{"id":157726,"date":"2024-01-16T05:27:13","date_gmt":"2024-01-16T10:27:13","guid":{"rendered":"https:\/\/44.250.171.167\/?p=157726"},"modified":"2024-01-16T05:27:14","modified_gmt":"2024-01-16T10:27:14","slug":"hcl-technologies-limited-q3-fy24-earnings-conference-call-insights","status":"publish","type":"post","link":"https:\/\/alphastreet.com\/india\/hcl-technologies-limited-q3-fy24-earnings-conference-call-insights\/","title":{"rendered":"HCL Technologies Limited Q3 FY24 Earnings Conference Call Insights"},"content":{"rendered":"<p><strong>Key highlights from HCL Technologies Limited (HCLTECH) Q3 FY24 Earnings Concall<\/strong><\/p>\n<ul>\n<li><strong>Revenue Growth and Margins<\/strong>\n<ul>\n<li>Revenue grew 6% sequentially and 4.3% YonY in constant currency, the highest growth since Q3 2021.<\/li>\n<li>Services revenue grew 3.1% sequentially despite being a seasonally weak quarter.<\/li>\n<li>Software revenue grew 5% YonY in constant currency due to growth in subscription and support revenue.<\/li>\n<li>Operating margins were 19.8%, up 126 bps sequentially and 16 bps YonY, after accounting for the impacts of wage hikes and furloughs.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Business Highlights<\/strong>\n<ul>\n<li>5 of 7 verticals grew this quarter, with telecom and media up 25.9% and manufacturing up 7.6% sequentially.<\/li>\n<li>Europe delivered 5% sequential growth including the ASAP acquisition.<\/li>\n<li>Added 3 $100 million plus clients and 4 $50 million plus clients on a YonY basis.<\/li>\n<li>Bookings were lower than last quarter but YTD bookings are up 10% versus last year.<\/li>\n<li>LTM attrition currently at 12.8%, a QonQ decline of 1.4%; lowest since 1Q21.<\/li>\n<\/ul>\n<\/li>\n<li><strong>GenAI Momentum and Outlook<\/strong>\n<ul>\n<li>30 GenAI deal wins, including with a US healthcare provider and financial services firm.<\/li>\n<li>Use cases include clinical search, risk management, anomaly detection, and sustainability analytics.<\/li>\n<li>Huge potential but near-term deployments will be small.<\/li>\n<li>Focus on laying foundations like cloud, data, security to scale GenAI.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Macroeconomic outlook<\/strong>\n<ul>\n<li>2024 presents opportunities and challenges for enterprises.<\/li>\n<li>Cost improvements and low code capabilities will be prioritized.<\/li>\n<li>While overall discretionary spending flat, some areas like cloud, data, and security remain resilient.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Guidance<\/strong>\n<ul>\n<li>Total revenue growth expected 5-5.5% in FY24, services towards higher end.<\/li>\n<li>Operating margins expected 18-19%.<\/li>\n<li>Healthy medium-term outlook based on business mix, people and innovation focus.<\/li>\n<li>Services expected to see good growth in Q4, typical seasonality in Software.<\/li>\n<li>Expect services to grow towards higher end of 5-5.5% FY24 guidance range.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Financial highlights<\/strong>\n<ul>\n<li>Revenue $3.4 billion, up 4.3% YoY in constant currency, including 100 bps from acquisition.<\/li>\n<li>Net income grew 5.2% YoY to $522.7 million.<\/li>\n<li>Operating margins at 19.8%, up 126 bps QoQ and 16 bps YoY.<\/li>\n<li>Annual recurring revenue $1.06 billion, up 2.9% YoY in constant currency.<\/li>\n<li>EBIT margin improved 126 bps QoQ to 19.8%.<\/li>\n<li>LTM ROIC improved to 32.8% at company level, 40.1% for Services.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Software R&amp;D Spend<\/strong>\n<ul>\n<li>Remained steady as revenue grows.<\/li>\n<li>R&amp;D capacity has expanded by leveraging right locations.<\/li>\n<li>Allows more investment in product modernization and embedding GenAI.<\/li>\n<li>Strategy to convert perpetual to subscription licenses is working.<\/li>\n<li>Seeing good traction for Unica and Commerce with cloud and GenAI.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Demand Environment<\/strong>\n<ul>\n<li>No change in discretionary IT services spending, still soft.<\/li>\n<li>Seeing green shoots of growth in Engineering Services.<\/li>\n<li>Confident of strong exit momentum in FY24 with bookings and pipeline.<\/li>\n<li>Partnering on Gen AI centers of excellence and advisory services.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Hiring Strategy<\/strong>\n<ul>\n<li>Had hiring this quarter in line with growth experienced.<\/li>\n<li>Headcount leading indicator aligned to guidance.<\/li>\n<li>Had some declines in prior quarters but positive YoY increase.<\/li>\n<li>Maintaining transparency on ask rates for next quarter.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>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. Services revenue grew 3.1% sequentially despite being a seasonally weak quarter. Software revenue grew 5% YonY in constant currency due to growth in subscription [&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-157726","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":154873,"url":"https:\/\/alphastreet.com\/india\/hcl-technologies-limited-q2-fy24-earnings-conference-call-insights\/","url_meta":{"origin":157726,"position":0},"title":"HCL Technologies Limited Q2 FY24 Earnings Conference Call Insights","author":"Praveen","date":"October 13, 2023","format":false,"excerpt":"Key highlights from HCL Technologies Limited (HCLTECH) Q2 FY24 Earnings Concall Financial Performance HCL Technologies had strong revenue growth this quarter across all dimensions. 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