Infosys (NYSE: INFY) Announces Results for the Quarter Ended September 30, 2017
BANGALORE, October 24, 2017 /PRNewswire/ --
1. Highlights of financial results for the quarter and half year ended September 30, 2017
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Q2 revenues grew sequentially by 2.9% in USD terms; 2.2% in constant currency terms
Q2 revenues grew 5.4% year-on-year in USD terms
Q2 operating margin at 24.2%, as compared to 24.1% in Q1 18
Q2 net margins improved to 21.2%, as compared to 20.4% in Q1 18
Q2 Basic EPS was $ 0.25, sequential growth of 7.0% and year-on-year growth of 7.3%
H1 year-on-year revenue growth at 5.7% in reported terms; 5.5% in constant currency terms
Liquid assets including cash and cash equivalents and investments were at $6,340 million as on September 30, 2017
Utilization excluding trainees at all-time high of 84.7%
Declared interim dividend of `13 per share, compared to an interim dividend of `11 per share in FY 17
FY 18 revenue guidance at 5.5%-6.5% in constant currency. Operating margin guidance unchanged at 23%-25%
Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter ended September 30, 2017
- Revenues were $2,728 million for the quarter ended September 30, 2017
QoQ growth of 2.9% in reported terms; 2.2% in constant currency terms
YoY growth of 5.4% in reported terms; 4.6% in constant currency terms - Operating profit was $659 million for the quarter ended September 30, 2017
QoQ growth of 3.4%; YoY growth of 2.4% - Net profit was $578 million for the quarter ended September 30, 2017
QoQ growth of 7.0%; YoY growth of 7.3%
Consolidated results under International Financial Reporting Standards (IFRS) for the half year ended September 30, 2017
- Revenues were $5,379 million for the half year ended September 30, 2017
YoY growth of 5.7% in reported terms; 5.5% in constant currency terms - Operating profit was $1,298 million for the half year ended September 30, 2017
YoY growth of 4.1% - Net profit was $ 1,119 million for the half year ended September 30, 2017
YoY growth of 6.6%
"We continue to focus on executing on the theme of software enabled services and on accelerating growth of our new services portfolio." said U B Pravin Rao, Interim CEO and Managing Director. "During the quarter, we responded quickly to the management and Board changes through proactive communication with all stakeholders minimizing any negative impact to the business and allowing us to deliver growth across all our large industry units."
"Our focus on improving operational efficiencies enabled us to deliver stable margins in the quarter and at the same time provide compensation increases and higher variable payouts to our employees." said M. D. Ranganath, CFO. "We have taken several steps during the quarter towards our capital allocation policy covering `13,000 crore share buyback, coupled with interim dividend of `13 per share for enhancing shareholder returns."
2. Outlook for FY 2018
The Company's outlook (consolidated) for the fiscal year ending March 31, 2018, under IFRS is as follows:
- Revenues are expected to grow 5.5%-6.5% in constant currency*;
- Revenues are expected to grow 6.5%-7.5% in USD terms based on the exchange rates as of September 30, 2017**
*FY 17 constant currency rates - AUD/USD - 0.75; Euro/USD - 1.09; GBP/USD - 1.30
**Currency rates as of September 30, 2017 - AUD/USD - 0.78; Euro/USD - 1.18; GBP/USD - 1.34
3. Update on share buyback
The Board, at its meeting on August 19, 2017, approved a proposal for the Company to buyback its fully paid-up equity shares of face value of `5 each from the eligible equity shareholders of the Company for an amount not exceeding `13,000 crore (approximately $2 billion). The Buyback offer comprises a purchase of upto 113,043,478 Equity Shares aggregating upto 4.92% of the paid-up equity share capital of the Company at a price of `1,150 per Equity share. The buyback is proposed to be made from all eligible equity shareholders (including those who become equity shareholders as on the Record date by cancelling American Depository Shares and withdrawing underlying Equity shares) of the Company as on the Record Date (i.e. November 1, 2017) on a proportionate basis through the "Tender offer" route. The shareholders approved the said proposal of Buyback of Equity Shares through the postal ballot concluded on October 7, 2017. The Company has published a Public Announcement on October 10, 2017 for the buyback of its shares through a tender offer and has submitted the Draft Letter of Offer to regulatory authorities for their comments.
4. Strategy Refresh
Over the past eight weeks, members of the management team and the Committee of Directors undertook a comprehensive strategy refresh exercise. With the objective of outlining a sharpened strategic direction, they reviewed all programs across the organization, accelerated execution plans and prioritized key areas of investments across the services and software portfolios.
An important outcome of the exercise is a reassertion that our strategic direction will continue to be driven with a portfolio of market relevant design, consulting and technology services, enabled by software. The successful execution of this strategy positions us as the partner our clients can count on to accelerate their digital transformation journey.
5. CEO search and shareholder consultation
The process of identifying the next CEO and shareholder consultation outreach have been initiated and are progressing well.
6. Review of Investigations
As previously indicated, the Chairman has conducted a review of all the external investigations into certain anonymous complaints the Company had previously received. The review covered a range of matters described below, including the acquisition of Panaya which was completed by the Company in February 2015 and the severance payments to the former CFO.
After careful consideration led by our Chairman, the Board reaffirms the previous findings of external investigations that there is no merit to the allegations of wrongdoing.
Mr. Nilekani, Chairman of the Board, said. "I believe that all stakeholders acted out of a strong passion for Infosys, wanting what they believed to be the best for the Company and to see it succeed. In light of my review of these matters, I am fully persuaded, as is the entire Board, that the conclusions of the independent investigations are correct. This Board and I are committed to the highest standards of professionalism and will deal promptly and decisively with any governance issues should they ever come up in the future."
In certain respects, as the Board has previously noted, the severance payments to the Company's former CFO could have been better handled, and the Company has identified opportunities for improvements in processes and practices, which have been implemented. While the disclosures in this regard were timely, based on the feedback received, the Company has since December 2016 adopted a practice of disclosing the severance payment to key managerial personnel ("KMP") at the time of their departure, making the disclosures sooner than required. Additionally, the Company has now globally benchmarked its severance pay and revised its senior management employment contracts.
As previously noted, these external investigations were comprehensive and robust. The investigation conducted by Gibson, Dunn & Crutcher and Control Risks, neither of whom had any prior dealings with Infosys, also included a review of the previous two investigations conducted by Cyril Amarchand Mangaldas ("CAM"). They concluded that CAM's two previous investigations were thorough and their findings and conclusions were reasonable and credible based on the evidence. Gibson Dunn's investigation was led by Charles Stevens and Benjamin Wagner, both Presidentially-appointed former senior prosecutors in the U.S. Department of Justice, each with several decades of experience in investigating and prosecuting fraud and business crimes. The investigation involved interviews of over 50 witnesses globally, a review of company policies, Board minutes, public filings and internal documents, the collection, search and review by Gibson Dunn attorneys of many thousands of internal emails and attachments, the use of forensic accounting experts to analyze technical and financial information, the review of media accounts and public records in multiple countries, the review of the previous investigation reports issued by CAM and supporting documentation, and other investigative measures. No limitations or restrictions were placed on the investigating team from accessing information, and the Company and the relevant directors and employees cooperated fully.
Among other things, the review reaffirmed the conclusion of the independent investigation that there was no merit to the allegations of wrongdoing with respect to the acquisition of Panaya. The review also confirmed that the Company made appropriate and timely disclosures relating to severance payments to the former CFO at the end of the quarter of his resignation, and subsequently in the Company's 20-F and Annual Report.
Unlike the practice followed in the past, the Company published the summary findings of these investigations, given the attention these matters had received. A copy of Gibson, Dunn & Crutcher's memorandum to the Audit Committee with the summary findings of the investigation is attached as an Annexure.
After careful re-consideration, the Company has concluded that publishing additional details of the investigation would inhibit the Company's ability to conduct effective investigations into any matter in the future. Confidentiality is critical to ensuring the candor and cooperation of whistleblowers and other participants in any investigative process. The precedent of releasing the full investigation reports could impair the cooperation of participants should the need for an investigation arise in the future.
Mr. Nilekani added, "As the Company moves forward to a more stable environment I am grateful to all the well-wishers of the Company, including Mr. Narayana Murthy, for their deeply held passion for Infosys. The Board will continue to represent the interest of all the shareholders. I would also like to acknowledge the leadership role Mr. Narayana Murthy has played in building this iconic institution and in corporate governance matters. Going forward, it is our endeavour to build a trusting relationship with Mr. Murthy."
The Board notes that the questions and scrutiny in relation to these matters were fuelled in part by the strong feelings that various stakeholders have for the Company and its success. Questions were raised by stakeholders who have a deeply held passion for Infosys. The Board responded with equal passion and good faith.
The Board also firmly believes that it is time to put these issues to rest. It seeks the support of all stakeholders to look towards the future, and to collectively focus on strategy, operations, and growth.
7. Business highlights
This quarter we acquired Brilliant Basics, a London-based product design and customer experience (CX) innovator known for its world-class Design Thinking-led approach and experience in executing global programs. This acquisition will enhance our digital capabilities to drive transformation solutions for clients.
We further enhanced our global footprint by opening a new office in the Netherlands. We also made good progress on our commitment to hire 10,000 American workers over the next two years, and announced that we will open our North Carolina Technology and Innovation Hub in Raleigh.
Our investments in new services, especially Cloud Ecosystem, Big Data and Analytics, API and Micro services, Data and Mainframe Modernization, Cyber Security and IoT Engineering Services are showing promising results. Over the past quarter, these offerings have seen increased traction with clients, and currently contribute 9.4% of our revenues in Q2 18.
In addition, the nature of our client engagements continues to evolve, as we explore new models and go-to-market approaches.
- CMA CGM Group, a world leader in container shipping, entered into a seven-year partnership with us aimed at simplifying and transforming CMA CGM's IT applications while improving their customer service experience. As part of this agreement, Infosys will open a Development Center in Marseille and will also acquire CMA CGM's Innovation and Delivery Center in Dubai.
- Working with ATP, we announced the launch of the new 'PlayerZone' app and website, an extranet portal for ATP players, their support teams, coaches, and others in the ecosystem, which allows users to engage with each other and access information across a wide range of operational aspects related to life on Tour.
- We launched a private cloud solution in collaboration with Micro Focus SUSE, a pioneer in open source software, providing software-defined data centre infrastructure and application delivery solutions. This solution will help businesses significantly accelerate their digital transformation journey by being hardware agnostic, enabling faster time to market through rapid adoption, providing faster delivery of services, and greater infrastructure agility and control.
- Infosys and Adecco, a Fortune 500 company and a leading Global HR Solution Provider, are redefining the future of staffing through the co-creation of Adia - a Mobile-first, Cloud-based, end-to-end Digital Staffing Platform. Adia makes it possible for employers to find temporary staff for short term assignments and aims to revolutionise the industry by matching the demand and supply of talent across multiple industry segments including hospitality, events, logistics among several others. The platform is already live in six cities in Switzerland.
Our new software business continues to grow and contributed 1.6% to our revenue in Q2 18. We are leveraging offerings across Finacle, NIA, Edge, Panaya and Skava to streamline processes, drive business differentiation and elevate user experience for our clients.
- In Q2, the EdgeVerve business delivered strong performance with 54 wins and 34 go-lives from both the Finacle and Edge suite of solutions across various markets.
- Infosys NIA, our flagship Artificial Intelligence and Automation platform, continues its positive momentum and features in most large new deals. In addition, the platform has been used in many diverse business solutions including Loan Onboarding, Fraud Management, Demand Sensing, Predictive Costing, Contract Compliance, Procurement Automation and more. We are working with more than 100 clients on close to 200 engagements and see tremendous potential for the platform and business solutions going forward.
- The AssistEdge RPA implementation at nbnTM was awarded the Winner in "RPA Excellence award for Customer Experience" at the AI and RPA for Enterprises event organized by IQPC Australia. The award recognizes key business outcomes delivered for nbnTM to support the scale required in year 2017.
- Finacle continued to strengthen its position as a partner of choice for digital transformation and to enable new business models for banks. This quarter, Finacle announced three new Fintech partnerships with - Active.AI, to offer conversational banking services through chat and voice based interfaces across digital channels; Niki.ai, which offers a chat-based commerce platform for banking customers; and ToneTag, to offer a joint solution that will leverage sound wave technology to enable proximity payments and interactions. All these partners were on-boarded through the Finacle Connect Program.
- Among key go-lives this quarter, Mediterranean Bank, a leading Maltese banks, went live on the Finacle Lending Module. The Bank replaced its existing lending solution with Finacle to provide a unified, consistent platform for its corporate customers. In yet another prominent implementation, DBS Hong Kong went live with the Finacle suite of solutions covering Deposits, Teller, Overdrafts, Clearing, ACH and Structured Products. The implementation program won the 'Core Banking System Initiative of the year - Hong Kong' in The Asian Banking and Finance awards 2017.
Infosys is very proud to be associated with the prestigious GST project which is the largest tax project of its kind in the world. The system has already demonstrated success across several parameters - till date 37 crore invoices have been uploaded on the system while the system is designed to handle 300 to 320 crore invoices every month. 70 lakh tax payers have successfully migrated to the new system and the country has recorded 25 lakh new registered taxpayers. Central and state level tax regimes have been integrated with all 29 States and 7 Union Territories successfully migrating onto this system. In addition, the system is able to manage 1 Lakh active users and saw peak loads during the last two days of filing, with 50% of the filings done in that timeframe and 70% of the collection achieved with just 25% of server utilization, demonstrating the system's ability to manage scale.
Any large project of this scale, especially a transformative one like this has to deal with changes in both policy and stakeholder usability. Some of these modifications have resulted in rapid changes to the system particularly due to its integration with heterogeneous IT ecosystems including GST Suvidha Providers, Aadhar, Central Board of Excise and Customs and Model 1 states. Given the complex nature of the project and rapid change management, there have been several stakeholder concerns that have also been raised. Some of our finest engineers are supporting the GSTN team as they work towards resolving these and serving all stakeholders.
AWARDS & RECOGNITION
- Infosys has been inducted into the prestigious Dow Jones Sustainability Indices (DJSI) and is now part of the DJSI World and DJSI Emerging Markets Indices
- Infosys positioned as a Leader in Everest Group's Life & Pensions (L&P) insurance AO PEAK MatrixTM
- Infosys positioned as a Leader in Everest Group's Insurance AO PEAK MatrixTM
- Infosys positioned as a Leader in Winner's Circle in the HfS Blueprint: Application Development and Management Services 2017
- Infosys positioned as a Leader in Winner's Circle in the HfS Blueprint: Energy Operations 2017
- Infosys positioned as a Leader in Winner's Circle in the HfS Blueprint: Application Testing Services 2017
- Infosys positioned as a Leader in Winner's Circle in the HfS Blueprint: IT Infrastructure Management and Enterprise Cloud
- Infosys was awarded the Microsoft Platform Modernization Award and the World Wide Cloud & System Integrator Intelligent Cloud Alliance Partner at Microsoft Inspire 2017
- Finacle positioned as a leader in digital banking offerings in the prestigious Forrester Wave: Digital Banking Engagement Platforms 2017
- Finacle was positioned as a Leader for the 10th time in Gartner's Magic Quadrant - Global Retail Core Banking 2017
About Infosys Ltd.
Infosys is a global leader in technology services and consulting. We enable clients in 45 countries to create and execute strategies for their digital transformation. From engineering to application development, knowledge management and business process management, we help our clients find the right problems to solve, and to solve these effectively. Our team of 198,000+ innovators, across the globe, is differentiated by the imagination, knowledge and experience, across industries and technologies that we bring to every project we undertake.
Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise thrive in the digital age.
Safe Harbor
Certain statements mentioned in this release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2017. These filings are available at www.sec.gov Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company unless it is required by law.
Infosys Limited and subsidiaries
Unaudited Condensed Consolidated Balance Sheets as of
(Dollars in millions except equity share data)
September 30,
2017 March 31, 2017
ASSETS
Current assets
Cash and cash equivalents 3,575 3,489
Current investments 1,857 1,538
Trade receivables 2,056 1,900
Unbilled revenue 633 562
Prepayments and other current assets 797 749
Derivative financial instruments 1 44
Total current assets 8,919 8,282
Non-current assets
Property, plant and equipment 1,814 1,807
Goodwill 580 563
Intangible assets 107 120
Investment in associate - 11
Non-current investments 945 984
Deferred income tax assets 111 83
Income tax assets 956 881
Other non-current assets 119 123
Total non-current assets 4,632 4,572
Total assets 13,551 12,854
LIABILITIES AND EQUITY
Current liabilities
Trade payables 82 57
Derivative financial instruments 10 -
Current income tax liabilities 700 599
Client deposits 2 5
Unearned revenue 306 274
Employee benefit obligations 228 209
Provisions 64 63
Other current liabilities 1,025 954
Total current liabilities 2,417 2,161
Non-current liabilities
Deferred income tax liabilities 29 32
Other non-current liabilities 21 24
Total liabilities 2,467 2,217
Equity
Share capital- `5 ($0.16) par value 2,400,000,000
(2,400,000,000) equity shares authorized, issued
and outstanding 2,286,087,194 (2,285,655,150), net
of 10,901,258 (11,289,514) treasury shares as of
September 30, 2017 (March 31, 2017), respectively 199 199
Share premium 592 587
Retained earnings 12,571 12,190
Cash flow hedge reserve (1) 6
Other reserves 108 -
Other components of equity (2,385) (2,345)
Total equity attributable to equity holders of the
company 11,084 10,637
Non-controlling interests - -
Total equity 11,084 10,637
Total liabilities and equity 13,551 12,854
Infosys Limited and subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income
(Dollars in millions except share and per equity share data)
Three months Three months Six months Six months
ended ended ended ended
September September September September
30, 2017 30, 2016 30, 2017 30, 2016
Revenues 2,728 2,587 5,379 5,088
Cost of sales 1,743 1,638 3,435 3,231
Gross profit 985 949 1,944 1,857
Operating expenses:
Selling and marketing expenses 132 134 269 271
Administrative expenses 194 171 377 340
Total operating expenses 326 305 646 611
Operating profit 659 644 1,298 1,246
Other income, net 137 114 263 226
Share in associate's profit /
(loss) - (1) - (1)
Write-down of investment in
associate - - (11) -
Profit before income taxes 796 757 1,550 1,471
Income tax expense 218 218 431 421
Net profit 578 539 1,119 1,050
Other comprehensive income
Items that will not be
reclassified subsequently to
profit or loss:
Re-measurements of the net defined
benefit liability/asset 1 (6) 1 (9)
Cumulative impact on reversal of
unrealized gain on quoted debt
securities on adoption of IFRS 9 - - - (5)
Equity instruments through other
comprehensive income, net - - - -
Items that will be reclassified
subsequently to profit or loss:
Fair value changes on investments,
net 2 - 6 -
Fair value changes on derivatives
designated as cash flow hedge, net 3 - (7) -
Foreign currency translation (107) 119 (47) (54)
Total other comprehensive income,
net of tax (101) 113 (47) (68)
Total comprehensive income 477 652 1,072 982
Profit attributable to:
Owners of the Company 578 539 1,119 1,050
Non-controlling interests - - - -
578 539 1,119 1,050
Total comprehensive income
attributable to:
Owners of the Company 477 652 1,072 982
Non-controlling interests - - - -
477 652 1,072 982
Earnings per equity share
Basic ($) 0.25 0.24 0.49 0.46
Diluted ($) 0.25 0.24 0.49 0.46
Weighted average equity shares
used in computing earnings per
equity share
2,285,865,36 2,285,641,71 2,285,762,18 2,285,632,08
Basic 1 0 6 1
2,287,526,18 2,285,949,30 2,287,882,53 2,285,875,98
Diluted 3 3 4 8
NOTE:
1. The unaudited Condensed Consolidated Balance sheets and Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended September 30, 2017 have been taken on record at the Board meeting held on October 24, 2017
2. A Fact Sheet providing the operating metrics of the company can be downloaded from www.infosys.com
3. During the quarter ended June 30, 2017, the Company has written down the entire carrying value of the investment in its associate DWA Nova LLC, an Infosys Innovation Fund Investment. The impact of write down on Q1 18 net profit is $11 million
IFRS-INR Press Release: https://www.infosys.com/investors/reports-filings/quarterly-results/2017-2018/q2/Documents/IFRS-INR-press-release.pdf
Fact Sheet: https://www.infosys.com/investors/reports-filings/quarterly-results/2017-2018/q2/Documents/fact-sheet.pdf
Contact
Investor Relations
Sandeep Mahindroo
+91-80-3980-1018
[email protected]
Media Relations
Sarah Vanita Gideon
+91-80-4156-3998
[email protected]
Chiku Somaiya
+1-7136706752
[email protected]
SOURCE Infosys
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