Infosys Technologies Limited (INFY)

F1Q11 (Qtr End 06/30/10) Earnings Call Transcript

July 13, 2010 8:30 am ET


Sandeep Mahindroo – IR

S.D. Shibulal – COO and Member of the Board

V. Balakrishnan – SVP and CFO

T. V. Mohandas Pai – Director & Head - Finacle, Admin & Human Resources

B. G. Srinivas – SVP, Manufacturing; Product Engineering; Product Lifecycle and Engineering Solutions

S. Gopalakrishnan – CEO and Managing Director

Subhash Dhar – SVP and Head, Global Sales, Alliances and Marketing; Head, Communications, Media and Entertainment

Ashok Vemuri – SVP and Global Head, Banking and Capital Markets; Strategic Global Sourcing


Joseph Foresi – Janney Montgomery Scott

Bhavan Suri – William Blair & Company

Trip Chowdhry – Global Equities Research

Ed Caso – Wells Fargo

Rod Bourgeois – Bernstein

David Grossman – Stifel Nicolaus

Nabil Elsheshai – Pacific Crest Securities

Mark Zgutowicz – Piper Jaffray

Karl Keirstead – Kaufman Bros.

James Friedman – Susquehanna

Glenn Greene – Oppenheimer



Ladies and gentlemen, good day and welcome to the Infosys first quarter earnings conference call. As a reminder, all participants' lines will be in the listen-only mode for the duration of this presentation. There will be an opportunity for you to ask questions at the end of today’s opening remarks. (Operator Instructions). Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Sandeep Mahindroo of Infosys Technologies Limited. Thank you, and over to you, Mr. Mahindroo.

Sandeep Mahindroo

Thanks, Rochelle. Good morning, everyone, and welcome to this call to discuss Infosys’ earnings release for the quarter ending June 30th, 2010. I am Sandeep from the Investor Relations team in New York. Joining us today on this earnings call is CEO and M.D., Mr. Gopalakrishnan; COO, Mr. S.D. Shibulal; and CFO, Mr. V. Balakrishnan along with other members of the management team.

We will start the proceedings with a brief statement on the performance of the company for the recently concluded quarter, followed by the outlook for the quarter ending September 30th, 2010 and year ending March 31st, 2011. Subsequently, we will open up the discussion for Q&A.

Before I pass it on to the management team, I would like to remind you that anything which we say which refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risks that the company faces. A full statement and explanation of these risks is available in our filings with the SEC, which can be found on

I would now like to pass it on to the management team.

S.D. Shibulal

Good morning, good evening. This is Shibulal. We had an excellent quarter in Q1 for Infosys. We have exceeded the higher end of our guidance. Our guidance for the quarter was $1.33 billion to $1.34 billion. In constant currency terms, the guidance was $1.32 billion to $1.33 billion. Our revenue for the quarter was $1.358 billion. The revenue increased sequentially by 4.8%. In constant currency terms, the revenue increased sequentially by 6%.

Volume increase was 7.6% for the quarter. Onsite volume increased by 7% and offshore increased by 7.9%. Pricing declined by 1.6% in blended terms for the current quarter. Utilization for the quarter was 78.7%. It is up from 77.1% in Q4. As I said, this was an excellent quarter. We have seen growth all around. The growth was led by BFSI, retail, and energy and utilities. BFSI grew by 8.8% this quarter; energy and utilities, 9.9%; and retail by 6.4%.

We have seen, as I said, growth all around. Our top 10 clients grew by 6.6%, that is 7.9% in constant currency terms. And the remaining clients, the non-top 10, grew by 4.2%. We added 38 new clients in this quarter. Our $1 million clients today is 341. We have eight clients giving us more than $100 million in LTM basis. Of the clients we added, five were Fortune 500 U.S. and three were Fortune Global 500.

Our DSO this quarter was excellent. It was 60 days. Our operating margin for the quarter was 28.3%; in Q4, it was 30.1%. That is a 1.8% drop in the quarter on the operating margin. Now, this is against the 3% drop which we predicted in the beginning of the quarter. So while we predicted a 3% growth in the beginning of the quarter, the drop was 1.8%.

We added 8,800 gross employees in this quarter and a net of 1,000. For the year, we have increased our employee additions to 36,000. The number which we gave last quarter was 30,000. Our EPS, we have outperformed our guidance. Our EPS for the quarter was $0.57 compared with the guidance of $0.56.

So with that, now let me hand over to Bala to give a color on the financials. Thank you.

V. Balakrishnan

Good morning, friends. Nice to talk to you again. We have done extremely well this quarter. In constant currency, the revenue grew by 6% sequentially. Our reported revenue growth is 4.8% because we had lot of headwinds in terms of cross-currency.

Our gross margin is 41.1% for the quarter and operating income was 28.3%, a decline of 1.8% from the previous quarter. In the beginning of the year, we said in the first quarter, the operating margin could decline by 300 basis points, mainly because of the wage increases but net-net, it declined by 1.8%. Currency was against us. The rupee average rate for the quarter was 45.58 as compared to 45.91 in the previous quarter and also the cross-currency impact was around $15 million during the quarter. So net-net, the currency impact is around 90 basis points on the operating margin.

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