Infosys Technologies Limited (INFY)

F3Q2011 Earnings Call Transcript

January 13, 2011 8:30 pm ET

Executives

Sandeep Mahindroo – Senior Manager, IR

Kris Gopalakrishnan – CEO and Managing Director

S. D. Shibulal – COO

V. Balakrishnan – SVP and CFO

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

Haragopal Mangipudi – Global Head, Finacle

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

Swami Swaminathan – CEO and MD, Infosys BPO

Analysts

Joseph Foresi – Janney Montgomery Scott

Moshe Katri – Cowen and Company

Shashi Bhushan – Prabhudas Lilladher

Joseph Vafi – Jefferies

Mark Zgutowicz – Piper Jaffray

David Grossman – Stifel Nicolaus

Trip Chowdhry – Global Equities Research

Nabil Elsheshai – Pacific Crest

Ed Caso – Wells Fargo

Bhavan Suri – William Blair

Anthony Miller – TechMarketView

Presentation

Operator

Ladies and gentlemen, good day and welcome to the Infosys Third Quarter Earnings Conference Call. As a reminder, for the duration of this conference all participants' lines will be in the listen-only mode and 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 [ph]. Good morning, everyone, and wish you all a very Happy New Year. Welcome to this call to discuss Infosys earnings release for the quarter ending December 31, 2010. I'm Sandeep from the Investor Relations team in New York.

Joining us today on this call is CEO and MD, Mr. Kris Gopalakrishnan; COO, Mr. S. D. Shibulal; and CFO, Mr. V. Balakrishnan, along with other members of the senior management.

We will start the call with a brief statement on the performance of the company for the recently concluded quarter, followed by the outlook for the quarter and year ending March 31, 2011. Subsequently, we'll open up the call for questions.

Before I pass it on to the management team, I would like to remind you that anything that 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 www.sec.gov.

I'll now like to pass it on to the Mr. S. Gopalakrishnan.

Kris Gopalakrishnan

Thanks, Sandeep and first, let me wish all of you a very Happy New Year. May this decade be much better than the last decade.

Coming to the quarter three financial year 2011, we had all-round good performance. Our revenue for the quarter was $1.585 billion and this is higher than the upper end of our guidance, which was $1,562 million. So the revenues grew sequentially by 6%; in constant currency terms revenue increased by 4.7%; volume increase was 3.1%. We had revenue per employee increase of 1.6% in blended terms.

We added 40 new clients; last quarter it was 27. The top 25 clients grew by 4.3%, non-top 25 by 7.4%. We added 11,067 employees against our projection of 11,000. For the year we are looking at 40,000. Attrition has come down. If you look at the attrition for the last three quarters, it has been steadily declining. Two quarters back it was 5,400 and now it's about 3,500. So, attrition in absolute terms have come.

We have been able to maintain our margins, utilization is still high and utilization will have an impact in the future, but utilization is about 81.9% in Q3; last quarter it was 82.7%, and including trainees it is actually now low, so it's 72.7% and that's actually good for the future.

When we told our customers and talked to them about the budgets, the indication is that the budgets are up slightly. So, it is a positive environment. They are all saying that the offshore allocation should increase and nothing bad happens, we believe that next year is going to be a normal year for the IT services industry.

If we look at client additions, if we look at growth – broad based growth, if we look at the various industry segments for Infosys, if we look at service lines, if we look at our positioning in the market in terms of how analysts perceive Infosys, our clients perceive Infosys, our own relationship with them, we believe that we are in a good position to take advantage of the growth opportunities provided and we're continuing to build capacity. We will recruit 40,000 people this year as we have projected, and so we'll continue to build capacity. We are already recruiting for the next financial year, and we will update you as we go along on that. So, we are optimistic about the coming year.

And this quarter one of the interesting things that we saw happen was that there was no budget flush. Normally, there would be a budget flush in the third quarter. Though third and fourth quarters typically are slow quarters for us, we would have seen a budget flush, but we didn't see that this quarter, because we believe the companies had spent their money in the earlier quarters, and we saw that. We saw good volume growth in the last three quarters. So there was no budget flush this quarter. That was very interesting in this quarter.

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