This summary is based on the first quarter fiscal 2008 earnings call conducted by Infosys Technologies Limited (INFY) on July 11, 2007.
Chief Executive Officer & Managing Director: S. Gopalakrishnan
Chief Operating Officer: S. D. Shibulal
Chief Financial Officer: V. Balakrishnan
Director Human Resources: Mohandas Pai
Senior Manager IR: Shekar Narayanan
IR Manager: Sandeep Mahindroo
Key Investors Issues
- The net profit grew 34.6% over the prior year to $263 million.
- Quarterly revenue was $928 million, up 7.5% from the sequential quarter.
- For fiscal 2008, EPS are expected to range between $1.92 to $1.94.
First Quarter Fiscal 2008 Financial Highlights
The revenues went up sequentially by 7.5% in U.S. dollar terms to $928 million.
The revenue exceeded the company’s guidance of roughly $908 million. The company has seen strong growth all around. North America contributed 62.6% of its revenue this quarter. Europe contributed 26.8% of revenue this quarter compared to 26.6% in last quarter. Rest of the world contributed 8.8%.
From a service portfolio point of view, development has marginally come down, while maintenance has gone up. Together they have contributed close to 40%. Package implementation contributed 18.4% of revenue while consulting contributed 4.9% of the revenue compared with 4.3% the last quarter. Testing contributed 7.5% of the company’s revenue this quarter. Testing grew 11.1% quarter-on-quarter. Business process management, which contributed 5.4%, grew 11.2% quarter-on-quarter. The revenue from services accounted for 96.8% this quarter. The products revenue was 3.2%.
From a vertical perspective, banking, insurance and financial services contributed 36.1% of our revenue, manufacturing accounted for 13.6%, Retail was 10.8% and telecom was 22%. The company has also seen strong growth in energy and utilities and transportation and services.
The company was able to maintain the net margin in spite of the headwind effect it has seen in terms of currency, visa and salary costs during the quarter.
The firm witnessed the currency appreciate by around 7% during this quarter. The company guided, in the beginning of the quarter, at INR43.10. The average rate for the quarter is INR40.66, which means appreciation of 7%, which impacted the margin by 3.5%. The company also had the salary increases coming into effect from April, which impacted the margin by 2.5%. The visa costs impacted the margin by another 1%. Overall, the firm had an impact of 7% on the margin due to rupee, wages and visa, which was to some extent offset by increase in utilization of 3%, which impacted the margin positively by 1.5%. Pricing increased by 1%, which impacted the margin positively by 1%. Losses in the subsidiaries and the scale benefits added another 1.5%. On a net basis, the operating margin got impacted by 3 percentage points.
The non-operating income went up because the firm had increased its hedging positions.
Today the company has close to $925 million of hedging position. It was $470 million last quarter. Infosys has seen a ForEx gain of $18 million coming in the non-operating income. It enabled the firm to maintain its net margin similar to what you have seen last quarter.
The firm has seen the pricing going up by 1% during this quarter.
The price went up by 1.4% onsite, 1% offshore. On a blended basis, it went up by 1%. Fixed price was 29.1% compared to 27.4% in the previous quarter. Onsite revenue is 54.1% compared with 54.3% last quarter.
