effective and timely manner, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, the success of our brand development efforts, liability for damages on our service contracts, the success of the companies / entities in which we have made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property, other risks, uncertainties and general economic conditions affecting our industry. There can be no assurance that the forward looking statements made herein will prove to be accurate, and issuance of such forward looking statements should not be regarded as a representation by the Company, or any other person, that the objective and plans of the Company will be achieved. All forward looking statements made herein are based on information presently available to the management of the Company and the Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.