This summary is based on the third quarter fiscal 2009 earnings call conducted by Infosys Technologies Ltd. (INFY) on 13 January 2009.
Management:
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CEO and Managing Director: S. Gopalakrishnan
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COO: S. D. Shibulal
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CFO: V. Balakrishnan
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SVP and Global Head, Banking and Capital Markets: Ashok Vemuri
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SVP, Communications, Media and Entertainment: Subhash Dhar
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CEO and Managing Director, Infosys BPO: Amitabh Chaudhry
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Director, HR, Education and Research and Administration: T.V. Mohandas Pai
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Senior Manager, IR: Sandeep Mahindroo
Key Investors Issues
- Revenues were $1.171 billion, growing by 8%.
- Earnings of $332 million or 58 cents a share were up 6% from $312 million or 55 cents a share a year ago.
Year to Date Highlights:
- Revenues were $3.5 billion, up 15.5% from $3.03 billion in the prior year.
- Earnings amounted to $960 million or $1.69 a share, up 13%.
Third Quarter Highlights
Revenues were $1.171 billion, growing by 8% from $1.08 billion in the prior year, pushing earnings to $332 million or 58 cents a share, up 6% from $312 million or 55 cents a share a year ago.
- Operating margins were up 31.8% as compared to 29.5% in the prior period basically because of a benefit of 4.7% in the margins because of rupee, because it depreciated by close to 11%.
- The firm had a negative impact because of cross currency on the operating margin of 1% and the utilization coming down from 70.7% to 68.5% this quarter impacted the margin by around 1.3%.
- There were offsetting factors like reduction in SG&A and the reduction in overall per capita revenue.
The IBPO subsidiary added $67 million of revenue, with net margin of 16%, while Australia did $26 million in revenue, down due to currency.
- Consulting made a loss of $2.6 million, China $2 million, Mexico $0.5 million. All these subsidiaries are still in the investments stage and that is the reason why they are making losses.
- DSO days of 56 days for the quarter in a quarter where there are a lot of holidays, where the environment is challenging, as the firm was able to collect most of its receivables and make sure that DSO days are reduced.
- It ended the quarter with $1.98 billion of cash.
Billing rates have come under pressure, prices have come down by 1.8% on constant currency.
- The firm’s strategy is to convert the price negotiations into more of value conversations. - The company has won four large deals, $50 million to $100 million this quarter and there are multiple deals in the pipeline.
- Utilization has gone up 74.8% compared with 72.1% and three subsidiaries, Infosys China, Infosys Consulting and Infosys Mexico are still in the investments stage.
- Infosys added 30 new clients this quarter and the top ten clients grew 2.3% in constant currency, and non-top ten group 0.1% sequentially in constant currency.
Fiscal 2009 Outlook:
- Consolidated revenues in the fourth quarter are expected to be in the range of $1.13 billion and $1.17 billion.
- Earnings per American Depositary share are expected to be 55 cents.
- Consolidated revenues for the full year are expected to be in the range if $4.67 billion to $4.71 billion and Earnings per American Depositary share of $2.23.
Key questions and answers from the third quarter earnings call conducted by Infosys Technologies Ltd. (INFY) on 13 January 2009.
Bhavan Suri (William Blair):
Could you elaborate a little more on kind of the discussions you have with customers around pricing and then where are you experiencing these conversations?
S. D. Shibulal: We are having discussions with a few customers across vertical and across geos. If you look at the past ten quarters or so, you can clearly see that our prices have gone up, our revenue productivity has gone up quarter on quarter.
We have been able to convince our customers of the value which we provide and they have been willing to pay us. Higher value, higher rates (inaudible). Today the customers are undergoing trouble and they are under pressure, so that is where some of the discussions are happening.
Also we are seeing, at least in some occasions, competitors cutting price globally and offshore. So our direction is usually to try and convert that discretion into a valid discussion on the value which we deliver and on the total cost of ownership.
So we can look at linking those discussions through additional volume, we can look at converting the deal into fixed price, we can look at converting the deal into other pricing models, we can look at productivity improvements. So we explore all these possibilities, and usually we end up in a combination of some of these possibilities.
