{"id":154873,"date":"2023-10-13T08:38:53","date_gmt":"2023-10-13T12:38:53","guid":{"rendered":"https:\/\/44.250.171.167\/?p=154873"},"modified":"2023-10-13T08:38:55","modified_gmt":"2023-10-13T12:38:55","slug":"hcl-technologies-limited-q2-fy24-earnings-conference-call-insights","status":"publish","type":"post","link":"https:\/\/alphastreet.com\/india\/hcl-technologies-limited-q2-fy24-earnings-conference-call-insights\/","title":{"rendered":"HCL Technologies Limited Q2 FY24 Earnings Conference Call Insights"},"content":{"rendered":"<p><strong>Key highlights from HCL Technologies Limited (HCLTECH) Q2 FY24 Earnings Concall<\/strong><\/p>\n<ul>\n<li><strong>Financial Performance<\/strong>\n<ul>\n<li>HCL Technologies had strong revenue growth this quarter across all dimensions.<\/li>\n<li>Revenue was $3.225 billion, up 1% sequentially and 3.4% in constant currency. This includes a 60 bps contribution from the ASAP acquisition.<\/li>\n<li>EBIT margin improved 154 basis points sequentially to 18.5%, driven by productivity, utilization, and cost optimization.<\/li>\n<li>Net income grew 6.4% year-over-year to $463.5 million. In rupee terms, it grew 9.8% to 14.4% of revenue.<\/li>\n<li>Services revenue grew 1.6% QoQ in constant currency.<\/li>\n<li>Engineering and R&amp;D Services segment grew 5% and IT and Business Services grew 0.9% QoQ in constant currency.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Improved Margins<\/strong>\n<ul>\n<li>Operating margins improved by 154 bps sequentially through several initiatives.<\/li>\n<li>Efficiency improved in managed services operations through automation and AIOps capabilities.<\/li>\n<li>Freshers who were hired and trained over last 18 months got deployed economically.<\/li>\n<li>Subcontracting costs were optimized.<\/li>\n<li>As a result, EBIT percentage reached 18.5%.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Attrition<\/strong>\n<ul>\n<li>LTM attrition stood at 14.2%, down almost 10% on a YoY basis.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Record High Bookings<\/strong>\n<ul>\n<li>Q2 bookings hit a record high of $4 billion vs. $2 billion range in previous quarters.<\/li>\n<li>HCL signed a major deal with Verizon to become the main provider for deploying Verizon\u2019s managed services worldwide for enterprise customers.<\/li>\n<li>The high value of bookings sets up HCL for healthy growth in 2H24.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Guidance<\/strong>\n<ul>\n<li>HCL revised full year revenue guidance down by 300 bps at upper end due to weak Q1 and Q2 performance being below expectations.<\/li>\n<li>Q1 was weak and Q2 had some strain on discretionary spending, leading to lowering of full year guidance.<\/li>\n<li>But Q3 and Q4 expected to be strong with services organic growth of 2.6-3.8% to achieve new guidance range.<\/li>\n<li>Large deal ramping up in Q3 and Q4 will significantly contribute to growth.<\/li>\n<li>Software margins expected to remain in similar range as last year for now.<\/li>\n<li>Verizon cost deal ramp-up related to sales may affect margins, but upward bias is still expected.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Demand Environment<\/strong>\n<ul>\n<li>Discretionary spending by clients continues but is lower than normal levels.<\/li>\n<li>Deal pipeline continues to remain very strong, though maybe 10% below peak levels.<\/li>\n<li>HCL continues to see good deal flow and is in final stages on many large deals.<\/li>\n<li>Direction of discretionary spending still uncertain, with volatility in market outlook every 2-3 months.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Cost Reduction Measures<\/strong>\n<ul>\n<li>Deliberate action has been taken on a number of fronts to reduce costs, including third-party subcontractors and travel.<\/li>\n<li>Training costs have not been cut, but recruitment has been reduced due to hiring of freshers.<\/li>\n<li>Cost of hardware and software has also reduced.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Timing And Impact Of Wage Hikes<\/strong>\n<ul>\n<li>Salary increases usually happen in July, but will now happen in October due to one quarter deferral.<\/li>\n<li>Wage hikes will have an impact of around 60-65 basis points in October and a small impact of 25-30 basis points in March.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Outlook for 2H24<\/strong>\n<ul>\n<li>In 2H24, recovery is expected due to large deal going live in November, software seasonality, and continuing revenue.<\/li>\n<li>Strong growth is expected in the rest of the year with a commitment to deliver 5-6% growth for the full financial year.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Key highlights from HCL Technologies Limited (HCLTECH) Q2 FY24 Earnings Concall Financial Performance HCL Technologies had strong revenue growth this quarter across all dimensions. Revenue was $3.225 billion, up 1% sequentially and 3.4% in constant currency. This includes a 60 bps contribution from the ASAP acquisition. EBIT margin improved 154 basis points sequentially to 18.5%, [&hellip;]<\/p>\n","protected":false},"author":1767,"featured_media":154818,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[9825,392,8],"tags":[10169,5075,9124],"class_list":["post-154873","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-earnings-call-highlights","category-earnings","category-technology-stocks","tag-earnings","tag-it-services","tag-software-technology-services"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/alphastreet.com\/india\/wp-content\/uploads\/2023\/10\/CC_Image_1.jpg","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":157726,"url":"https:\/\/alphastreet.com\/india\/hcl-technologies-limited-q3-fy24-earnings-conference-call-insights\/","url_meta":{"origin":154873,"position":0},"title":"HCL Technologies Limited Q3 FY24 Earnings Conference Call Insights","author":"Praveen","date":"January 16, 2024","format":false,"excerpt":"Key highlights from HCL Technologies Limited (HCLTECH) Q3 FY24 Earnings Concall Revenue Growth and Margins Revenue grew 6% sequentially and 4.3% YonY in constant currency, the highest growth since Q3 2021. 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