HCL Technologies announces first quarter 2020 results

Revenue at US$ 2,364 mn; up 3.8% QoQ & 15.0% YoY

Revenue in Constant Currency up 4.2% QoQ & 17.0% YoY

Net Income at US$ 320 mn; down 12.3% QoQ & 10.1% YoY

Key Highlights

• HCL’s strong growth at 17% YoY in constant currency, led by double digit growth across Segments. IT and Business Services 18.1%, Products & Platforms 15.2%, Engineering and R&D Services 13.3% (on YoY Constant Currency basis).

• This quarter, HCL closed the previously announced $1.8 bn acquisition of select IBM products for Security, Marketing, Commerce, and Digital solutions on June 30, 2019.

• HCL launched “HCL Software,” a new business unit that provides modernized software products to businesses to help them transform their environment. A business unit of Products and Platforms segment, HCL Software has successfully delivered more than 400 releases, for popular products such as Informix 14.10, Domino 10 and Workload Automation 9.5.

• HCL also completed the acquisition of Strong-Bridge Envision (SBE) on April 01, 2019, a digital transformation consulting firm with offices in Seattle, Denver, Atlanta and New York City.

• Operating Cash Flow / Net Income conversion at 88% (on LTM basis).

• Dividend of `2 per share, 66th consecutive quarter of dividend pay out has been announced.

FY’20 Guidance

• Revenue: FY'20 Revenues are expected to grow between 14.0% to 16.0% in Constant Currency * Revenue Guidance is based on FY’19 (April to March) average exchange rates. The above constant currency guidance translates to 13.3% to 15.3% in US$ terms based on June 30, 2019 rates.

• Operating Margin (EBIT): FY’20 expected Operating Margin (EBIT) range is from 18.5% to 19.5%.

“With a rapidly changing global ecosystem and ever-evolving technologies, we believe in building transformational partnerships and long-lasting relationships with our customers by delivering valuable services, products and platforms. Given our deep commitment to be a responsible organization, we continue to remain focused on driving diversity, CSR and sustainability as an intrinsic part of the way we conduct business”, said Shiv Nadar, Chairman & Chief Strategy Officer, HCL Technologies Ltd.

“We have started FY’20 on a very strong note with our quarterly revenue growth of 4.2% QoQ and 17% YoY in constant currency. With our current momentum, we aspire to register an industry leading organic growth in FY’20. While our margins this quarter were muted in line with our investment strategy to leverage future growth opportunities, I am confident that our time-tested operating model will deliver margins within our guided range this year”, said C Vijayakumar, President & CEO, HCL Technologies.

”We are delighted to have delivered the best revenue growth in the industry. EBITDA has exceeded US$ 2 B mark on LTM basis. Cash EPS has increased by 13.3% on LTM YoY basis. And all this is before any contribution from the mega acquisition of 7 IBM software products, which we expect to kick in from Q2 FY20. We have also introduced new segment reporting consequent to reorganization of our global operations and reporting Products and Platforms as a new segment”, said Prateek Aggarwal, CFO, HCL Technologies Ltd.

Corporate Achievements

The world is changing rapidly and it is imperative for an organization to adapt to this dynamic ecosystem. With entrepreneurial DNA at its core, HCL has always been at the forefront of innovation. HCL continues to invest in the next-generation capabilities and solutions in order to create a long-term and sustainable impact for its stakeholders.

• HCL launched “HCL Software”, a new business unit that provides modernized software products to businesses to help them transform their environment. The business unit aspires to reshape the enterprise software business by focusing on innovation and cutting-edge delivery for customer success. A business unit of Products and Platforms segment, HCL Software has successfully delivered more than 400 releases, for popular products such as Informix 14.10, Domino 10 and Workload Automation 9.5.

• HCL continues its strong deal win momentum, signing 12 transformational deals this quarter, across its service lines. These deals were led by industries such as Financial Services, Manufacturing and Retail.

• On June 30, 2019, HCL closed the previously announced $1.8B acquisition of select IBM products for Security, Marketing, Commerce and Digital solutions. As part of the deal’s closure, HCL will be responsible for the research and development, sales, marketing, delivery, and support for AppScan, BigFix, Commerce, Connections, Digital Experience (Portal and Content Manager), Notes Domino and Unica.

• HCL celebrated its 20-year anniversary in Australia and New Zealand (ANZ) with a series of events and activities across its offices and the communities it serves. Over the years, the company has made significant contributions to the ANZ IT market and to the local economy in various sectors. HCL now has a workforce of more than 1,600 across eight locations – Adelaide, Sydney, Melbourne, Brisbane, Perth and Canberra in Australia, and Auckland and Wellington in New Zealand.

• HCL was selected as the digital transformation partner for Cricket Australia to provide new exceptional digital experiences for fans, teams and the community at large. HCL will implement its Scale Digital methodology and will work in the areas of design, mobile, front-end engineering, API, data, machine learning, AI, voice engagement, and other digital areas in order to conceptualize, build and maintain Cricket Australia’s digital properties. This will help the Australian cricket’s governing body provide a heightened digital experience to cricket fans, players, partners, employees and volunteers across the country through digital offerings designed to increase passion for the sport.

• HCL expanded its US operations by launching a CyberSecurity Fusion Center (CSFC) in Frisco, Texas. The opening of the CSFC represents the next phase in the company’s mission to support the securing of businesses globally by providing customers with a single point of contact for the Enterprise Security Lifecycle, from detection to remediation.

• Continuing its tradition of ‘ideapreneurship’ and a culture of innovation, HCL filed 11 patents in Q1, adding to its intellectual property base. Research, discovery and invention came from HCL professionals driving next-generation technologies and platforms, blockchain, automation, data analytics and simulation and machine learning.

• HCL has invested $2m in a startup technology company, in the social networking area, called Kalido, picking up a 6.6% stake as part of a Series “A” round. Founded in 2014, Kalido is a next-generation collaboration and connectivity tool for Professional business networking, freelancing and skills matching. With its real-time AIdriven matching platform, Kalido helps address the changing work environment in wake of the ongoing Technology shift and helps Enterprises build longstanding networks and meaningful connections. Kalido offerings are planned to be integrated with cloud-native DRYiCE platform and newly acquired “Connections” product to create access to HCLT’s vast customer base as well as broaden HCL’s offerings under Digital Workplace Solutions.

HUMAN RESOURCES

• HCL continues to hire local workforce in all regions across the globe. As of June 30, 2019, local hires represented 70% of the US workforce.

• Scaling and transforming employee skills continues to be a key focus area, in line with HCL’s “Employee First” culture. In Q1, HCL delivered 85,193 employee trainings in digital and next-gen technology skills.

• Creating a sustainable balance in gender diversity has always been a focus of HCL. As of June 30, 2019, women represented 25.5% of the global workforce.

• HCL prides itself in employing people from different geographies and nationalities, creating a unique fabric of values and traditions. As of June 30, 2019, HCL employed people from 146 nationalities spread across 44 countries.

• In Q1, there was a net addition of 5,935 employees.

PARTNER ECOSYSTEM

• HCL achieved AWS Migration Competency Status in the Migration Acceleration Program (MAP). As a designated AWS MAP Partner, HCL will help its customers reduce the risk of migrating to the cloud, build a strong operational foundation and offset the initial costs of migrations. This achievement marks a new milestone in the 5-year partnership and validates HCL’s strength and capabilities in leading complex migrations. HCL has also joined AWS CPPO (Consulting Partner Private Offers) program, which aligns HCL’s expertise with the AWS Marketplace “friction-free customer purchase experience”.

• HCL successfully achieved the Expert MSP Certified competency by Azure. This competency showcases HCL’s capability on Azure and validates its strength and capabilities in leading complex migrations. As a designated Azure Expert MSP Partner, HCL will help its customers reduce the risk of migrating to the cloud, build a strong operational foundation, and offset the initial costs of migrations.

• Google named HCL an early service partner in the Google Anthos Program because of HCL’s strength in infrastructure services, which will enhance the Hybrid Cloud solution with Google Cloud Partnership (GCP).

• HCL engaged with GCP on a data center exit model that will enable customers to move from on-premise to Google Cloud seamlessly. HCL signed a specific Professional Services Agreement for SAP on GCP migrations to Google cloud and named GCP as a preferred platform, to be utilized in the HCL Cloud Foundry for conducting customer application prototyping.

• HCL signed strategic partnerships with Pivotal and IBM Cloud Private (ICP) to help accelerate the hybrid cloud journey of customers.

• HCL extended its VelocITy framework to encapsulate VMware Cloud, HCL certified for VMware Validated Design 4.3 (VVD). The validation provides comprehensive and extensively tested blueprints to build and operate a software-defined private cloud.

• HCL partnered with Silver Peak for SDWAN (Software-Defined Wide-Area Network) as a Service in the SDWAN offering “Transport Independent Site - TIS”.

• HCL partnered with Aruba for wireless operations management and automation.

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 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 while 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 June 30, 2019, HCL has a consolidated revenue of US$ 8.9 billion and its 143,900 ideapreneurs operate out of 44 countries.

For more information, visit www.hcltech.com

SAFE HARBOR  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.