Hexaware Technologies Limited (NSE: HEXT) Q4 2025 Earnings Call dated Apr. 29, 2025
Corporate Participants:
Niraj Khemka — Head, Investor Relations
Srikrishna Ramakarthikeyan — Chief Executive Officer & Executive Director
Vikash Kumar Jain — Chief Financial Officer
Analysts:
Ankur Rudra — Analyst
Abhishek Kumar — Analyst
Shweta Seth — Analyst
Manik Taneja — Analyst
Dipesh Mehta — Analyst
Abhishek Gupta — Analyst
Gaurav Rateria — Analyst
Presentation:
Operator
Good day, and welcome to the Hexaware Technologies Limited Q1 CY 2025 Earnings Call. We will begin with the presentation by the Hexaware Technologies management team, followed by a question-and-answer session. [Operator Instructions]
I will now hand the conference over to Mr. Niraj Khemka from the Hexaware Technologies. Thank you, and over to you, Mr. Niraj Khemka.
Niraj Khemka — Head, Investor Relations
Thank you, Dinesh. Hello, everyone, and welcome to Hexaware Technologies Q1 CY ’25 Earnings Call. In the call today, we have with us Mr. R. Srikrishna, CEO; and Mr. Vikash Jain, CFO.
In the course of this call, we may make certain statements which are forward-looking and may involve a number of risks and uncertainties. All forward-looking statements made herein are based on information presently available to the management, and the company does not undertake to update any forward-looking statements that may be made in the course of this call. In this regard, there’s a full disclosure, which has been included in the investor presentation and the press release. We consider that as read.
With this, I’ll hand over the call to Keech. Keech, over to you.
Srikrishna Ramakarthikeyan — Chief Executive Officer & Executive Director
Thank you, Niraj. Could you go to the next slide, please.? One more. Thank you. So good morning, good evening. Welcome, everyone. For all that’s happening around the world, we had a surprisingly normal quarter. We expect quarter 1 of a calendar year to be a soft quarter always. And that’s kind of how it was. It is a flattish quarter in terms of quarter-on-quarter, still a solid YonY growth of roughly 12.5%. Both are a little higher on INR terms, 16.5% YonY and INR, and moderate growth QonQ INR terms.
While I wouldn’t call these out in a good quarter, I’ll call out two or three factors that contributed to our performance. There were two clients, this was planned, who moved the work offshore. And then, there was one program, which I will talk about later that actually delayed start. And I’ll say, between them, they had a little over 100 bps of revenue headwind during the quarter. Like I said, this is kind of what we would consider normal. I wouldn’t call out in a regular quarter, but in a soft quarter I thought it is worthwhile calling out.
The fact is the planned movement of work from onshore to offshore for two clients did help improve our margins in a difficult quarter. So we’ve actually improved EBITDA from the prior quarter to 16.7%. And actually, our EBITDA in absolute terms gone up 20-odd percent YonY in absolute terms. And our EPS is up 16.7% YonY. And finally, we have a healthy closing cash balance as of 31st March, as we always do.
I want to spend some time on some of the investments and some of the key topics that happened during the quarter. The first is that we expanded our footprint in Dehradun. We actually moved to a much larger facility. This is a good indication of the success of the location. We also opened a new 700 seater in Hyderabad. Some of you that may have seen our Chennai facility know that we have a customer experience center there. Post-COVID as client visits to our centers have declined, we decided to open two centers, one each in New Jersey, Jersey City, and the second in London. And these are investments we’ve made to help get closer and bring some of our innovation closer to client locations. The Jersey City location, we inaugurated a few weeks ago, and London office actually, while we’ve already moved in there, the official inauguration is in a couple of days from now.
We closed our headcount at 31,500-odd. This is actually a net reduction from the prior quarter. However, if you peel the onion, our IT headcount went up moderately, just shy of 100 people, and all the reduction was actually in our BPS business. Attrition, we continue to do very well. It’s range-bound. It was 10.8%. It’s 11.2%. And our utilization, as expected, after a furlough heavy quarter moved up in Q1.
We spoke about our NPS score in the cycle directly prior to IPO. Actually, since then, we’ve got the results for ’24 because the numbers we had published at that time were ’23 results. Early this year, we got results for ’24. And as always, we scored very well on NPS, 67; 27 points higher than industry median. We continue to have three clients above $75 million and one in the $100 million-plus category.
In a variety of discussions, I’ve spoken about what are four strategies that we have to accelerate and improve our historical performance, and those four were: the first one was legacy modernization using AI, and more specifically, we think we have a highly differentiated platform, RapidX. The second was to open PE as a channel. The third was to expand our footprint in Hi-Tech and ISVs. And the fourth was to make our Middle East and India markets count more. And I think the last one, especially in the light of global macros, there is additional conviction that these markets, India and Middle East will be more decoupled from world macros than other economies. So I’ll touch a little bit upon each of these to provide a progress.
The most progress actually is in the first line, which is legacy modernization. So we did beta last year with two or three clients in Q4. There’s a lot of confidence that came from that, and we decided to invest in both accelerating the platform and in a go-to-market effort. And the go-to-market effort has been in place essentially since Jan this year. And I’m happy to say that we have shy of 40 clients in the pipeline for this already. And I can say that we’ve not kind of had a new service that has attracted such a solid pipeline early in the process. To be sure, all of these — many of these are in the POC kind of process. That’s how these will start because they tend to be very large and involved programs, but even the POC investments are material for clients. We started our capability with [Indecipherable]. We’ve expanded it since to COBOL and PL/SQL. I think a good marker of success for us is when we talk the next time, after Q2, that we should have moved at least one or two clients out of POCs into real full-scale modernization orders. So, that will be defining what good will look like for us in a quarter from now.
I think the second of the board [Phonetic] for us where we’ve made the most progress is in the Middle East and India markets. I think we spoke about the fact that we did a couple of JVs. I think that’s on the Middle East side, and there is a very healthy pipeline in Middle East that we expect will play out through the rest of the year.
India/GCC is where we have been actively looking for ways to become significant in the market. As a quick recap, for good or bad, we don’t have a lot of footprint in GCCs. And at an aggregate, we see it as a big net new opportunity because we get virtually very low millions of digits, millions of revenue from GCCs right now. And you will hear some material updates from us in the next quarter on this.
I will pick ISVs as the third topic. I think some of you may have seen that we made a notification that Rak, who used to lead our Hi-Tech and Professional Services vertical as a combined unit, left the organization. He became the CEO of another company. We — what was in the cards in any case, we kind of executed immediately, which is to separate Hi-Tech and Professional Services. We have search underway, so it’ll take us a little bit of time to find a new leader. But that new leader is going to be very focused on Hi-Tech end market [Phonetic]. The desired profile for us is somebody who’s done this sold into [Indecipherable] at scale. And so, we think that will give a boost to our ongoing efforts in ISV.
And lastly, private equity, we think there is obviously a fair bit of discontinuity in that market right now, but we think we will see outcomes coming through the Q3 and Q4 of this year. So we’ll have more meaningful updates for you later in the year. But I will provide every quarter a brief commentary on each of these four. The reason is this; we’ve spoken about a $3 billion ambition on revenue for us. We’ve said good for us looks like getting there in calendar year 2029. And even through challenging macro this year, we actually feel pretty good about getting to that medium-term goal as a consequence of these growth accelerators and tuck-in M&A.
Over to you, Vikash.
Vikash Kumar Jain — Chief Financial Officer
Thanks, Keech. Can we move to the next one? So just to recap last quarter what Keith mentioned, we had a good quarter with revenue year-on-year growth being 12.4 percentage in reporting currency, 12.7% in constant currency. The growth was led by four out of the 6 verticals growing at double digits on a year-on-year basis.
We had double digit — that came through a combination of both the existing accounts and new account ramp-ups. The two verticals that did not deliver year-on-year are banking and M&C. Banking headwind is associated with project closure that we had called out even in our last earnings call. However, we have a very healthy pipeline, and we expect this vertical to grow meaningfully from a full year perspective. In fact, it would be one of the growth drivers for us at an overall company level.
M&C is expected to continue to face some headwinds. Recent challenges, whether it is in terms of the tariff, market uncertainties, trade barriers are leading to a bit of a delayed decision-making and subdued spend. So that’s the reason for M&C in terms of underperforming for some time.
Let’s go to the next one. The only key point to highlight here is very meaningful set of accounts that we continue to add. So from a last year perspective, if you look into it on an LTM basis, we have added two accounts which are greater than $20 million and one account which is greater than $75 million. We do have a $100 million-plus account. And as we had called out last time, hopefully, by end of the year, we’ll have two accounts which are going to be $100 million plus. Next.
Srikrishna Ramakarthikeyan — Chief Executive Officer & Executive Director
So Vikash, I will take back over. Thank you. We had — I think the most important aspect of Q1 for us is a number of solid wins that we think sets us up very well for the next quarter — for the remainder of the year. These wins are a mix of EN and NN, and I will briefly touch upon several of these. The first one is a transnational bank that provides aid. They go through a cycle of redoing the vendor list every 5 years.
So this year — through last year, they went through a process. Early this year, they announced 7 vendors. And I think we are or maybe one more are the only nonincumbents in that list. What will happen is that through the course of the next two years, they will bid out $200 million per annum roughly of work, which are restricted to 7 of us. So we expect this account to be — it is a very large logo. We expect this could be — this will be a growth driver for us this year and a more material growth driver for us in future.
The second one is a similar firm in Europe where we are part of their — we are the lead implementers on SAP for their most important core transformation project of back office on finance and HR. And this is a very large program that has eyes from the top of this bank. In fact, I am a part of their business steering committee for this.
The third large global bank, this — and I will later provide an update on some of the pipelines that we spoke about in the past. This is a client where — which is still in pipeline for a large consolidation opportunity. They actually gave us a test drive. And so we won a piece of work that has several components to it, but the most important component is app modernization and transformation.
The next one is a cool work. This is a legal advisory firm. I think in a couple of weeks, there is a legal conference Legalweek, which brings together the heads of many legal firms, the tech heads and business heads. And actually, an app — Gen AI-based platform and app, which we built for this firm is getting launched at this firm in — at this forum in a couple of weeks.
The next one, this is the bottom left-hand corner. One of the key things happening in the airline industry is called ONE Order, which allows airlines to distribute their products more widely, not just through their own websites. And this is a new standard that will allow them to do that. And this is actually — will be one of the first implementations in the industry for that. So this is the ONE Order platform implementation.
We have been going after legal as a subdomain. We already have a top 5 client in this domain. There’s another one. A lot of the initial work is created because of a need to separate from China, and we have specific experience in doing that rapidly. And this is, again, a top kind of 10 global legal firm.
The next one is actually a health care division of a very large conglomerate that’s separated into three businesses recently. And we have an app modernization and legacy modernization effort underway here. And the last one is one of the largest pet insurance companies in the world. And many parts of the world, pet insurance is a big thing.
There’s a lot of money that pet parents spend on pets and insurance is a way to manage that spend better. And we won — essentially we became a strategic supplier. There’s an initial set of good set of work, but there’s a lot of pipeline for us to become — for this to become a very material client for us very quickly. Next slide, please. Vikash?
Vikash Kumar Jain — Chief Financial Officer
Thanks, Keech. So on the margins, we are progressing well on improving margins. Current quarter saw a margin improvement of 40 bps. Our Q1 margin at 16.7%, the 40 bps improvement was driven by operational benefit of 50 bps, which was partially offset with currency headwind of 10 bps.
And the currency headwind for us is a combination of two factors, the underlying benefit that we get with respect to rupee depreciating, but at the same point of time, how the hedges play out because we start taking hedges as per our hedge policies two years in advance. What you would see here that while the EBITDA improved by 40 bps, the net profit improvement is lower as ETR has gone up quarter-on-quarter.
ETR for the current quarter is 25 percentage versus 23 percentage last quarter. Last quarter had some onetime credits in our ETR. As we had guided to earlier, our ETR guidance for the full year is approximately 26% versus 25 percentage from a full year of last year and what we saw in the current quarter. The marginal increase, what you would see in the subsequent quarters is on account of some of the SEZ units coming out of the tax holiday period.
If you look into our current quarter results and despite the currency headwinds that we absorbed in the numbers, we delivered a sequential improvement. And this is despite the fact that we have the ERP cost still into our numbers, which is expected to go out in the future quarters. So we remain confident in terms of delivering to our reported margins of 17.1% to 17.4% from a full year perspective.
Move to the next one. So we are making progress on our operational — we continue to make progress on our operational metrics. The offshore mix has improved by 200 bps sequentially. You heard Keech state that we had two clients move some of their work offshore plus the ramp-up in the new deals helped with a better offshore mix. Now this has — while this is a bit of a revenue headwind, this has definitely helped us in terms of our margin expansion.
On the headcount, while there is a net decline, if you look into the numbers what we have given as part of the data book published with the results, you would see that we added 100 net headcount — approximately 100 net headcount in IT, which was offset by a reduction in the BPS headcount of close to 850. On the IT side, we have added headcount while improving our utilization quarter-on-quarter, demonstrating that we have an underlying volume increase.
BPS, there is a marginal decline in revenue quarter-on-quarter and the headcount associated with that has actually come down. We improved our utilization quarter-on-quarter. We expect our utilization to be range bound between 82% to 83% from a full year perspective. Let’s move to the next one. DSO for the quarter is at 75 days. This is marginally higher than the target DSO level we have set out for ourselves, which is 70 to 72 days.
Like every year, at the start of the current year, we had a meaningful number of SOWs that were due for renewal. This is basically a paperwork while the work continues to happen at the client’s end. However, it took a little bit more time than usual to have the paperwork executed this year. The resultant impact of the same is basically delays in invoicing and leading to a DSO increase. We expect the DSO to be back to the 70 to 72 days by the year-end.
On the — similarly, on the OCF to EBITDA. Now we have a very healthy cash balance of $225 million, completely debt free. Our goal is to generate OCF to EBITDA on an LTM basis at 70 percentage. And we always look at LTM basis as there are cash flow seasonality primarily associated with tax and variable payouts in between quarters. So our OCF to EBITDA for LTM Q1 is 67%, which is marginally lower than our target levels of 70%, driven by the DSO being higher in the current quarter.
On the ETR, as I called out, ETR for last year was 25 percentage. There was some variability by quarters, both ways, which actually offset the impact on a full year basis. ETR for current quarter is 25%. We expect our ETR for the full year to be 26 percentage. Last from my side, just to add on the dividends. We dividend — we declared dividend post the quarter close of $5.75 per share, leading to a total payout of $40 million.
Keech, over to you.
Srikrishna Ramakarthikeyan — Chief Executive Officer & Executive Director
Thank you, Vikash. Could you go to the next slide, please? This is our last slide, and I’m going to spend several minutes, hopefully addressing several kind of questions that you may have. I think the first and top is really kind of an update on our two GSE clients. I know there’s been some risk perception worry about where this will go. So here’s the update. So update on client one. This is one of the two consolidation deals that we won earlier in the year.
The deal execution was delayed but has begun now. So it got delayed for a few to several weeks, but it has started now. So we are all good here. The delay was not just the revenue kind of impact for that, but it’s also a signal of what could further happen because we have a very large pipeline in that client. So the fact that it’s bigger now is actually a good signal for us that whatever uncertainty was there when the new administration took over has kind of receded.
In client two, we had a sharp ramp-down. Now this actually was told to us early last week. It was quite — it didn’t happen immediately, but we had a sharp ramp-down, which will account for roughly 1% of the company revenue. However, in my conversations with their management, what they said is this is our kind of here and now attempt to reduce cost. However, our more sustainable way of doing this is that we want to consolidate.
They have roughly 2,500 contractors, which they do business with over 100 people. We are less than 20% of that. And — but we are the largest. And they said they want to get it down to a very small number, somewhere between two and 10. And so that’s a process that has started. So in many ways, for this client, the way we look at it is the downsides are behind us and it’s in the books and upsides, potentially large upsides are ahead of us.
Now we spoke on two deals that we won last time. We didn’t kind of provide a color on size of these. I want to provide — we have more clarity on what are the book of work that will come. So really client 1, which is kind of the same one where the work got delayed, that will give us, on an annualized basis, about $20 million to $30 million per annum incremental revenue and ramp from Q2 — partial ramp from Q2.
Client two, we will get $25 million to $35 million annualized incremental revenue. That again, the partial ramp is from Q2. Now we also spoke about two very large, call it, mega consolidation opportunities in clients where we are nonincumbents for this work. We do other work on both these clients, but we’re not incumbents for this. Both of these, there have been positive progress. I’ll say they are closer to a decision. In fact, in one of them, they gave us a test run. I spoke about that deal earlier.
Aside from these, we have two other very large consolidation opportunities in the pipeline, one of which I referred to already, the 2,500 FTEs. And in that, as the largest incumbent, we feel good about where we are. The other one is in another large global bank. We are — we have a footprint, but we’re not a strategic vendor. We have very large spend, and this process will potentially put us in play for another $0.5 billion per annum of outsourced spend.
Now the reason I’m highlighting these is, a, of course, impact on our performance and our revenues, which is very positive. But I think more importantly, also that we are now, with some more consistency, getting into consolidation deals in very large customers who have very large spends. And that’s as a consequence of our focused strategy to make sure that we hunt material logos even on Day 1. It starts with low or even sometimes zero revenue. But eventually, these are the clients where if you’re in play, you get opportunities which are very large. So what does all this mean for ’25?
I think we last time said we’re not going to provide guidance. We’re taking kind of a 10-year view. There will be up and down cycles. We’re going to stick to that. We’re not providing guidance, but I’m going to provide as much color as we can. So Q2, actually, our underlying performance will be very strong. There are two — I already spoke about one of the GSEs will have an impact of 1% of company revenue. That has already started. It was announced last — early last week, and it’s in effect immediately.
That plus another large program, which ended, normally, the client would have had quite a bit of follow-on work, but they are client in financial distress. So they have actually stopped follow-on work for that. So just between these two, we’ll convert Q2 from what would have been a great Q2 to a good Q2. So we still expect to have a good Q2, but actually underlying performance ex of these two will actually be a very solid Q2.
And that momentum will continue into Q3. So we expect to have accelerated growth in Q3. And given some of the deals in the pipeline and the back-end nature of the ramp-up, we expect at this point that we will buck the usual trend in Q4 and actually deliver sequential growth in Q4 as well. And much of this is not macro contingent for us. A measure of our confidence, we expect to hire 1,800 to 2,000 IT people in Q2, both to serve Q2 ramp and in anticipation of Q3 ramp.
Some vertical color, and Vikash touched on some of these already. We expect banking and financial services to lead growth for us. FS already is, and it will continue. Banking, you’ve seen a couple of negative quarters, but you will see a very sharp literally potentially double-digit Q-on-Q growth starting immediately from Q2. So it will turn around.
And actually, for the full year, we expect it to be a growth driver for us. T&T, I’ll say it’s marginal incremental weakness due to macros over the last several weeks, but it will still grow at roughly company average for us. HTPS, H&I, we expect it to grow roughly at company average. And M&C is where actually the biggest impact of macros is, and it will have — it has had weakness and it will actually continue to have significant weakness.
Finally, on margins, I want to reiterate what Vikash said, we will improve our reported EBITDA to a range in 17.1% to 17.4%. We are not in the phase of profit kind of maximization. These are what will happen naturally. We are still investing significantly in our business. I did kind of speak about some of the investments we made even in this quarter.
ERP cost will be a tailwind for us. It will end, end of Q2. Finally, on margins, there are medium-term levers to improve the margin 100 bps to 150 bps. However, our here and now focus is to not necessarily apply those levers, but instead focus on using that to maximize growth.
With that, we will stop for Q&A. Dinesh?
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from Ankur Rudra from JPMorgan.
Ankur Rudra
So maybe to start with, Keech, you gave a lot of detailed outlook. Could you maybe elaborate a bit more on the nature of client feedback you’re getting across banks, financial services, manufacturing and travel on spend intentions? And how widespread are your client ramp-downs and cancellations? I think you referred to two of them specifically.
Srikrishna Ramakarthikeyan
So I had the benefit we had in the first week of April and annual kind of client meeting at Pebble Beach, it’s a golf resort in California. And we had like, call it, 50 clients in that location. We had conversations with a number of clients about what does the macro mean for them, positive, neutral, negative. I think kind of manufacturing clients, a lot of them actually pulled out of the event.
That in of itself tells a story. And the ones that were there clearly said we have trouble. There were a surprising few clients that actually said it’s a positive for them. It was a surprise to me, but for them, it was kind of, hey, this is a positive for us. For example, there’s an insurance client that said, any time there’s higher volatility, people tend to buy more of our products. The vast majority said it’s kind of a second order impact, just a wait and watch.
They don’t have any kind of specific plus or minus plans that are in motion. It’s a wait and watch. Now Ankur, you said something I mentioned a couple of client ramp-downs. Actually, I didn’t. I mentioned one, which is a project that was scheduled to get over. Normally, there would have been follow-on work from that, but that client because of financial issues did not choose to continue. They’ve chosen not to continue at least for now. I can’t recall another one I mentioned.
Ankur Rudra
So the other one is the ramp-down on your GSE client where you will be hit this quarter onwards. I was referring to those two, but are there any other besides those two?
Srikrishna Ramakarthikeyan
No. I mean nothing which is not in the normal course of business.
Ankur Rudra
Okay. So given all of this, Keech, what kind of visibility do you have into the year now given the headwinds you face? Do you think you will be able to sustain the double-digit growth momentum given you face somewhat tough comparables in both 2Q and 3Q? And also, if you can summarize the full year outlook in a way, how should we think about it versus what you did in the first quarter or what you did last year?
Srikrishna Ramakarthikeyan
Yes. So I did say that Q2 — let’s start with Q2, right? But actually Q2, our underlying growth will be solid. And actually, because of the two clients that you referred to, it will go from an outstanding quarter to a good quarter. So we’ll still have a good quarter. And those two kind of quarter-on-quarter headwinds will go away for Q3. And actually, Q3 growth will accelerate. So we actually expect to have a pretty solid year, Ankur.
Ankur Rudra
Okay. Understood. Maybe the last question on the GSE side, just to clarify. Your second GSE client, the impact will happen for two months in the current quarter. It will complete in 3Q. Is that the mean to understand this?
Srikrishna Ramakarthikeyan
2.5 months, a little more than — I mean, a little under 2.5 months, 2 to 2.5 months for the current quarter and full quarter from the next, yes. But their intention, at least right now, what they have stated is that they will make pretty quick decisions on the consolidation because that’s a more sustainable path to cost reductions. Right now, they’ve kind of taken a, as they described it, peanut butter approach, just uniform cuts. They haven’t given thought to programs and things like that, that get impacted. That’s not a sustainable way for them to more sustainable ways through consolidation.
Operator
[Operator Instructions] Our next question comes from Abhishek Kumar from JM Financial.
Abhishek Kumar
Keech, you mentioned that now Hexaware is increasingly participating in vendor consolidation or large deal scenarios. So one question is what is helping us win more in these deals? And second, have you seen more pricing pressure around large consolidation deals? Because it looks like these are the only type of deals out there in the market.
Srikrishna Ramakarthikeyan
So I’ll say, I think even — the first question is not even why we win. I think the first question is why are we in these deals because they can only happen large — very large opportunities can only happen in very large clients. And I think it’s a very systematic effort for us to hunt material logos. And I think we’ve mentioned in the past, some 61%, 62% of our revenues comes from clients whose revenues are above $5 billion.
And that’s a very — that’s not an outcome without a focus and an effort behind that. So I think once you get in and you deliver well and over time, you get an opportunity to play in this, right? As of now, much of these opportunities that are in front of us, we are nonincumbents far. It’s really kind of no downside but potential upside scenarios for us in many of these. Clients have chosen not to kind of put our book of work into the mix or in many cases, we are not even in that lane, right, for that.
But yet we’ve done well somewhere else. So they have put us in play for something larger. So why we won is simply why we win the ones that we’ve won is, I’ll say, really kind of three things: One, whatever we have executed, we execute very well; two, we are able to bring more intensity and focus to the clients; and three, customers love our platforms.
Abhishek Kumar
Okay. Understood. Maybe one last related question. It looks like the deal wins have been healthy. Any color on what would be the TCV order backlog we are sitting on compared to where we were maybe a year back? And which verticals you think order bookings are strong? And maybe a related one is we have seen — you mentioned a couple of ramp — one ramp down and one delay. So the deal TCV to revenue conversion, do you think that would flow as usual? Or as we go through the year and there are uncertainty around there could be gaps between TCV and revenue conversion?
Srikrishna Ramakarthikeyan
The reason for the many kind of gaps between TCV to revenue translation is the reason we are not reporting a TCV. Instead, I’m hopefully making it simple for you by translating it to specific revenue range of growth in the key deals. This is obviously not all of the deals, but at least the large ones, we’re going to try and translate to a revenue growth over the next 12 months which is what we’ve done for two other deals.
Yes. I think you asked about verticals. I already gave commentary on verticals. FS and banking will lead for us. And M&C will pull us down. What would have otherwise been — M&C will be a drag, others will be roughly on par.
Operator
Our next question comes from Shweta Seth from AllianceBernstein.
Shweta Seth
So I have two questions. First is, do you see any impact from reshoring in case of any risk due to any change in Trump policies? And my second question, I’m not sure whether it’s within your scope to comment right now. But just the question will be around the refinancing risk for the bond. Like what are you thinking about the $1 billion bond that’s maturing next year? Like any — what options do you have in case you’re not coming to the dollar bond market?
Srikrishna Ramakarthikeyan
Thank you. So on reshoring, we’re not hearing any clients talk about it, okay? Certainly, as it pertains to our business, you are hearing enough announcements, including IBM most recently that they’re kind of going to invest more in the U.S. for manufacturing. There’s nothing really about services. But should it happen, it’s not necessarily a risk for us. I see it as an opportunity.
We have a solid kind of employment brand in several major pockets around the U.S. I actually see it as an opportunity. The clients want to do more in the U.S. The second question, we can kind of do — like you said, it’s not — the bond is not on Hexaware. Nevertheless, I’ll say that we have good options on the table. So you should not think of it as an issue. So when or much before the time comes, there will be an answer for it.
Operator
Our next question comes from Manik Taneja from Axis Capital.
Manik Taneja
And my apologies that I joined the call late. So if you can — I don’t know whether you already answered that, but if you could break up the segmental performance between Hi-Tech and Professional Services in the current quarter? And how do you see each of those two parts behaving through the year? That’s question number one.
And the second question is with regards to some of the challenges or the pressure that you are witnessing with some of your GSE customers. Do you think this drives more expansion in your offshore revenue mix and thereby some sort of a tailwind to margins as well?
Srikrishna Ramakarthikeyan
So on the first one, Manik, the — I mentioned earlier that we are actually going to split our Hi Tech and PS. And we think that will give serious growth wings to Hi Tech. We’ve done this playbook before. Banking was embedded in a small portion of our financial services vertical.
We separated it four years ago and has actually grown quite nicely, and we’ve acquired some major logos in the process. We’re going to do the same to Hi Tech. Hi Tech actually is very small right now, okay? So it wouldn’t be meaningful commentary to talk about differential performance between the two. Much of our performance is actually driven by PS right now. And that’s the opportunity for us to do a lot better in Hi tech, and hence, we are going to create a new vertical.
On the second one, we did answer in some detail, Manik. So maybe we can follow up with you in more detail, but I’ll tell you the high level. Out of the two clients, one of them, there was a slight delay in consolidation deal, but that’s since started. So we are actually on good we get there. The fact that we’ve started also to us is a signal that things are back to kind of normal.
The second one, there was a sharp rundown that was announced early last week, effective immediately. That will have an impact of 1% on the company revenue for the year. So — but that is behind us. They’ve also said they want to consolidate 2,500 vendors to a much smaller list. And as having just shy of 20% there and as a large spender, we actually stand in a very good spot in that exercise. But there was more details and perhaps we could do that offline, Manik, since we answered it in some detail earlier.
Manik Taneja
Keech, my clarification on this one is basically, does this provide an opportunity to increase your offshore revenue mix given some of these GSE customers have largely been onshore service customers?
Srikrishna Ramakarthikeyan
I mean, in general, I think we will improve our offshore mix. We did improve it this quarter, but that is not because of the GSEs. Actually, there are two other clients that have planned movement from offshore to onshore. That was a revenue headwind for us in Q1, but a margin — sorry, revenue headwind, but a margin tailwind for us.
So I don’t think GSEs will be a driver of improving offshore mix. I mean there is a onetime kind of step reduction that will be an improvement for offshore. But there’s still plenty of opportunities, like I said. In some ways, the downsides are behind us. We think there is potential large upsides ahead of us.
Operator
[Operator Instructions] Our next question comes from Dipesh Mehta from Emkay Global.
Dipesh Mehta
Two questions. I just want to understand because in second GSE client, you indicated about immediate ramp-down kind of thing. So what factor led to it? And whether you see risk it to play out even in the another client?
Second question is about the CY ’25 outlook, whether any change, let’s say, based on what you have observed in quarter one and likely to see in next three quarters compared to what we might have expected at the beginning of year, if any changes?
Srikrishna Ramakarthikeyan
See, the — on the first one, right, I mean, what led to the reduction, I explained it earlier. The client is simply doing and this is their words peanut butter. There was an ask from the administrator to reduce X amount of cost, and they did. And they didn’t give thought to where, what programs, quality work, nothing.
That is all kind of Phase 2 through a consolidation, a more thoughtful exercise. That has already started. There’s an RFI out already, and their desire is to rapidly kind of make a decision, okay? And like I said, because we’re the largest, we feel good about it, more than largest.
We deliver outstanding work in critical programs for that. So there’s no real why, except hey, it’s a peanut butter spread of the company. Could it happen in the other one? I don’t know. It’s not happened until now. More importantly, I think kind of are — at least the initial intel is that the administrator thinks the other one is better. For example, they had already 100% work from office implemented for three days a week. That was one of the big first things for the administration, and these guys already have done it. Sorry, what was the second question, Vikash? Can you remind?
Dipesh Mehta
CY ’25 outlook. Were there any change based on what we observed in quarter one and next three quarters?
Srikrishna Ramakarthikeyan
See, on the first one, right, I mean, what led to the reduction — I explained it earlier. The client is simply doing and this is their words peanut butter. There was an ask from the administrator to reduce X amount of cost, and they did. And they didn’t give thought to where, what programs, quality work, nothing.
That is all kind of Phase 2 through a consolidation, a more thoughtful exercise. That has already started. There’s an RFI out already, and their desire is to rapidly kind of make a decision, okay? And like I said, because we’re the largest, we feel good about it, more than largest. We deliver outstanding work in critical programs for that. So there’s no real why, except hey, it’s a peanut butter spread of the cut. Could it happen in the other one?
I don’t know. It’s not happened until now. More importantly, I think kind of are — at least the initial intel is that the administrator thinks the other one is better. For example, they had already 100% work from office implemented for three days a week. That was one of the big first things for the administration, and these guys already have done it. Sorry, what was the second question, Vikash?
Dipesh Mehta
CY ’25 outlook, whether there any change based on what we observed in quarter one and next three quarters.
Srikrishna Ramakarthikeyan
Yes. Listen, I’ve called the negatives out, right, very specifically and try to characterize it as much as I can. There’s a number of positives, right? So there’s lots of pluses and deal wins. What is true is that our deal ramp-ups are — some have started in Q2, but it will continue ramping through Q3, Q4 and others will start in Q3. So we will actually have pretty solid quarters ahead of us, right?
I’ll leave it at that. I’ve said we won’t do guidance, so I’m going to stick to that, right? We will have — Q2, I want to reiterate, it would have been a great quarter. It will actually be a good quarter because of the two specific headwinds in Q2. Q3, those Q-on-Q headwinds will go away. So we’ll actually have accelerated growth in Q3. And Q4, we will likely up the trend of a flattish Q4 and actually grow in Q4.
Operator
Our next question comes from Girish Pai from BOB Capital Markets.
Srikrishna Ramakarthikeyan
Girish, if you’re saying something we can’t hear you.
Operator
It looks like we are having trouble getting connected. We will place you back in the queue and return you later. We’ll move to the next question. The next question comes from Abhishek Gupta from Axis Asset Management Company.
Srikrishna Ramakarthikeyan
Sorry, Abhishek, we can’t hear your question at all.
Abhishek Gupta
Am I audible now?
Srikrishna Ramakarthikeyan
I don’t if it’s just me. Vikash can you hear?
Vikash Kumar Jain
Same, muffled.
Srikrishna Ramakarthikeyan
Abhishek, try one more time.
Abhishek Gupta
Am I audible now, sir? Hello?
Niraj Khemka
Yes, it’s slightly better, Abhishek. Try one more time, please.
Abhishek Gupta
Hello? Am I audible now?
Srikrishna Ramakarthikeyan
Yes, Abhishek. Yes.
Abhishek Gupta
So I just wanted to check on the two clients, which might impact our growth in Q2. So what are the kind of work which we were doing for these two clients? And wanted to more clarity on the second client because we saw a sharp drawdown.
What is the criticality of the work for that organization? Just wanted to understand like how the budgeting is happening within this corporate, right? Are they looking for that criticality? Are they even like considering the criticality of work to ramping down the…
Srikrishna Ramakarthikeyan
So in this one — so there are two. One is the GSE and the other is — I’ll come to the second one. In the first one, we are involved in 80% of their transformation programs. Everything that is very core to their business, pricing, underwriting, securitization, forecasting, all of their core systems we are involved in. Their data, we are kind of the number 1, right? And in many of these, we are the number 1.
So in this client, again, I said it a few times, they took a peanut butter spread approach for cuts on Day 1. They haven’t had time to kind of sort through programs, delivery excellence, criticality, any of that. But they’re doing that now. They’ve started an RFA process that will lead them there. For consolidation that will lead them there. So that’s client one.
The client two, we essentially built and finished for them, handed to them what will be the future of their company. It’s a platform with four different brands. We kind of did a new architecture to bring these brands and platforms together that will help reduce development effort and materially improve velocity. So that’s the work we did, which we’ve delivered. Like I said, usually, it would have contributed to additional work, but they are not doing well, so they stopped.
Operator
We have a last question coming from Gaurav Rateria from Morgan Stanley.
Gaurav Rateria
Congrats on good execution in an uncertain environment. Keech, I just wanted to understand for the deals where you’re using your platforms, how are the contracts structured in those cases? Are there different outcome-based models, which are being explored versus the effort-based business model that we have always dealt with in the past? Are there any new billing models that are in the works, especially with the advent of generative AI? Just trying to understand like how the business model will evolve.
Srikrishna Ramakarthikeyan
So the old platforms like Tensai is very kind of managed services, that construct doesn’t change. I think incrementally, there is Gen AI benefits into those kind of deals and contracts. On the newest, which is RapidX, I think it’s evolutionary. We are going to experiment with different models. We’re still in early phases. Remember, we only brought it a beta at Q4 last year. So it’s early stages. Clearly, our kind of attempt is to see what’s the best mechanism that will bring us value for the platform beyond the human effort.
Operator
That brings our Q&A session to a close. I will now hand back to Mr. Srikrishna for closing remarks.
Srikrishna Ramakarthikeyan
Thank you. Thanks, Dinesh. I — we actually — like I said in the beginning, in the light of everything that is happening, we had a surprisingly normal quarter. We had actually a number of wins that made us feel good. We had uncertainties around two clients. I think we now know what the bad is and that’s in the books.
We — there’s potential significant upside even at those clients going forward. And otherwise, we are in play for a number of very large deals that can change trajectory of growth of our company quite a bit. Even without — all of those happening, we will still have a solid Q2. We don’t have a great Q2, but we have solid Q2 and a great Q3.
So with that, I look forward to speaking to you again. And like I said in the beginning, I will also provide you an update on our strategic initiatives every quarter. Look forward to the next quarter and look forward to meeting some of you offline as well.
Operator
[Operator Closing Remarks]