Infosys Technologies Ltd. (INFY)
Q1 2010 Earnings Call Transcript
July 10, 2009 8:30 a.m. ET

Executives

Sandeep Mahindroo – Senior Manager, Investor Relations
S. Gopalakrishnan – Managing Director & Chief Executive Officer
S. D. Shibulal – Chief Operating Officer
V. Balakrishnan – Chief Financial Officer
Ashok Vemuri – Senior Vice President, Head – Banking and Capital Markets
Subhash Dhar – Senior Vice President, Head – Communication, Media and Entertainment, Corporate Marketing

Analysts

George Price – Stifel Nicolaus & Co.
Ed Caso – Wells Fargo
Mark Vitovitch – Piper Jaffray & Co.
Joseph Foresi – Janney Montgomery Scott
Moshe Katri – Cowen & Company
Ashish Thadhani – Gilford Securities
Julio Quinteros – Goldman Sachs
James Friedman – Susquehanna Financial Group

Presentation

Operator

Good day, everyone and welcome to the Infosys first quarter fiscal 2010 earnings release conference call. Today’s call is being recorded. At this time, for opening remarks and introductions, I’d like to turn the conference to Sandeep Mahindroo. Please go ahead, sir.

Sandeep Mahindroo

Thanks, Asha. Good morning everyone, and welcome to this call to discuss Infosys’ financial results for the quarter ending June 30, 2009. I am Sandeep from the Investor Relations team in New York. Joining us today on this call is our CEO and MD, Mr. Gopalakrishnan; COO, Mr. S.D. Shibulal; and CFO, Mr. V. Balakrishnan along with other members of the senior management.

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 30, 2009, and year ending March 31, 2010. Subsequently, we will open up the discussion for Q&A.

Before I pass it on to 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 and 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 would now pass it on to Mr. S. Gopalakrishnan.

S. Gopalakrishnan

Thanks, Sandeep and good morning, good afternoon, good evening to every one of you. Thank you for joining us for this call at the end of Q1. We have exceeded the higher end of our guidance by 3.9%. Our guidance was $1.06 to $1.08, and we did $1.12. Revenue increased sequentially by 0.1%. Of course, in constant currency, it declined. Volume declined sequentially by 1.1%. It’s slightly better than what we had projected at the beginning of the quarter.

On-site volumes declined by 2.1, offshore volumes declined by 0.6. In constant currency terms, the revenue per employee has come down by about 1%. Utilization is slightly lower, but given where we are, given the environment in which we are operating today, we feel we’ve been able to execute this quarter reasonably well. We’ve increased the operating margin by about 0.7%. We’ve added 27 clients. We’ve had three large what we call outsourcing deals. We have won three transformation deals. We continue to add employees. We continue to invest in sales, marketing. We continue to invest in solutions, IP. We have capacity. We see growth opportunities. We can take advantage of that, and our ability to manage the margins in these circumstances gives us the confidence that we would be in a strong position.

If I look at the environment, medium- to long-term, we still believe in the growth story for the industry. In the short term, it is going to be volatile. It’s going to be challenging. It’s going to be unpredictable, and that’s why if you look at our guidance, in dollar terms, we did not revise the upper end of the guidance. The lower end of the guidance reflects what happened in the first quarter. It has been increased by about $100 million. At the EPS level, for the full year, we’re saying $1.97 to $2.00. It is a sequential decline from last quarter, and we feel very cautious in the short terms but optimistic in the medium- to long-term.

When we discuss with our clients, they were actually probably more upbeat a couple of weeks back. In the last two weeks, sentiment may have become a little bit negative. They also tell us that recovery will be sometime in 2010, beyond this fiscal for us. So we want to be cautious at this point, and that is reflected in our guidance. The currency is fluctuating, quite volatile. We have benefited from currency movements, and Bala will explain the details this quarter.

Our philosophy always has been to take the exchange rate at the last day of the quarter and project, so whatever is reflected includes what has happened in the first quarter, but it’s based on the last day’s exchange rate, and what is seen now is our forecast, our guidance based on the current economic environment.

Now, I’ll pass it onto my colleague, Shibulal, to give you more segmentation details.