HCL Tech Jul-24
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Questions and Answers

What is one of the risks associated with managing growth in the IT services sector?

  • Employee retention strategies
  • Fluctuations in earnings (correct)
  • Increased demand for technology
  • Improvements in technology infrastructure

Which factor may negatively impact the cost advantage of a company in IT services?

  • Government incentives for technology companies
  • Strengthened client relationships
  • Wage increases in India (correct)
  • Expansion into international markets

What is a potential risk associated with client concentration for a company?

  • Strengthened market position
  • Greater diversification of services
  • Increased customer satisfaction
  • Vulnerability to losing key clients (correct)

Which of the following represents a risk related to the integration of acquired assets?

<p>Time and cost overruns on contracts (D)</p> Signup and view all the answers

What type of instability can affect a company's ability to operate internationally?

<p>Political instability (A)</p> Signup and view all the answers

Which segment reported the highest EBIT margin as of 30-Jun-23?

<p>HCLSoftware (A)</p> Signup and view all the answers

What was the YoY basis points change for HCLSoftware from 30-Jun-23 to 30-Jun-24?

<p>-239 (D)</p> Signup and view all the answers

Which segment saw an increase in its EBIT margin from 30-Mar-24 to 30-Jun-24?

<p>Services (B)</p> Signup and view all the answers

As of April 1, 2024, which segments began managing services related to certain software products previously under HCLSoftware?

<p>Both IT and Business Services, and Engineering and R&amp;D Services (C)</p> Signup and view all the answers

What was the total EBIT margin as of 30-Jun-24?

<p>17.1% (A)</p> Signup and view all the answers

Which segment recorded a decrease in EBIT margin from 31-Mar-24 to 30-Jun-24?

<p>Engineering and R&amp;D Services (C)</p> Signup and view all the answers

What is the impact of the change in revenue reporting on the segments?

<p>Immaterial impact (B)</p> Signup and view all the answers

Which segment had the lowest EBIT margin reported as of 30-Jun-23?

<p>Services (C)</p> Signup and view all the answers

What method is used to allocate common assets and liabilities between businesses?

<p>In ratio of last twelve months revenues (A)</p> Signup and view all the answers

Which segment is now responsible for managing certain software products previously under HCL Software as of April 1, 2024?

<p>Engineering and R&amp;D Services (A), IT and Business Services (B)</p> Signup and view all the answers

What was the total revenue reported for HCL Software for the quarter ended 30-Jun-23?

<p>$325.4 million (C)</p> Signup and view all the answers

What types of revenue are included in Subscription & Support revenue?

<p>Term subscription revenues and support revenues (A)</p> Signup and view all the answers

How has the average invested capital been computed?

<p>Using the average of last 5 quarters (A)</p> Signup and view all the answers

Which component of revenue saw a value of $47.6 million for the quarter ending 31-Dec-23?

<p>Perpetual License Upfront &amp; Others (A)</p> Signup and view all the answers

What was the HCL Software revenue for Professional Services in the quarter ended 30-Sep-23?

<p>$16.0 million (A)</p> Signup and view all the answers

What was the total revenue reported for the quarter ended 30-Mar-24?

<p>$334.4 million (D)</p> Signup and view all the answers

What technology capabilities is HCLTech leveraging to enhance user experience for its partners?

<p>GenAI, XR/VR, and IoT (C)</p> Signup and view all the answers

Which company has selected HCLTech to transform its ecommerce platform?

<p>A leading US-based beverage company (C)</p> Signup and view all the answers

What service does HCLTech provide to the Europe-based financial services company for customer experience transformation?

<p>Future-ready private cloud and zero-trust framework (A)</p> Signup and view all the answers

What is the main goal of the digital marketing program automation for State Bank of India?

<p>Transform customer interaction framework (D)</p> Signup and view all the answers

Which platform will Banco do Brasil implement with HCLTech?

<p>Salesforce’s Slack integrated with WhatsApp (C)</p> Signup and view all the answers

What business growth strategy is Ahold Delhaize USA focusing on with HCLTech?

<p>Driving business growth via online channels (D)</p> Signup and view all the answers

What is the purpose of HCL Software’s BigFix platform for the US-based financial services company?

<p>To optimize core infrastructure strategy for servers and workstations (B)</p> Signup and view all the answers

What type of customer experiences is HCLTech aiming to deliver through its services?

<p>Hyper-personalized and connected experiences (C)</p> Signup and view all the answers

What was the NOPAT for HCLSoftware in the quarter ending 31-Dec-23?

<p>108.3 (C)</p> Signup and view all the answers

Which quarter saw the highest revenues for HCLSoftware?

<p>31-Dec-23 (A)</p> Signup and view all the answers

What was the average Estimated Invested Capital for HCLSoftware over the given quarters?

<p>1,628 (D)</p> Signup and view all the answers

Which quarter recorded the lowest LTM ROIC for HCLSoftware?

<p>30-Jun-23 (A)</p> Signup and view all the answers

What was the cash and treasury balance reported for HCLSoftware at the end of the quarter on 30-Sep-23?

<p>2,558 (D)</p> Signup and view all the answers

Which of the following periods showed the highest NOPAT for HCLTech Services?

<p>31-Mar-24 (A)</p> Signup and view all the answers

What was HCLTech's LTM ROIC at the end of the period for 30-Jun-24?

<p>34.6% (D)</p> Signup and view all the answers

Which quarter reflected the lowest estimated invested capital for HCLTech Services?

<p>30-Jun-24 (D)</p> Signup and view all the answers

What was the trend in HCLSoftware's Revenue from the quarter ending 30-Jun-23 to 31-Mar-24?

<p>Increasing then decreasing (A)</p> Signup and view all the answers

In which quarter was the EBITDA for HCLSoftware the lowest?

<p>30-Sep-23 (D)</p> Signup and view all the answers

What initiative did HCLTech Americas announce in April?

<p>Grant for Climate Action (C)</p> Signup and view all the answers

Which organization won top honors in the recent HCLTech-sponsored event?

<p>Argilando (A)</p> Signup and view all the answers

For the quarter ending on June 30, 2023, what was the reported revenue of HCLTech?

<p>$3,200.0 million (A)</p> Signup and view all the answers

What was the QoQ growth percentage for HCLTech revenue for the quarter ending September 30, 2023?

<p>1.0% (A)</p> Signup and view all the answers

As of June 30, 2024, what is the projected revenue for HCLTech Services?

<p>$3,040.5 million (A)</p> Signup and view all the answers

What has been the trend in the YoY growth percentage for HCLTech Services from the quarter ending June 30, 2023, to the quarter ending June 30, 2024?

<p>Fluctuated but ended higher (B)</p> Signup and view all the answers

What is the effective date for the transition of certain software products to new service segments?

<p>April 1, 2024 (D)</p> Signup and view all the answers

What was the reported revenue for HCLTech as of September 30, 2023?

<p>$3,224.7 million (A)</p> Signup and view all the answers

Which currency has the lowest average rate reported for the quarter ending September 30, 2023?

<p>AUD - USD (C)</p> Signup and view all the answers

What was the YoY growth percentage for the quarter ending March 31, 2024, for HCLTech revenue?

<p>6.0% (B)</p> Signup and view all the answers

Flashcards

Risk

The possibility or likelihood of something negative happening which can negatively affect a company's financial performance or goals.

Uncertainty

A situation that has the potential to create doubt or change the outcome of an expected event.

Regulatory Risk

Risks related to regulations and government policies that may change or be imposed on a company.

Financial Risk

The possibility that a company may not be able to meet its financial obligations or achieve its revenue targets.

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Earnings Volatility

The degree to which a company's profits or financial performance may change based on unpredictable events.

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What is HCLSoftware?

HCLSoftware is a segment that reports revenue generated from software products internally developed by HCL Technologies.

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Who managed software revenue before June 2022?

Before June 30, 2022, IT and Business Services managed and reported revenue from certain internally developed software products.

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What is inter-segment revenue?

Inter-segment revenue occurs when one HCL segment uses another segment's offerings to provide services to external customers.

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What is EBIT margin?

EBIT margin is a profitability metric calculated as earnings before interest and taxes (EBIT) divided by revenue.

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What major change occurred on April 1, 2024?

A change in departmental structure led to the shift of certain software products from HCLSoftware to IT & Business Services and Engineering & R&D Services on April 1, 2024.

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What happened to historical financial data?

HCL restated the financial figures of previous periods to reflect the new segment structure for software products.

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What was the impact of the change?

Despite the change, the impact on each segment's financial performance was insignificant.

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What does the YoY BPS change signify?

YoY BPS change indicates the percentage point change in the EBIT margin compared to the same period in the previous year.

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EBITDA

The profit generated by a company's operations before interest and taxes (EBIT), adjusted for non-cash expenses like depreciation and amortization.

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Return on Invested Capital (ROIC)

Net operating profit after taxes (NOPAT) divided by invested capital. It reflects the return generated by a company's assets.

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Invested Capital

The total amount of funds invested in a business, typically calculated as the sum of equity and debt.

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Net Operating Profit After Taxes (NOPAT)

A company's operating profit (EBIT) after deducting taxes.

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Cash & Treasury Balance

The amount of cash and short-term investments held by a company, often considered as readily available funds.

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Last Twelve Months (LTM)

A company's profits or financial performance over the past 12 months.

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Effective Tax Rate

The rate at which a company's profits are taxed.

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Perpetual License Upfront Revenue

A type of software revenue that is recognized upfront when a customer purchases a perpetual license for a software product.

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Subscription Revenue

Software revenue generated from recurring subscriptions that provide access to a software product for a specific period.

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Support Revenue

Software revenue generated from providing technical assistance and support to customers using a software product.

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Professional Services Revenue

Software revenue generated from delivering services to clients related to a software product, such as implementation, customization, or training.

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Software-as-a-Service (SaaS)

A business model where software is delivered over the internet on a subscription basis, rather than being installed on a customer's own devices.

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IP Partnerships Revenue

A software revenue stream that involves collaborations with other companies to offer software products or services.

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Allocation of Assets and Liabilities

The process of allocating costs, assets, and liabilities between different business units based on a predetermined ratio.

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Average Invested Capital

The average capital invested in a business over a specified period, often used to assess the financial health of the business.

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How does HCLTech enhance user experience?

HCLTech uses its expertise in GenAI, XR/VR, and IoT to deliver personalized and engaging digital experiences for users.

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What is HCLTech's role in digital transformation?

HCLTech helps businesses transform their digital platforms to reach customers efficiently.

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How does HCLTech enable faster time-to-market?

HCLTech utilizes its global network and expertise to assist businesses in streamlining their operations and launching new products effectively.

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How does HCLTech help companies with customer experience transformation?

HCLTech's services help companies implement Salesforce's Slack, integrated with WhatsApp, to enhance customer interactions and communication.

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What solutions does HCLTech offer for digital transformation?

HCLTech assists in setting up a secure and modern IT infrastructure that includes cloud computing, AI-led automation, and enhanced network security.

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How does HCLTech support businesses in improving operational efficiency?

HCLTech provides services like managed network, retail IT operations, and mainframe support to enable businesses to optimize their operations, enhance efficiency, and achieve greater automation.

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How does HCLTech help companies with digital marketing automation?

HCLTech provides solutions like HCL Unica to empower companies to personalize customer interactions and deliver targeted marketing campaigns.

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How do HCLSoftware's offerings support businesses in optimizing IT infrastructure?

HCLSoftware's BigFix platform helps companies manage and secure their IT infrastructure, while HCL MyCloud enhances cost optimization and efficiency.

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YoY (Year-over-Year) Growth % (CC)

The percentage change in a company's revenue compared to the same period in the previous year, adjusted for currency fluctuations.

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QoQ (Quarter-over-Quarter) Growth % (CC)

The percentage change in a company's revenue compared to the previous quarter, adjusted for currency fluctuations.

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EBIT (Earnings Before Interest and Taxes)

A metric that measures a company's profit before deducting interest and taxes. It reflects the core profitability of a business.

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LTM (Last Twelve Months)

This term is used to describe the period covered by financial data. For example, 'Last Twelve Months' represents the company's data over the past 12 months.

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ROIC (Return on Invested Capital)

A profitability metric that indicates how effectively a company is using its assets to generate profits.

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EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

The profit generated by a company's operations before deducting interest and taxes, adjusted for non-cash expenses like depreciation and amortization.

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Inter-segment Revenue

Revenue generated from one segment of a company being used by another segment to offer services to outside customers.

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Study Notes

HCLTech Q1 FY25 Investor Release

  • Date: July 12, 2024
  • Financial Results: Investor release for the quarter ended June 30, 2024
  • BSE Scrip Code: 532281
  • NSE Scrip Code: HCLTECH
  • Company Secretary: Manish Anand
  • Financial Highlights:
    • INR Revenue: ₹28,057 Crores (down 1.6% QoQ, up 6.7% YoY)
    • USD Revenue: $3,364M (down 1.9% QoQ, up 5.1% YoY)
    • HCLTech Services Revenue: down 1.9% QoQ, up 5.8% YoY
    • Digital Revenue: up 6.0% YoY
    • HCLSoftware Revenue: up 3.5% YoY
    • HCLSoftware ARR: $1.01B+ (down 0.3% YoY)
    • EBIT: ₹4,795 Crores
    • Net Income: ₹4,257 Crores (up 6.8% QoQ, 20.4% YoY)

Forward-Looking Statements

  • Statements are forward-looking
  • Risks and uncertainties may impact actual results
  • Factors include regulatory proceedings, fluctuations in earnings, competitive pressure, wage increases, immigration, market factors and use of technology
  • Management does not update forward-looking statements

Additional Information

  • People Metrics:

    • Total People Count: 219,401
    • Net addition: (8,080). Reduction in headcount due to divestiture.
    • LTM Attrition: 12.8%

  • ESG and Awards:

    • HCLTech ranked #3 in Brand Finance's Sustainability Perception Index (India)
    • HCLTech wins SAP Pinnacle Award (Social Impact)
    • HCLTech received a Environmental Stewardship Award

  • FY25 Guidance:

    • Company Revenue growth: 3.0%–5.0% YoY CC
    • Services Revenue growth: 3.0%–5.0% YoY CC
    • EBIT margin between 18.0%–19.0%

  • Segment-wise Highlights: details of revenue mix and growth by IT and business services, engineering, and R&D services, HCLSoftware, and inter-segment

  • Return on Invested Capital (ROIC):

    • Details of ROIC for HCLTech Services and HCLSoftware
    • LTM ROIC for HCLTech Services: 38.0%-42.8%
    • LTM ROIC for HCLSoftware: 15.7%-16.1%

  • Other Metrics: detailed information on quarterly performance trends, quarterly performance trends in INR and LTM performance trends, client metrics, key deal wins

  • Client comments: Quotes about HCL's performance from key executives at partner companies

  • Awards and Recognitions: List of awards and recognitions received by HCLTech

  • Analyst recognitions: details of analyst recognitions received by HCL

  • HCLSoftware Metrics: details of revenues for different segments

  • Global initiatives overview of HCL's societal contribution through activities such as education, healthcare, and environmental sustainability.

  • Annexure: Details of Constant Currency Reporting.

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HCLTech Q1 FY25 Investor Release PDF

Description

Test your knowledge on the various risks and challenges faced by companies in the IT services sector. This quiz covers aspects such as client concentration, cost advantages, and the integration of acquired assets. Additionally, evaluate the performance metrics and changes in EBIT margins across different segments.

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