Welcome to Hexaware Technologies Limited Conference Call for the Q4 CY 2025 Earnings Call. We'll begin today's session with a presentation from the Hexaware management team, followed by a Q&A segment. To ask a question during Q&A, please use the Raise Hand feature located at the bottom of your Zoom interface. This will place you in a virtual queue. I will now hand the conference over to Mr. Neeraj Kamtekar, Head of Investor Relations. Thank you. Over to you, Mr. Neeraj.
Hello, everyone. Hello, everyone. Can you-- I hope I'm audible. Welcome to Hexaware Technologies Q4, Q4 CY 2025 Earnings Call. In the call today, we have with us Mr. R. Srikrishna, CEO, Mr. Vikash Jain, CFO. In the course of this call, we will make certain forward-looking statements which may involve a number of risks and uncertainties. All forward-looking statements made herein are based on the information available currently with the management, and the company does not undertake to update any of these statements made in the course of this call. In this regard, there's a full disclosure which has been provided in the earnings presentation and in the press release. We consider that as read. With this, I'll hand over the call to Keech. Over to you, Keech.
Thank you, Neeraj. If you could move slides, please. Now, you know, one announcement from Anthropic yesterday before shook our stock markets, right? Globally for our industry. So I thought I'll start with that. Today, we were anyway going to do the topic that we were going to deep dive on strategy is on AI. So actually, I will start with that. One more slide, please. So at the highest level, our goal with customers is that every single day, every single client, the work we do is positively impacted by AI. And I think we're gonna get there sooner than we originally imagined. Now, to do that, we are doing four things. First, we are building AI into all of our platforms and reimagining our platforms. So whether it's Tensai for IT operations, RapidX for Softcrylic's engineering, or Amaze.
The second thing we're doing is to create and launch new services that deliver new revenue streams, which are enabled by AI. The third, our workforce training. We are already in the second generation of retraining our workforce on AI. And fourth, and most importantly, processes need to be redone in AI. For example, SDLC, as we know it in the past, is completely being redone. Now, if AI is in the SDLC, it is not just that the same people, same talent, same process, don't run sprints the same way. So these are the four things that we are doing to get to our goal of impacting positively every single customer, every single day. So what do we tell our clients? You know, there is... at the highest level, there is AI for IT and AI for business.
We tell our clients when it comes to AI for IT, leave it to us. We, we know how to get productivity and velocity executed for clients well. You set the guardrails, you set the rules, and leave the execution to us. And I think this narrative has found resonance. I think earlier, I would say last year, people are not quite willing to do that, but I would say far more so right now, especially when it comes to IT operations and data engineering. In SDLC, I, I think it's a little more complicated. We tell them on AI for business, the roles are a little different. Our role is to enable you to meet what you dream of.
Now, we certainly have multiple ideas on what they could do, but our first job is to enable the technology to realize the velocity, the use cases that they want to execute. Now, on AI for IT, we have been first off the block multiple times, and consistently so. We were the first to launch a product, RapidX, that focuses on legacy reengineering, or legacy reverse engineering, which is actually a crucial pre-step required to any coding that is needed. In July last year, we were actually the first company to launch a White Coding offering.
Three weeks ago, we launched an offering that goes to the heart of the Anthropic release, which says, "Hey, software products or SaaS products can be replaced by agentic AI." We agree, or actually, we think it's a massive opportunity for us, and the service we launch is a reflection of that. In these ones I spoke about are all as it pertains to AI for SDLC. But in AI for outsourcing, our Tensai platform, we would have built in the next, I would say, less than two quarters, and quite a bit of it is already done. I'll say 80 supervisory agents and underpinned by 400, what you call, atomic agents that can operate in, you know, in, in a mode which is assisting humans to all the way autonomous over time.
In AI for business, while we are telling customers we don't know your business as well as you do, for a number of industries we operate in, we detailed out level five to level one process, or level one to level five processes. And for each business process, we have a point of view on how can AI impact that process. And if all of that is executed, what kind of business value will it deliver to customers? So we, we've been, like I said, first off on a number of fronts. Now, legacy modernization that we've been now talking about for over a year as a growth accelerator for us, is a very specific use case of new revenues caused by AI. And we've been making good progress in that.
I think in this year, I can say with confidence that we will have at least two or three scale legacy modernizations completed, and multiple other of smaller ones that we've continued to execute. Yet, I think that the biggest opportunities are still ahead of us. Now, we spoke about a key growth driver for us is launching a technology vertical. So we hired somebody last quarter that we spoke about. We launched a new vertical called we renamed it as TPP, Technology Products and Platform. And from Q1 onwards, you will see us reporting on this vertical as a separate vertical from where it is currently in HTPS. We did launch, you know, three new services on AI this quarter.
One of the most exciting things we did is this: I think we are the first company in the world to implement a completely AI-first global multilingual helpdesk in production. So we now have 33,000 employees, who, if they call our helpdesk, it'll be answered by AI. And I think we are the first company in the world to put it in production. You know, the private equity markets, private markets in a more broad sense, is a critical growth driver. Companies are staying private for longer and for larger, and there is no more important time than now in for value creation in these companies. Amit Vinchhi joined us as the Chief Private Markets Officer. He's done this for a living for over 20 years in different firms, most recently in Tech Mahindra. So we are pleased to have Amit.
He joined us about two weeks ago. Our revenue and our people metrics continued to be positive. We closed with close to 34,000 headcount. We continue to have among the lowest attrition in the industry. In IT, it was at 11%. Our utilization ticked down a bit in anticipation mainly of growth in 2026. We will talk about that later. Last year, we crossed one customer with $100 million. This year, we crossed two customers with $100 million, and we added one client in the north of $50 million category. Our revenues for Q4 were, I would say, a tad lower than what we expected. I would say there are, you know, three things to call out.
One is that one of the GSCs again had I would say a substantial cut which amounts to about 70 bps annualized. This had an impact in Q4. It also will have an impact in Q1, and we'll talk about 26 later. The second thing is a client that normally does not do furloughs actually did a significant furlough. And the third, and you'll see in our numbers, that our pass-through revenues are materially lower than normal and average. So but given all that, it was a tad lower than what we expected. On profitability, again, we were you know in absolute terms in reported profitability we were solid, but there's a number of puts and takes on our EBITDA and profitability, which I think Vikash will walk you through later.
And as always, we had outstanding cash conversion and an outstanding cash balance. If you go to the next slide, please. The best part of the quarter for us is that we won any number of deals. We won pretty much everything that we expected to win, expected to close, and some more. And last quarter, I'd said, "Hey, just given kind of the volume closures in Q4, maybe our pipeline will release." Actually, it didn't, our pipeline continued to go up, and actually just crossed $4 billion for the first time. So some of the deals, I, I think the most important one is a very large consolidation deal in a big tech. This is a process that's been going on for a very long time.
To be sure, this doesn't come with, like, a predefined book of work, but it does give us the right to hunt and the right to receive RFPs in a very, very large pool of spend. The second one here is a bank that we had won earlier last year, but there's a significant deal in this. So, you know, what the deal does is to put us in a position of nice growth for us in 2026 and forward. The, probably the single largest deal. Actually, the single largest deal we did is who's now probably the globally largest financial company.
They've been acquiring companies at a rapid pace, and we do multiple things for them, starting from integrating acquired entities into a common IT framework, and now we are running all of it, everything in tech, infrastructure, applications, and in future, also the modernization for a new platform. There's another very large insurance company that is modernizing their core to Guidewire, and we have a role in that. We're not the leaders, we're not the only people, but we have a significant role to play in that modernization. I was talking to you about AI for business, where for multiple industries, we've mapped out the process and showing what are the possible to clients of where can Agentic AI play a significant role in transforming operations.
So this deal here, Global CRO, is an example of that, where we're building agents for multiple steps in a clinical research process that will bring substantial efficiency to the customer. We have a deal with the world's largest casual dining. It's a holding company. They own multiple large brands in the US and some elsewhere in the world as well, and again, we will do much of tech for them. A very large tech services company in Asia, there's a scale GCC deal that we won late last year. And finally, one of the large PBMs, which also happens to be owned by the firm, we are doing product development and platform support and engineering support for this organization. There are more deals. We stuck to the eight here.
You know, we will talk about 2026, later, after Vikash goes a little bit into details. But at the highest level, our deal wins were the best part of Q4. Vikash?
Hej. Thanks, Hej. If you can go to the next page, please. A little bit more color in terms of our revenue. So Q4 revenue was $389 million, sequential decline of 1.5%. In absolute terms, this represents a $6 million of decline. The decline was primarily driven by calendars and furloughs, which are seasonal in nature, close to $9 million, a lower licensed revenues of $7 million, and marginal headwinds from Forex. So FX was a headwind in the current quarter on revenues and also in terms of margins. The $16 million of headwind that we had in the current quarter was partially offset by a robust volume growth and a little bit of contribution from CyberSolve, which we closed in the middle of the quarter. Now, calendar and furloughs are seasonal items and will come back in future quarters.
However, the way the calendar days line up in 2026, it comes back in a more positive way in Q2 and Q3. Q1 will still be a net headwind versus Q4. License revenue for the quarter was at $11 million versus $18 million in Q3, a drop of $7 million on sequential basis. This was also lower than our historical average, which is anywhere around $12.5 million-$13 million a quarter. So the volume growth is also reflected in our headcount additions that we have done during the quarter, and Hej spoke about the fact that it also had an impact, particularly with respect to some bit on the utilization, given the fact that we have been building up capacity to service the demand that we have been seeing. On margins, a reported EBITDA for the quarter was 17%.
This includes impact of few one-timers during the quarter. Normalized for the one-timers, the margin for the quarter was 15.4%. Now, it's a drop of 210 basis points sequentially. The major contributors were Forex, which was a headwind during the quarter of 20 basis points. Operationally, it was a tailwind, but then from a hedge perspective, for the hedges that we had started taking, it was close to a 40 basis points of headwind. So the net of operational tailwind plus the hedge headwind, we had a net impact of close to 20 basis points of headwinds. Calendar was a 60 basis points of headwind. Utilization was close to another 60 basis points, and we did give merit increases, which was close to 90 basis points.
So if you think about it, a lot of the drop that we had in the current quarter were seasonal in nature and will come back. Forex, we expect will recover back soon. Calendar is going to come back starting Q2, and utilization, I'll talk through in terms of details, how we are thinking about it in terms of recovering some of it. One-timers during the quarter, I spoke about the adjusted view. One-timers during the quarter in EBITDA were on three fronts. The first one was we acquired Softcrylic in 2024, and there was an earn-out related to the deal, which was payable based on the asset delivering a great financial milestones. Softcrylic missed those targets, so the earn-outs are reversed out. This was close to $25 million. Associated with that, and for the other assets, we did an impairment testing.
It's an annual exercise which we do every year, and based on that, there was an impairment testing done on client relationships and a charge of close to $15 million. So when you think about the reversals, you need to think about the reversals and the impairment charges at the highest levels in conjunction because they are closely interlinked. So those were the two items. The third one in EBITDA, in terms of one-timers, is an additional expected credit loss of—credit loss provision of close to $4 million. Now, last couple of years, we have seen an increase in credit risk and account collections. On a prudent basis, we have taken an additional provision during the current quarter. Now, this is one-timer in nature. This is an additional generic credit risk provision and not related to any client-specific issue.
Now, if the collection pattern improves in future, this will come back into the P&L in future years. So this is—I just want to call out that what you see as an expected credit loss provision is generic in nature and not associated with any specific client. So the net of the three is close to 160 bps of one-timer credit at an EBITDA level. In addition, there are two more items which are one-timer in nature. If you recall, in Q2, we had announced a restructuring in one of our European countries. Now, that's progressing on track. Now, with the labor footprint reducing in that country, in the European country, there's a need to optimize on the real estate footprint we have. Now, some of these leases are committed and are long-term in nature.
Now, as these offices are underutilized, we have taken an accelerated amortization towards the unused office space. That impact is close to $3.5 million. Now, this impact has been taken at an EBIT level, so that makes the total one-time credit of close to 64 pips at EBIT level. Last one is the impact of Labor Code. All of you are aware of the French Labor Code change, so I'm not going to get into that detail. Impact for the same for us is close to $12.5 million in Q4. On a continuing basis, we expect the impact to be close to 20 pips on margins for the full year next year. Let's go to the next page. Revenue for the full year was 7.6%, 7.1% in constant currency.
Pro forma growth was close to six point six percentage. Now, reported margin for the year is 17.1, versus 15.9 percentage last year, an improvement of 120 pips. Even if you normalize it for the Q4 one-timers, the margin is 16.8 percentage, so that's a significant improvement on a full year basis compared to where we were from a 25 perspective. Next page. A little bit of color on the unit level performance. For the quarter, all vertical, except HTPS, delivered year-on-year growth, and on a full year basis, all verticals delivered year-on-year growth. Financial services has been the strongest performing vertical and delivered-- and has delivered both sequential and year-on-year growth in all four quarters of the year.
And if you recall, this is after absorbing a material headwind from budget cuts in one of the GSCs in Q1 and some bit of it in from a Q4 perspective. Growth was delivered, and the growth in this vertical was delivered by a combination of scaling existing clients and new wins. H&I, for the full year, growth was largely in line with the company average. The decline during the quarter, as we had called out in the last earnings call, was driven by an increased license revenue in Q3. This is a vertical where we are seeing the maximum amount of deal traction from a new logos perspective. MNC, manufacturing and consumer. We started the year with significant headwind, driven by macro and tariff uncertainty.
We called out in our last earnings that the headwinds in the vertical has started to bottom out, and we see growth coming back at a gradual pace. There are green shoots, both in terms of existing account and new logos. We delivered a healthy year-on-year growth for the quarter and back to green from a full year perspective. High Tech and Professional Services. On a go-forward basis, which is starting next quarter, we'll report it as two different verticals, one as a professional services, the other as TPP, which is going to be technology platform and products and platforms. Now, on a combined basis, performance for the quarter was impacted by decline in two large accounts of the unit. Now, these are in line with what was expected, and Keech had, in fact, called it out in the last earnings call.
We expect both the units to get back to the growth from a 2026 perspective, and more color on that, Keech will anyway provide at the end of the presentation subsequently in the presentation. Banking, a third straight quarter of strong sequential and year-on-year growth, and again, here, growth is being driven by a combination of scaling existing accounts and opening new logos. Travel and transportation delivered a healthy year-on-year growth, both in Q4 and full year terms. On geos, for the quarter, all the geos grew year-on-year. Sequentially, what you see as a decline in North America was actually driven by lower licenses and calendar plus furlough. The underlying volume growth continues to be very strong from a North America perspective.
On a full year basis, North America growth was contributed by FS and banking, which were one of the best performing, even from a unit perspective. APAC is trailing growth, however, we expect to see a turnaround in 2026. More commentary on the 2026 outlook will be covered by Keech later during the call. If you go to the next page. We continue to add meaningful clients to our client base. Keech spoke about the fact that now we have $200 million clients, and we have also added one to our $50 million client base. Next page, please. Now, this chart lays out the key operational parameters. On the offshore mix, now, offshore mix has improved by close to 400 basis points on a year-on-year basis. Now, there's a bit of a decline in the current quarter.
It's a mix of a few aspects related to how the deals have shaped up, but at the highest level, if you zoom out and look into it, on a year-on-year basis, there's an improvement of close to 400 BPS. 100 BPS of this was contributed by SMC. SMC being in the GCC space, is completely offshore centric, so that is helping in editing. Outside of SMC, too, we continue to make significant progress in terms of improving our offshore mix. On the headcount side, during the quarter, we added close to 254 resources. 10th straight quarter of headcount addition. Now, during the quarter, IT was a net headcount add of 585, and BPS was a decline of 331.
On a full year basis, we added close to 1,535 resources, with IT, IT adding close to 2,000 and a net reduction in BPS of close to 500 resources. Utilization, Keech spoke about the fact that we did have a bit of a softness from a utilization perspective. There was a 300 BPS decline in utilization compared to the prior quarter. The 300 BPS is contributed hundred BPS by three factors, two of which are seasonal in nature and is expected to sharply recover in the, in the next quarter or, or, or the quarter after. Close to a 100 BPS of the decline was furlough driven. The next 100 BPS was on account of employees taking higher number of leaves during the quarter, being the year-end and, and, and how the holidays stacked up.
The employees took a higher number of holidays in Q4 compared to Q3. And the last 100 basis points drop was driven by the bench we are building during the quarter to support the new deal ramp-ups. We expect the utilization to materially improve next quarter. Let's move to the next page. We continue to generate very healthy cash. Our closing cash balance is close to $235 million plus. It's balance sheet is completely debt-free. DSO for the quarter came in at 67 days. It's a combination of both billed plus unbilled, and is one of the lowest in the industry. In fact, the 67 days is lower than our guided range of 70-72 days. So, and that helped a lot in our cash conversion.
Our OCF to EBITDA on an LTM basis was 76%, which was higher than our guided range of 70%. ETF for the quarter came in at 10.4%. This had a one-time impact associated with our note reversals. Adjusted for that, ETF for the quarter was at 25%. We expect the ETF for CY 2026 to be between 25%-26%. EPS for the quarter, what you look at, 4.79, obviously has a one-time impact associated with Labor Code. If we adjust for that, just the Labor Code impact, our EPS for the current quarter is close to 6.15. With that, I'll hand it over back to Keech.
Thank you, Vikash. If you go to the next slide, please. I'm gonna end by talking about the future.
Okay?
First, I'm going to say demand environment is improving and decision-making is better, and I will say this specific to the customer base and the deals that we are fighting. Okay. Need not-- It doesn't necessarily mean macro. I think macro is still spotted, right? You saw the jobs report from yesterday in the U.S. was pretty bad. But certainly, the customers and the deals we're seeing, it is better in the long term. Like I said, we are progressing very well on deals. In Q4, we won pretty much everything we expected to win and more... and the headline was the consolidation deal in the big tech.
The other, there is one deal that is not desired yet, which was, you know, which could have been late Q4 or the Q1, is the GSE consolidation deal. That is still WIP. Now, little more on that, you know, later. Okay. I think AI, you know, I'll say it has two factors, okay? One, it does have a dampener for our, for, you know, whether it's software engineering, testing, IT operations, it is a dampener on our revenue. And, you know, we have... whatever best estimate we have, we've included that. Okay. There's, I'll say for now, two, maybe three quarters, every single deal we do, has kind of productivity and impact from AI data. And we expect more of that will continue through the year.
That's why I said there will be a dampener on revenue growth due to IT, which we've accounted for. On the other hand, I think it is creating exciting new opportunities and avenues for growth. The most recent one, we've been speaking about it for a while, for a bit, but you know, suddenly, you know, the whole world is speaking about it, you know, an opportunity to replace SaaS. Now, if you think about it, that's a massive opportunity. And I, I'm not sure about the... of course, some of the reaction is initial, but if you think about it, SaaS cannot replace itself. You need somebody needs to work on it. And I think there are two parts to it.
One part is, if you know what to build, you still need somebody to work on it to build it. But there's a bigger part of knowing what is in something you want to replace or rewrite, and that is a pretty tough problem to solve. And frankly, that's a secret sauce that we built, and that's one of the services that we launched this quarter, and I think eventually all these services will create net new, after accounting for the dampness, positive growth for us. Now, what does kind of all this mean for 2026? Right. Now, we... given where we kind of how 2025 panned out, you know, clearly we have some lessons learned on how to communicate too.
So what we're saying is that we expect our revenue growth to be better than what we reported in 2025, which is 7.6%. I, I don't want to mention, we don't think of this as like a new baseline. Our core thesis of growth in—base growth in teens, low teens, and acceleration, levers to get us to mid to high teens remains completely intact. We've been through many bad growth cycles in the past, and we've recovered pretty quickly. In the last 11 years, I think we've been through three times when we've grown less than 10%. One was COVID. The other, interestingly, was in 2016. For those of you that may have followed us then, at that time, one of our largest clients, who still is, we had a significant drop, in that client.
But we recovered very quickly from there in the following years, so and we fully expect that that team will continue. Now, FY 2026 can be better depending on the following, okay? Better depending on deal ramp-ups. I told you, for example, the consolidation deal in big tech, and actually even the consolidation deal we announced the prior quarter on a big bank, these don't come with big books of work attached. Ramp-ups and how well we execute in those, and how much market share we can grab. The fact that the largest consolidation deal is still WIP. And here, unlike in other cases, we are an incumbent, so we actually accounted for some downside in that when we called the 7.6 number. So depending on how all of those pan out, we can do better.
Now, I'll come to vertical outlook in a second. Q1 is always seasonally weak for us, and you already heard Vikash say, this year, actually Q4, Q1 also, there will be a headwind on calendar. That doesn't happen every year, but it is gonna happen this year. But we're also going through some additional one-off negatives. Okay? I told you about the GSC that got another significant chunk. This is the one where the consolidation deal is still WIP. That impact for us full year is 70 basis points. And so there was some impact in Q4. There is a full quarter impact in Q1. Every year, I think customers have... There is a lag between when they get budgets at a company level to when it gets allocated to projects.
That's one of the reasons why Q1 is seasonally weak, but I'll say this year it's a little more than what we see normally. It was in the beginning of the year, but, you know, even a few days lost revenue means a lot. And so we bake that all into kind of the full year growth outlook, and we're saying Q1 will be weaker, will always be seasonally weak, and it will be weak for us this year. We will accelerate kind of growth every quarter after Q1, and you will see that in our numbers. From a vertical perspective, banking and HNI will lead growth for the company. They will be higher, probably quite a bit higher than company average. MNC will be back to growth.
Professional Services, I called out the two clients last time that led to kind of, one which had a significant ramp down, the other, which had a specific beginning of the year budget issue. We'll kind of get back to growth, but lower than company average. Now, TPP, which is a new vertical, will grow but from a small base. And finally, GTT and FS will grow at company average. So those are our expectations beginning of the year. MNC and HNI lead. FS and GTT will be at or whereabouts of company average. MNC and Professional Services will trail. TPP will be faster, but from a small base. Finally, on margins, we will change our reporting to EBIT from Q1. This is, of course, based on feedback from you, what we see in the market.
You know, there are various reasons from an IPO we had to do EBIT, but which we're gonna change it. Our EBIT outlook for the year is at a 13%-14%, which is lower than the current year. What will happen essentially is that, the first half of the year, you will see actually quite a reduction. This is on account of. In Q1, apart from other things, there's also on account of a 100 basis points headwind on the calendar. But there is lots of deal ramp-ups in the first half of the year, including two or three that include rebadging components. Quite a bit of rebadging components that will depress the margins. It will recover pretty sharply as we kind of rightshore those deals that we execute in the first part of the year, in H2.
So actually, you'll see from the H2 exiting at better than the current year, but in aggregate, because we start with a low, lower start point, in aggregate, it will be at 13%-14%, but with a stronger exit. That's the margin. With that, I will pause and take questions. Thank you all.
Thank you very much. We will now begin the question and answer segment. To ask a question, please click on the Raise Hand button at the bottom of your Zoom interface to enter the queue. Once announced, kindly unmute yourself, state your name and organization, and proceed with your question. If your query is addressed before your turn, you may press the Lower Hand button to exit the queue. We will pause briefly to allow the team to assemble the list of participants. Our first question comes from Pratik Maheshwari at HSBC. Your line is open. You may now unmute and ask your question.
Hello. Thank you for the opportunity. So, Keech, I had one question around the expectation for next year. So, I understand that probably 1Q has a lot of headwinds both around the calendar days and some client-specific issues, right? But to hit again the mid-teen guidance, right, do you think... How do you think probably 2Q and 3Q will pan out, right? The deal wins and the deal pipeline is very strong, as you've said. But it seems that there'll be a very high ask rate for those two quarters as well. So just wanted to kind of... If you could double down on that.
Hey, Pratik. You know, I said our growth will be better than 7.6. I said our long-term thesis of teens and mid-teens, low teens to mid-teens is intact. But you're right. No matter what number you pick, the growth ask in Q2 and Q3 will be high. Like I said, we do expect to kind of accelerate growth every quarter from Q1. So yes, that is the expectation that there will be a growth. Now, the calendar in itself this year actually is gonna give a little bit higher than usual growth from Q1- Q2. Much like it is a tailwind for Q4- Q1, it's a little more than normal headwind for Q1- Q2 as well.
Okay. And besides the headwind from the GSC client, do you think the headwind which company face from the professional services client, do you think that is curtailed now and probably that should start growing as a renewed basis?
So there were two clients in PS. One where we kind of won the consolidation deal, we've been gaining market share. There was a kind of plateauing at the beginning of their fiscal year, which is July. And that is, that'll come back to growth. The other one where we had a very sharp decline, you know, I'll say like 75%, decline from where we were a year ago. That's stabilized. So I, I think what you will see is that, we will get good growth again from Q2 in this vertical. On the other one, the GSC, I mean, our best read is this right now: that the, the—they still haven't decided on the consolidation deal.
You know, the cuts and the lack of allocation of budgets early in the year is essentially kind of, we think, pending the decision. So we expect that, once they make a decision, those factors will change. Nevertheless, you know, again, in our base growth that we put here, we haven't assumed that. In fact, we've assumed, because we are an incumbent, we've assumed some downside case. Because they haven't decided we could win or lose. We assumed a downside case, too. But, you know, that's the commentary on the GSC.
Okay. Thank you, Keech. Those are my questions.
Our next question comes from Ankur Rudra, from J.P. Morgan. Your line is open. You may unmute and ask your question.
Thank you. Just, you know, thank you for your comments on AI, Keet. Just zooming out a bit, what's the best way to assess your relative competitiveness here? I'm asking this because in the lack of anything else, investors normally look at growth. On that basis, if one looks at the growth trajectory on the last five quarters, we've gone from 16% organic growth CC basis to perhaps flat this quarter, maybe 1%. It's a bit of a contrast versus what we've seen in, you know, your peers with broadly similar mixes. So maybe you can highlight, you know, why the investors should not assume AI is more negatively impacting you versus others.
Yeah. So, you know, if you recall, I think last quarter or even last quarter prior to that, I said that for 2025, our performance issues are not to do with AI, okay? And, I'll say that my view in general for the industry, I do think there will be an impact on growth for the industry and for us, and we've accounted for it in 2025. Now, I will reiterate why I think... Actually, not only are we at par, I think we are way better. We've been first off on a number of fronts, okay? And I'll recount them again, some of them again. And what you will see is that these are all long-term, large opportunities, don't necessarily translate to bookings or revenues in any material term in the short term.
So we were the first to launch a legacy modernization platform. There are any number of clients that have given us a trial run. These are very large customers that don't do it only with us. They've benchmarked us with any number of others in the industries, and they think we're the best. I could, you know, potentially think of having one of those clients speak to you guys, okay? If it's of interest, we can certainly show you what we do, and I think seeing will be believing. July last year, we launched a White Coding offering. Essentially, we said we can build software 10x faster, and nobody else went to market with that at that point of time. Three weeks ago, we launched an offering called Zero License. Essentially, it's a think of it as a SaaS kill.
What we're telling clients is, we can get you to license soft-- we can exit all your licensed software over time. We've identified a number of what we think will be easier to execute, use cases and types of software to do initially before people kind of start getting closer to the core. And lastly, these are all the more, you know, I'll say, exciting stuff. The base stuff is the AI embedded in our platforms for outsourcing. We certainly went through a phase where that was weak.... I think in Q3 and Q4 could be significant wins. To be sure, that performance is not demonstrated in our numbers yet, but you will see it in future.
Thank you. Just if you could clarify, you know, you mentioned you've baked in the AI as a dampener in the existing business as you renew things for this year also. How should we think about the level of, impact, you know, on an existing renewal? Is it 30, 40%? Is it a lot more? And given it's evolving at a very rapid pace, as you mentioned as well, you know, how is this changing?
Yeah. So, I'll say if the scope were to remain the same, it could be in that 30%-40%. You know, I'd say 20%-40%, depending on the type of work. But we've in some cases at least, I think it comes with a higher volume, but for the same scope, that's the order of magnitude of production.
Thank you. Just the last question. You know, you mentioned one Q is gonna be softer than seasonal. Fourth quarter is seasonally soft. So the bulk of your ability to beat last year's 7.5% number overall, perhaps organic of 6%, falls to the two quarters. Just wanted to know, how much visibility do you have to hit those sort of mid-single-digit kind of growth rate you need sequentially for those two quarters?
So, like I said, we kind of have some lessons learned from communicating and setting expectations. You know, based on the deal wins, there's a lot of confidence in these numbers. Okay? What can happen more is if the deal wins that don't have a number, like the consolidation deals, some of the consolidation deals, if they grow and we grab a lot of market share, that'll grow. But the base is based on deals that have won.
I appreciate it. Thank you, and best of luck.
Thank you.
Our next question comes from Vibhor Singhal at Nuvama Equities. Your line is open. You may unmute and ask your question.
Yeah, hi. Thanks for taking my question. I have a couple of questions from my side, and then I have one question for Vikash. So, on the healthcare vertical, I just wanted to pick your brains on how are you looking at the outlook, given that the U.S. government, Medicare spending next year is expected to be flattish, as against, it has been growing by around 5% historically. This quarter also, we saw basically a sharp correction in the healthcare vertical. So how do we tie these two things together and the overall outlook for the healthcare vertical, for us specifically and maybe for the industry in CY 2026? And second, my second question was on the margin outlook for the next year.
From the face of it, looks like that they're kind of downgrading the margin band by almost 100 basis points. So if you could basically call out the puts and takes for this, and what are the major reasons for this? And also, do we expect this band to be back to the 14%-15% in CY 2027, or do you think this is where we will kind of settle it and find the little bit?
Okay. So the first one on healthcare, for good or bad, we don't have exposure to much exposure to payers or providers. Okay? Now, that's a huge net new opportunity. For us, our history, we do have some, but our historic presence is in the insurance side and life sciences, less so on core healthcare, and that's a net new opportunity for growth. So notwithstanding the headwinds in the industry, our start point is at a much lower level. The person we hired, Chandru, was twice, I think, rated as top 25 healthcare IT execs. So you know, we feel good about where we're going in that business, and we will do very well. On the second question, I'll retrace a couple of things I said.
The margins are gonna be lower because of deal ramp-ups in the first part of the year, and including some- ...
Sorry, somebody needs to go on mute. Sorry, moderator, can you figure out. Okay, thank you. The margins will be lower, primarily because in the first half of the year, especially, primarily because of deal ramp-ups. And the deal ramps also have, three of them actually have rebadging components, which will depress our margins. As we normalize the rightshoring, the sourcing for those deals, it'll actually improve in second half of the year. So actually, if things go right, we will not only get back to normal in 2027, actually, we'll get back to normal a little better, even in the second half of the year. So the margins that I'm talking about in this are not the new base.
Actually, there'll be quite a bit of difference you'll see between H1 and H2, and H2 will be higher than, or at least as much as the normal base.
... Our next question comes from Anmol Garg at DAM Capital. Your line is open. You may unmute and ask your question.
Yeah. Hi, hi. Thanks for the opportunity. A couple of questions. Firstly, a bookkeeping one, if I look at our note 13 in our BSC release results, then the impairment there is written at around INR 107 crores. However, in our PPT, the impairment is, you know, near about 3.7% of revenues, which comes a little higher than that. So wanted to understand, where is the 60-70 basis point kind of difference coming from?
There's no difference in terms of the numbers. It's the same number what I called out in terms of the impairment.
So basically, what I'm referring to is, in the note 13, the impairment charge written is around INR 107 crores, whereas we have indicated, 3.7% of revenues, in our PPT as-
In the notes, if you see, there are two notes with respect to the impairment. You need to add both the amounts to the impairment to get to the same number what we have from a presentation perspective of what I covered. So it's been split into two different line items in the notes. I'll give you the specific note reference numbers. If you have any other questions, you can continue. I'll come back on the specific-
Sure
... note references.
Sure, sure. Second question is, basically, on, on the growth for, next year. So, there will be some, incremental impact, of CyberSolve as well, which will add in, around three odd quarters, or three and a half odd quarters of impact. So, are we saying that growth next year would be better than that, you know, excluding the acquisition impact, as well?
So, so we're saying our growth will be better than the 7.6, which is reported this year. This year also, there was an impact due to acquisitions. Next year also there will be some carry forward impacts. But what we're saying is our reported number will be better than 7.6.
Understood. One last thing, just might want to tie up, you know, utilization dip in this quarter, along with the headcount increase, that has come in, and with that, we are indicating that one edge, particularly, would be a slight negative during the quarter. So, why are we inching up headcount over the last couple of quarters? Just wanted to understand.
Preparing for deal ramp-ups.
Sure. And just one last thing is on the license. So we have indicated that there is a $6 million-$7 million license drop during the quarter. So is there any resale component as well into this license, or this is something which are our own products?
Sorry, I didn't hear the last phrase. Is there a resale component or...?
or these are our own IPs-
Repeat it again.
Or these are our own IPs that we are selling?
No, no, these are not our own IP. These are third-party licenses. It's, you know, it gets baked in into the work we do, but it has renewal cycles. Sometimes it gets baked into the work we do, sometimes they're dependent. For example, ServiceNow, so we do quite a bit of work. Some of the clients do the licenses also with us. No, these are not our IPs.
Assuming-
Our last question comes from Dipesh Mehta at Emkay Global.
Sorry, there was a question-
Just wanted to clarify on one thing. The impairment numbers, what you were trying to look for from a balance sheet perspective, if you look at note 10 on the balance sheet, it calls out the console impairment impact of INR 1,302 million. So you can, you can look into that.
Yeah, thanks for the opportunity.
Yeah. Over to you, operator.
Can you hear me? Hello.
We can hear you, Dipesh. We can hear you, Dipesh.
Okay. Okay, thank you. Thanks for the opportunity. Couple of questions. First, just want to understand about the acquisition, how those acquisitions are playing out. If you can give some sense about SMC and Cyber, how those acquisitions are playing out. Because now I think a number of quarters have played out. In terms of synergy benefit, what we envisage, as well as capability expansion, help us to extend our overall addressable market perspective. So if you can give some sense. We made some impairment provision in some of the past acquisitions, so if you can help us understand it pertains to what? Second question is about the overall deal intake.
We said we have a good, healthy intake in quarter four, but can you provide some sense about how the ACV played out in CY 2025, compared to, let's say, CY 2024, kind of... And any change we made to guidance practice, the way we guide, for future, if any changes we made to give some comfort about the way we guide. Thank you.
... Okay. There are a number of questions in that. So, we can just—the first question was-
First was on M&A performance.
M&A performance. Okay. So I think our Softcrylic, which is not in 2025, which is in 2024, is not doing well. That's why you've seen the impairments. To be sure, the payout kind of goals were aggressive, maybe they are for there are other acquisitions we made as well. So, you know, reversing payouts doesn't necessarily mean bad performance. But in this case, I would say the performance was not good. I think that's part of the reason why we didn't do it in 2025. I'll say kind of, you know, two of software clients went bankrupt during the year. Two substantial ones. Okay. During the year as in 2025, vast majority of the work is also in the consumer sector. Actually, in consumer sector, and that's not a sector that's done well, did well due to macros.
But what are the reasons? In aggregate, it didn't do well. CyberSolve is still too early. It is not even a quarter, not even a full quarter yet, so it's still too early. We expect it'll do well. It's very adjacent to what we do in cyber security. It's a service that we sell otherwise, and we have been selling. We didn't have the capability to execute, so we actually sub a bunch of that work. So very adjacent, we expect it to do well. SMC, you know, the world, you know, is going to GCC. Who is not there is gonna set up one, who is there is gonna grow. And of course, you know, it's not only India, right?
So I think the fact that you need a capability to do what SMC does is necessary. I think it gives us visibility. You know, lots of customers who are thinking about GCCs, who were not thinking about us before, clearly do now because of this acquisition. Every quarter since we acquired, we announced a deal, including in Q4, we signed a major IT services firm in Asia-scale GCC deal we won.
The next question was on guidance practice, H&I.
Yeah. So I think our most important kind of is to be more conservative, right? So is to make sure that we can meet what we said we will do.
ACV trend, if you can give some sense, how it played out CY 2025 versus CY 2024?
Where we ended in 2025 is better than where we ended in 2024, quite a bit so. In terms of bookings that we carry forward into the year, and in addition, our pipeline is also materially better. Now, we've kind of spoken about some structural things that went into this. We built a new hunting frame team through 2024, through the second half of 2024. So essentially, the current team, as it stands, came together in end of 2024. I think it took some time for them to learn, settle in, become productive, and it is now working well. And the results for us were in booking in second half of 2024. That's why I said our where we ended the year was much better than where we ended 2024. You'll see that translated into revenues through the course of 2026.
Understand. Thank you.