This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Satyam Computer Services Ltd. (SAY) on April 20, 2007.
Key Investors Issues
- Net profit grew 17% sequentially on the back of the higher revenue growth.
- Sequential volume growth for the parent company was 9.5% with offshore volumes growing at 12%.
- Revenues grew 9.5% sequentially in US dollar terms and over 7% in rupee terms as rupee appreciated 1.5%.
Fourth Quarter Highlights
Revenues grew 9.5% sequentially in US dollar terms and over 7% in rupee terms as rupee appreciated 1.5%.
- Net profit grew 17% sequentially on the back of the higher revenue growth.
Sequential volume growth for the parent company was 9.5% with offshore volumes growing at 12%.
Offshore billing rates were up by 0.7% and onsite rates increased by 0.6%. Based on the contract renegotiations that the company had in the last year and the rates at which new customers are coming in, the company is confident that the positive momentum seen in the billing rates in will continue in fiscal 2008 also.
- Operating margins under consolidated Indian GAAP were at 23.1% after factoring in a stock-based compensation charge of Rs. 16 crores and 1.5% rupee appreciation.
- EBITDA margins for fiscal 2008 are expected to be at the same levels as fiscal 2007 after considering salary increments, over 6% rupee appreciation and absorbing a charge of US$20 million on account of RSUs given in fiscal 2007.
Net manpower addition was 1,265 for the parent company and includes 600 ELTPs, that is freshers.
- Nipuna, BPO subsidiary, had a sequential growth of 18% in revenues.
- Nipuna reported revenues of US$11.5 million and a loss of US$0.2 million.
- Turning to the US GAAP, revenue grew 9.5% sequentially to US$411.3 million.
- Net income was US$86.3 million, a sequential growth of 21% after factoring in a stock compensation charge of US$5.9 million.
Fiscal 2007 Highlights
- The company has achieved an annual revenue growth of 35% and net profit growth of 43% under Indian GAAP consolidated basis for fiscal 2007.
- As per US GAAP, the revenue growth rate is 33% and the net income growth is 40%.
- The strong performance is a culmination of strategic initiatives taken by the company on several fronts, notably in the areas of relationship management, deepening of competencies and associated flight. The company added 138 customers in fiscal 2007, including seven Fortune 500 customers. The number of customers billing more than US$10 million increased to 35 from 27 during the year, while the number of customers billing more than US$1 million increased by 20% to 180.
- The revenue from consulting and enterprise business solutions grew 43% in the year, indicating dominant position in this segment. The company continues to win the confidence of prominent customers, resulting in opportunities of size and criticality. Recent win of US$200 million deal from Applied Materials in the fourth quarter based on managed services model is illustrative of this trend. This has been complemented by successful execution capabilities resulting in higher growth of such accounts.
- The company continues to service customers in areas of strategic importance, such as delivering greater proportion of work from offshore. Progress was made in this area in fiscal 2007 leading to an increase in the offshore contribution to 49% of revenues compared to 45% in fiscal 2006. This was driven by a double-digit offshore volume growth in each of the quarters.
- The net addition of associates during the year is around 11,000, taking the total organization strength to around 40,000 at the close of this year. A noteworthy feature of the year has been the reduction in associate attrition to 15.7% from 19.2% in fiscal 2006. Annualized quarterly attrition for Q4 was 13%.
- People Practices have won several recognitions in the global and regional arena, which is an attestation of the renewed focus and commitment in this area. The latest feather in the cap is being accorded the Number 2 position in the Hewitt ‘Best Employers in India’ survey. The company featured amongst the Top 12 in the Hewitt ‘Best Employers in Asia’ survey, the only IT services company from India in the Top 20 rankings.
The company continues to see a strong demand in the marketplace and is well-positioned to address that demand. The company looks forward to a revenue growth rate of 28% to 30% in fiscal 2008 as per US GAAP. The company expects to record revenue of US$1.9 billion in fiscal 2008, at the higher end of revenue guidance. The EPADS is expected to grow in the range of 27% to 29%.
Corresponding Indian GAAP consolidated guidance after factoring in a rupee appreciation of 6% would translate to revenue growth rate of 20% to 22% and an EPS growth of 18% to 20%. The Board has proposed a final dividend of 125%. The total dividend for the fiscal 2007 stands at 175%, including the interim dividend of 50%.
For fiscal ‘07, operating margins declined by 60 basis points compared to fiscal 2006, in line with earlier guidance.
For fiscal ‘07, Nipuna recorded revenues of US$38 million, a growth of 91% over fiscal 2006, and was EBITDA positive for the entire year.
