Transcript Slide 1

Financial update
T. V. Mohandas Pai
Chief Financial Officer
© Infosys Technologies Limited 2004-2005
Safe Harbor
Certain statements made in this Analyst Meet concerning our future growth prospects are forwardlooking statements, 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, 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 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,
2004 and quarterly report on Form 6-K for the quarter ended June 30, 2004. These filings are
available at www.sec.gov. Infosys may, from time to time, make additional written and oral forwardlooking 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.
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 2
Q1 05 – A good quarter….
Sequential
growth
Q1 FY 2005
Q4 FY 2004
$m
%
$m
%
Revenue
335
100.0%
303
100.0%
10.6%
Gross Profit
145
43.3%
130
42.9%
11.5%
Operating income
96
28.7%
86
28.4%
11.6%
Net income
83
24.8%
77
25.4%
7.8%
Earnings per ADS ($)
© Infosys Technologies Limited 2004-2005
0.31
0.29
Analyst Meet 2004 | New Game. New Rules.
6.9%
Slide 3
....leading to an upward revision in
Outlook
OUTLOOK FOR FY 05
April 2004
July 2004
Revenues ($ m)
1,381
1,392
1,476
1,485
Y-o-y growth (%)
30%
31%
39%
40%
EPADS ($)
1.30
1.30
1.37
1.37
Y-o-y growth (%)
27%
27%
33%
33%
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 4
Infosys has a competitive cost structure….
FY 02
$m
%
FY 03
$m
FY 04
%
$m
%
Q1 05
$m
%
Revenues
545
100.0%
754
100.0%
1,063
100.0%
335
100.0%
Cost of revenues
293
53.8%
417
55.3%
603
56.7%
190
56.7%
Gross Profit
252
46.2%
337
44.7%
460
43.3%
145
43.3%
S&M expenses
27
5.0%
56
7.4%
77
7.2%
23
6.9%
G&A expenses
44
8.1%
58
7.7%
82
7.7%
26
7.8%
2
0.4%
4
0.5%
8
0.8%
-
0.0%
74
13.6%
118
15.6%
167
15.7%
49
14.6%
Operating income
178
32.7%
219
29.0%
293
27.6%
96
28.7%
Other income, net
14
2.6%
18
2.4%
28
2.6%
-
0.0%
192
35.2%
237
31.4%
321
30.2%
96
28.7%
28
5.1%
42
5.6%
51
4.8%
13
3.9%
164
30.1%
195
25.9%
270
25.4%
83
24.8%
Amortization
Operating exp.
Income before taxes
Provision for taxes
Net income
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 5
….With a viable Onsite-Offshore mix….
FY 02
FY 03
FY 04
Q1 05
Onsite
50.8%
57.4%
54.7%
54.1%
Offshore
49.2%
42.6%
45.3%
45.9%
Total
100.0%
100.0%
100.0%
100.0%
Onsite
30.7%
35.7%
33.3%
33.1%
Offshore
69.3%
64.3%
66.7%
66.9%
Total
100.0%
100.0%
100.0%
100.0%
Services only
Revenue mix
Effort mix
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 6
….High utilization rates….
UTILIZATION
FY 02
FY 03
FY 04
Q1 05
Including trainees
70.1%
77.6%
73.0%
73.4%
Excluding trainees
72.9%
82.2%
82.2%
79.7%
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 7
….Optimized SG&A
FY 02
FY 03
FY 04
Q1 05
Revenues - $ m
545
754
1,063
335
S&M exp - $ m
27
56
77
23
5.0%
7.4%
7.2%
6.9%
No. of people in S&M
143
280
308
313
G&A exp - $ m
44
58
82
26
8.1%
7.7%
7.7%
7.8%
No. of people in G&A
874
1,069
1,337
1,352
Total SG&A exp - $ m
71
114
159
49
13.1%
15.0%
15.0%
14.6%
% of revenue
% of revenue
% of revenue
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 8
Wage pressure is manageable
Salary costs as a % of revenue
FY 02
FY 03
44.3%
47.1%
FY 04 Q1 05
50.6%
50.7%
» Variable compensation structure
» Market led salaries
» Low attrition (10.9% in Q1 05, LTM basis*)
* Standalone basis
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 9
Pricing environment is stable….
Pricing change *
FY 02
FY 03
FY 04
Q1 05
(4.4%)
(0.8%)
(5.9%)
(1.3%)
* Y-o-Y
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 10
….With a strong volume growth
Volume growth *
FY 02
FY 03
FY 04
Q1 05
37.7%
38.8%
48.2%
43.9%
* Y-o-Y
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 11
New services adding more value to
Infosys
FY 02
FY 03
FY 04
Q1 05
Development
32.0%
32.1%
25.7%
25.6%
Maintenance
29.0%
28.2%
30.1%
29.9%
Re-engineering
10.1%
5.5%
6.0%
6.0%
Package Implementation
9.8%
11.0%
14.5%
16.5%
Consulting
4.2%
4.3%
3.7%
3.4%
Testing
2.9%
3.4%
5.3%
4.7%
Engineering services
2.6%
2.6%
2.2%
2.0%
Business Process Management
0.0%
0.5%
1.6%
1.9%
Other Services
5.4%
7.8%
8.1%
7.8%
Total services
96.0%
95.4%
97.2%
97.8%
Products
4.0%
4.6%
2.8%
2.2%
100.0%
100.0%
100.0%
100.0%
Total revenues
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 12
Exchange rate movement has an impact
FY 02
FY 03
FY 04
Q1 05
USD-INR rate (period-end)
48.79
47.53
43.40
45.99
% change
4.8%
(2.6%)
(8.7%)
6.0%
USD-INR rate (Average)
47.75
48.35
45.78
45.31
% change
4.3%
1.3%
(5.3%)
(1.0%)
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 13
Components of exchange variation
» Components of Forex variation under other income
» Effect of foreign currency denominated monetary assets and liabilities
» Transaction differences
Gains or losses arising on
difference in foreign exchange
rates between date of settlement
of transaction and originating
transaction rate/ carrying value
» Translation differences
Gains or losses arising on
revaluing foreign currency
denominated assets and liabilities
at each period end
» Effect of hedging
» Gains and losses on forward contracts
Gains or losses on forward
contracts maturing/cancelled during
the period - difference between
forward rate and spot rate on date
of maturity/cancellation
» Effect of marking to market
Difference between forward
rate/carrying value of FC rate and
period end rate
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 14
Investment in Capex remains strong
FY 02
Capex investments ($ m)
53.48
FY 03 FY 04 Q1 05 FY 05*
25.96
74.48
25.70
140-175
* - Estimated
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 15
Infosys is investing for the future
Investment plans for FY 05
$m
Business plan initiatives of IBUs
16.0
Banking Business Unit product development
10.0
Infosys Consulting initiative
3.6
China initiative
2.6
Total investments
32.2
Total revenue – Average of Guidance
1,481
Impact on margin
2.2%
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 16
Infosys has a robust Balance Sheet
» Debt free
» Cash and cash equivalents of $ 468 m including $ 185 m
invested in liquid mutual funds (as of June 30, 2004)
» Paid out a one-time special dividend of $ 188 m in Q1 05
» Policy is to earn a minimum of twice the cost of capital on
average capital employed and thrice the cost of capital on
invested capital
» AR of $ 182 m. DSO at 58 days (as of June 30, 2004)
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 17
In summary
» Financially strong and profitable
» Growing faster than industry
» A robust revenue model and a competitive cost structure
» Ability to scale up to meet demands
» Willing to make investments for future growth and differentiation
© Infosys Technologies Limited 2004-2005
Analyst Meet 2004 | New Game. New Rules.
Slide 18
Thank you
© Infosys Technologies Limited 2004-2005