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