Infosys (NYSE: INFY) Announces Results for the Quarter Ended September 30, 2017

PR70707

BANGALORE, Oct. 24 /PRNewswire=KYODO JBN/ --

1. Highlights of financial results for the quarter and half year ended

September 30, 2017

(Logo: http://photos.prnewswire.com/prnh/20130122/589162 )

Q2 revenues grew sequentially by 2.9% in USD terms; 2.2% in constant currency

terms  

Q2 revenues grew 5.4% year-on-year in USD terms  

Q2 operating margin at 24.2%, as compared to 24.1% in Q1 18

Q2 net margins improved to 21.2%, as compared to 20.4% in Q1 18

Q2 Basic EPS was $ 0.25, sequential growth of 7.0% and year-on-year growth of

7.3%

H1 year-on-year revenue growth at 5.7% in reported terms; 5.5% in constant

currency terms

Liquid assets including cash and cash equivalents and investments were at

$6,340 million as on September 30, 2017  

Utilization excluding trainees at all-time high of 84.7%  

Declared interim dividend of `13 per share, compared to an interim dividend of

`11 per share in FY 17

FY 18 revenue guidance at 5.5%-6.5% in constant currency. Operating margin

guidance unchanged at 23%-25%

Financial Highlights        

Consolidated results under International Financial Reporting Standards (IFRS)

for the quarter ended September 30, 2017

- Revenues were $2,728 million for the quarter ended September 30, 2017

  QoQ growth of 2.9% in reported terms; 2.2% in constant currency terms

  YoY growth of 5.4% in reported terms; 4.6% in constant currency terms  

- Operating profit was $659 million for the quarter ended September 30, 2017

  QoQ growth of 3.4%; YoY growth of 2.4%

- Net profit was $578 million for the quarter ended September 30, 2017

  QoQ growth of 7.0%; YoY growth of 7.3%

Consolidated results under International Financial Reporting Standards (IFRS)

for the half year ended September 30, 2017

- Revenues were $5,379 million for the half year ended September 30, 2017

   YoY growth of 5.7% in reported terms; 5.5% in constant currency terms  

- Operating profit was $1,298 million for the half year ended September 30, 2017

  YoY growth of 4.1%

- Net profit was $ 1,119 million for the half year ended September 30, 2017  

  YoY growth of 6.6%

"We continue to focus on executing on the theme of software enabled services

and on accelerating growth of our new services portfolio." said U B Pravin Rao,

Interim CEO and Managing Director. "During the quarter, we responded quickly to

the management and Board changes through proactive communication with all

stakeholders minimizing any negative impact to the business and allowing us to

deliver growth across all our large industry units."

"Our focus on improving operational efficiencies enabled us to deliver stable

margins in the quarter and at the same time provide compensation increases and

higher variable payouts to our employees." said M. D. Ranganath, CFO. "We have

taken several steps during the quarter towards our capital allocation policy

covering `13,000 crore share buyback, coupled with interim dividend of `13 per

share for enhancing shareholder returns."

2. Outlook for FY 2018

The Company's outlook (consolidated) for the fiscal year ending March 31, 2018,

under IFRS is as follows:

- Revenues are expected to grow 5.5%-6.5% in constant currency*;

- Revenues are expected to grow 6.5%-7.5% in USD terms based on the exchange

rates as of September 30, 2017**

*FY 17 constant currency rates - AUD/USD - 0.75; Euro/USD - 1.09; GBP/USD -

1.30

**Currency rates as of September 30, 2017 - AUD/USD - 0.78; Euro/USD - 1.18;

GBP/USD - 1.34

3. Update on share buyback

The Board, at its meeting on August 19, 2017, approved a proposal for the

Company to buyback its fully paid-up equity shares of face value of `5 each

from the eligible equity shareholders of the Company for an amount not

exceeding `13,000 crore (approximately $2 billion). The Buyback offer comprises

a purchase of upto 113,043,478 Equity Shares aggregating upto 4.92% of the

paid-up equity share capital of the Company at a price of `1,150 per Equity

share. The buyback is proposed to be made from all eligible equity shareholders

(including those who become equity shareholders as on the Record date by

cancelling American Depository Shares and withdrawing underlying Equity shares)

of the Company as on the Record Date (i.e. November 1, 2017) on a proportionate

basis through the "Tender offer" route. The shareholders approved the said

proposal of Buyback of Equity Shares through the postal ballot concluded on

October 7, 2017. The Company has published a Public Announcement on October 10,

2017 for the buyback of its shares through a tender offer and has submitted the

Draft Letter of Offer to regulatory authorities for their comments.

4. Strategy Refresh

Over the past eight weeks, members of the management team and the Committee of

Directors undertook a comprehensive strategy refresh exercise. With the

objective of outlining a sharpened strategic direction, they reviewed all

programs across the organization, accelerated execution plans and prioritized

key areas of investments across the services and software portfolios.

An important outcome of the exercise is a reassertion that our strategic

direction will continue to be driven with a portfolio of market relevant

design, consulting and technology services, enabled by software. The successful

execution of this strategy positions us as the partner our clients can count on

to accelerate their digital transformation journey.

5. CEO search and shareholder consultation

The process of identifying the next CEO and shareholder consultation outreach

have been initiated and are progressing well.

6. Review of Investigations

As previously indicated, the Chairman has conducted a review of all the

external investigations into certain anonymous complaints the Company had

previously received. The review covered a range of matters described below,

including the acquisition of Panaya which was completed by the Company in

February 2015 and the severance payments to the former CFO.

After careful consideration led by our Chairman, the Board reaffirms the

previous findings of external investigations that there is no merit to the

allegations of wrongdoing.

Mr. Nilekani, Chairman of the Board, said.  "I believe that all stakeholders

acted out of a strong passion for Infosys, wanting what they believed to be the

best for the Company and to see it succeed.  In light of my review of these

matters, I am fully persuaded, as is the entire Board, that the conclusions of

the independent investigations are correct.  This Board and I are committed to

the highest standards of professionalism and will deal promptly and decisively

with any governance issues should they ever come up in the future."

In certain respects, as the Board has previously noted, the severance payments

to the Company's former CFO could have been better handled, and the Company has

identified opportunities for improvements in processes and practices, which

have been implemented.   While the disclosures in this regard were timely,

based on the feedback received, the Company has since December 2016 adopted a

practice of disclosing the severance payment to key managerial personnel

("KMP") at the time of their departure, making the disclosures sooner than

required.  Additionally, the Company has now globally benchmarked its severance

pay and revised its senior management employment contracts.  

As previously noted, these external investigations were comprehensive and

robust. The investigation conducted by Gibson, Dunn & Crutcher and Control

Risks, neither of whom had any prior dealings with Infosys, also included a

review of the previous two investigations conducted by Cyril Amarchand

Mangaldas ("CAM"). They concluded that CAM's two previous investigations were

thorough and their findings and conclusions were reasonable and credible based

on the evidence. Gibson Dunn's investigation was led by Charles Stevens and

Benjamin Wagner, both Presidentially-appointed former senior prosecutors in the

U.S. Department of Justice, each with several decades of experience in

investigating and prosecuting fraud and business crimes. The investigation

involved interviews of over 50 witnesses globally, a review of company

policies, Board minutes, public filings and internal documents, the collection,

search and review by Gibson Dunn attorneys of many thousands of internal emails

and attachments, the use of forensic accounting experts to analyze technical

and financial information, the review of media accounts and public records in

multiple countries, the review of the previous investigation reports issued by

CAM and supporting documentation, and other investigative measures. No

limitations or restrictions were placed on the investigating team from

accessing information, and the Company and the relevant directors and employees

cooperated fully.  

Among other things, the review reaffirmed the conclusion of the independent

investigation that there was no merit to the allegations of wrongdoing with

respect to the acquisition of Panaya.  The review also confirmed that the

Company made appropriate and timely disclosures relating to severance payments

to the former CFO at the end of the quarter of his resignation, and

subsequently in the Company's 20-F and Annual Report.  

Unlike the practice followed in the past, the Company published the summary

findings of these investigations, given the attention these matters had

received. A copy of Gibson, Dunn & Crutcher's memorandum to the Audit Committee

with the summary findings of the investigation is attached as an Annexure.

After careful re-consideration, the Company has concluded that publishing

additional details of the investigation would inhibit the Company's ability to

conduct effective investigations into any matter in the future. Confidentiality

is critical to ensuring the candor and cooperation of whistleblowers and other

participants in any investigative process. The precedent of releasing the full

investigation reports could impair the cooperation of participants should the

need for an investigation arise in the future.  

Mr. Nilekani added, "As the Company moves forward to a more stable environment

I am grateful to all the well-wishers of the Company, including Mr. Narayana

Murthy, for their deeply held passion for Infosys.  The Board will continue to

represent the interest of all the shareholders.  I would also like to

acknowledge the leadership role Mr. Narayana Murthy has played in building this

iconic institution and in corporate governance matters.  Going forward, it is

our endeavour to build a trusting relationship with Mr. Murthy."

The Board notes that the questions and scrutiny in relation to these matters

were fuelled in part by the strong feelings that various stakeholders have for

the Company and its success. Questions were raised by stakeholders who have a

deeply held passion for Infosys. The Board responded with equal passion and

good faith.  

The Board also firmly believes that it is time to put these issues to rest. It

seeks the support of all stakeholders to look towards the future, and to

collectively focus on strategy, operations, and growth.

7. Business highlights

This quarter we acquired Brilliant Basics, a London-based product design and

customer experience (CX) innovator known for its world-class Design

Thinking-led approach and experience in executing global programs. This

acquisition will enhance our digital capabilities to drive transformation

solutions for clients.

We further enhanced our global footprint by opening a new office in the

Netherlands. We also made good progress on our commitment to hire 10,000

American workers over the next two years, and announced that we will open our

North Carolina Technology and Innovation Hub in Raleigh.

Our investments in new services, especially Cloud Ecosystem, Big Data and

Analytics, API and Micro services, Data and Mainframe Modernization, Cyber

Security and IoT Engineering Services are showing promising results. Over the

past quarter, these offerings have seen increased traction with clients, and

currently contribute 9.4% of our revenues in Q2 18.

In addition, the nature of our client engagements continues to evolve, as we

explore new models and go-to-market approaches.

- CMA CGM Group, a world leader in container shipping, entered into a

seven-year partnership with us aimed at simplifying and transforming CMA CGM's

IT applications while improving their customer service experience. As part of

this agreement, Infosys will open a Development Center in Marseille and will

also acquire CMA CGM's Innovation and Delivery Center in Dubai.

- Working with ATP, we announced the launch of the new 'PlayerZone' app and

website, an extranet portal for ATP players, their support teams, coaches, and

others in the ecosystem, which allows users to engage with each other and

access information across a wide range of operational aspects related to life

on Tour.

- We launched a private cloud solution in collaboration with Micro Focus SUSE,

a pioneer in open source software, providing software-defined data centre

infrastructure and application delivery solutions. This solution will help

businesses significantly accelerate their digital transformation journey by

being hardware agnostic, enabling faster time to market through rapid adoption,

providing faster delivery of services, and greater infrastructure agility and

control.

- Infosys and Adecco, a Fortune 500 company and a leading Global HR Solution

Provider, are redefining the future of staffing through the co-creation of Adia

- a Mobile-first, Cloud-based, end-to-end Digital Staffing Platform. Adia makes

it possible for employers to find temporary staff for short term assignments

and aims to revolutionise the industry by matching the demand and supply of

talent across multiple industry segments including hospitality, events,

logistics among several others. The platform is already live in six cities in

Switzerland.

Our new software business continues to grow and contributed 1.6% to our revenue

in Q2 18. We are leveraging offerings across Finacle, NIA, Edge, Panaya and

Skava to streamline processes, drive business differentiation and elevate user

experience for our clients.

- In Q2, the EdgeVerve business delivered strong performance with 54 wins and

34 go-lives from both the Finacle and Edge suite of solutions across various

markets.

- Infosys NIA, our flagship Artificial Intelligence and Automation platform,

continues its positive momentum and features in most large new deals. In

addition, the platform has been used in many diverse business solutions

including Loan Onboarding, Fraud Management, Demand Sensing, Predictive

Costing, Contract Compliance, Procurement Automation and more. We are working

with more than 100 clients on close to 200 engagements and see tremendous

potential for the platform and business solutions going forward.

- The AssistEdge RPA implementation at nbnTM was awarded the Winner in "RPA

Excellence award for Customer Experience" at the AI and RPA for Enterprises

event organized by IQPC Australia. The award recognizes key business outcomes

delivered for nbnTM to support the scale required in year 2017.

- Finacle continued to strengthen its position as a partner of choice for

digital transformation and to enable new business models for banks. This

quarter, Finacle announced three new Fintech partnerships with - Active.AI, to

offer conversational banking services through chat and voice based interfaces

across digital channels; Niki.ai, which offers a chat-based commerce platform

for banking customers; and ToneTag, to offer a joint solution that will

leverage sound wave technology to enable proximity payments and interactions.

All these partners were on-boarded through the Finacle Connect Program.

- Among key go-lives this quarter, Mediterranean Bank, a leading Maltese banks,

went live on the Finacle Lending Module. The Bank replaced its existing lending

solution with Finacle to provide a unified, consistent platform for its

corporate customers. In yet another prominent implementation, DBS Hong Kong

went live with the Finacle suite of solutions covering Deposits, Teller,

Overdrafts, Clearing, ACH and Structured Products. The implementation program

won the 'Core Banking System Initiative of the year - Hong Kong' in The Asian

Banking and Finance awards 2017.

Infosys is very proud to be associated with the prestigious GST project which

is the largest tax project of its kind in the world. The system has already

demonstrated success across several parameters - till date 37 crore invoices

have been uploaded on the system while the system is designed to handle 300 to

320 crore invoices every month. 70 lakh tax payers have successfully migrated

to the new system and the country has recorded 25 lakh new registered

taxpayers. Central and state level tax regimes have been integrated with all 29

States and 7 Union Territories successfully migrating onto this system. In

addition, the system is able to manage 1 Lakh active users and saw peak loads

during the last two days of filing, with 50% of the filings done in that

timeframe and 70% of the collection achieved with just 25% of server

utilization, demonstrating the system's ability to manage scale.

Any large project of this scale, especially a transformative one like this has

to deal with changes in both policy and stakeholder usability. Some of these

modifications have resulted in rapid changes to the system particularly due to

its integration with heterogeneous IT ecosystems including GST Suvidha

Providers, Aadhar, Central Board of Excise and Customs and Model 1 states.

Given the complex nature of the project and rapid change management, there have

been several stakeholder concerns that have also been raised. Some of our

finest engineers are supporting the GSTN team as they work towards resolving

these and serving all stakeholders.

AWARDS & RECOGNITION  

- Infosys has been inducted into the prestigious Dow Jones Sustainability

Indices

  (DJSI) and is now part of the DJSI World and DJSI Emerging Markets Indices

- Infosys positioned as a Leader in Everest Group's Life & Pensions (L&P)

  insurance AO PEAK Matrix(TM)

- Infosys positioned as a Leader in Everest Group's Insurance AO PEAK Matrix(TM)

- Infosys positioned as a Leader in Winner's Circle in the HfS Blueprint:

  Application Development and Management Services 2017

- Infosys positioned as a Leader in Winner's Circle in the HfS Blueprint: Energy

  Operations 2017

- Infosys positioned as a Leader in Winner's Circle in the HfS Blueprint:

  Application Testing Services 2017

- Infosys positioned as a Leader in Winner's Circle in the HfS Blueprint: IT

  Infrastructure Management and Enterprise Cloud

- Infosys was awarded the Microsoft Platform Modernization Award and the World

  Wide Cloud & System

  Integrator Intelligent Cloud Alliance Partner at Microsoft Inspire 2017

- Finacle positioned as a leader in digital banking offerings in the prestigious

  Forrester Wave: Digital Banking Engagement Platforms 2017

- Finacle was positioned as a Leader for the 10th time in Gartner's Magic

  Quadrant - Global Retail Core Banking 2017

About Infosys Ltd.

Infosys is a global leader in technology services and consulting. We enable

clients in 45 countries to create and execute strategies for their digital

transformation. From engineering to application development, knowledge

management and business process management, we help our clients find the right

problems to solve, and to solve these effectively. Our team of 198,000+

innovators, across the globe, is differentiated by the imagination, knowledge

and experience, across industries and technologies that we bring to every

project we undertake.

Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise

thrive in the digital age.

Safe Harbor  

Certain statements mentioned in this release concerning our future growth

prospects are forward-looking statements regarding our future business

expectations intended to qualify for the 'safe harbor' under the Private

Securities Litigation Reform Act of 1995, which involve a number of risks and

uncertainties that could cause actual results to differ materially from those

in such forward-looking statements. The risks and uncertainties relating to

these statements include, but are not limited to, risks and uncertainties

regarding fluctuations in earnings, fluctuations in foreign exchange rates, our

ability to manage growth, intense competition in IT services including those

factors which may affect our cost advantage, wage increases in India, our

ability to attract and retain highly skilled professionals, time and cost

overruns on fixed-price, fixed-time frame contracts, client concentration,

restrictions on immigration, industry segment concentration, our ability to

manage our international operations, reduced demand for technology in our key

focus areas, disruptions in telecommunication networks or system failures, our

ability to successfully complete and integrate potential acquisitions,

liability for damages on our service contracts, the success of the companies in

which Infosys has made strategic investments, withdrawal or expiration of

governmental fiscal incentives, political instability and regional conflicts,

legal restrictions on raising capital or acquiring companies outside India, and

unauthorized use of our intellectual property and general economic conditions

affecting our industry. Additional risks that could affect our future operating

results are more fully described in our United States Securities and Exchange

Commission filings including our Annual Report on Form 20-F for the fiscal year

ended March 31, 2017. These filings are available at www.sec.gov Infosys may,

from time to time, make additional written and oral forward-looking statements,

including statements contained in the company's filings with the Securities and

Exchange Commission and our reports to shareholders. The company does not

undertake to update any forward-looking statements that may be made from time

to time by or on behalf of the company unless it is required by law.

Infosys Limited and subsidiaries  

Unaudited Condensed Consolidated Balance Sheets as of

                                (Dollars in millions except equity share data)

                                  September 30, 2017         March 31, 2017

                                                         

                                                                     

ASSETS

Current assets

Cash and cash equivalents                 3,575             3,489

Current investments                       1,857             1,538

Trade receivables                         2,056             1,900

Unbilled revenue                            633               562

Prepayments and other current assets        797               749

Derivative financial instruments              1                44

Total current assets                      8,919             8,282

Non-current assets

Property, plant and equipment             1,814             1,807

Goodwill                                    580               563

Intangible assets                           107               120

Investment in associate                       -                11

Non-current investments                     945               984

Deferred income tax assets                  111                83

Income tax assets                           956               881

Other non-current assets                    119               123

Total non-current assets                  4,632             4,572

Total assets                             13,551            12,854

LIABILITIES AND EQUITY

Current liabilities

Trade payables                              82                57

Derivative financial instruments            10                 -

Current income tax liabilities             700               599

Client deposits                              2                 5

Unearned revenue                           306               274

Employee benefit obligations               228               209

Provisions                                  64                63

Other current liabilities                1,025               954

Total current liabilities                2,417             2,161

Non-current liabilities

Deferred income tax liabilities             29                32

Other non-current liabilities               21                24

Total liabilities                        2,467             2,217

Equity

Share capital- `5 ($0.16) par value

2,400,000,000 (2,400,000,000) equity

shares authorized, issued and

outstanding 2,286,087,194 (2,285,655,150),

net of 10,901,258 (11,289,514) treasury shares

as of September 30, 2017 (March 31, 2017),

respectively                               199               199

Share premium                              592               587

Retained earnings                       12,571            12,190

Cash flow hedge reserve                     (1)                6

Other reserves                             108                 -

Other components of equity              (2,385)           (2,345)

Total equity attributable to equity

holders of the company                  11,084            10,637

Non-controlling interests                    -                 -

Total equity                            11,084            10,637

Total liabilities and equity            13,551            12,854

Infosys Limited and subsidiaries  

Unaudited Condensed Consolidated Statements of Comprehensive Income  

                   (Dollars in millions except share and per equity share data)

    

                           Three months  Three months   Six months   Six months

                                 ended        ended        ended        ended

                              September    September    September    September

                               30, 2017     30, 2016     30, 2017     30, 2016

Revenues                          2,728        2,587        5,379      5,088

Cost of sales                     1,743        1,638        3,435      3,231

Gross profit                        985          949        1,944      1,857

Operating expenses:

Selling and marketing expenses      132          134          269        271

Administrative expenses             194          171          377        340

Total operating expenses            326          305          646        611

Operating profit                    659          644        1,298      1,246

Other income, net                   137          114          263        226

Share in associate's profit /(loss)   -           (1)           -         (1)

Write-down of investment in associate -            -          (11)         -

                                                  

Profit before income taxes          796          757        1,550       1,471

Income tax expense                  218          218          431         421

Net profit                          578          539        1,119       1,050

Other comprehensive income

Items that will not be

reclassified subsequently to

profit or loss:

Re-measurements of the net defined

benefit liability/asset               1           (6)           1          (9)

Cumulative impact on reversal of

unrealized gain on quoted debt

securities on adoption of IFRS 9      -            -            -          (5)

Equity instruments through other

comprehensive income, net             -            -            -           -

Items that will be reclassified

subsequently to profit or loss:

Fair value changes on investments, net 2            -           6           -

Fair value changes on derivatives

designated as cash flow hedge, net     3            -          (7)          -

Foreign currency translation        (107)         119         (47)        (54)

Total other comprehensive income,

net of tax                          (101)         113         (47)        (68)

Total comprehensive income           477          652        1,072        982

Profit attributable to:

Owners of the Company                578          539        1,119      1,050

Non-controlling interests             -            -            -          -

                                     578          539        1,119      1,050

Total comprehensive income

attributable to:

Owners of the Company                477          652        1,072        982

Non-controlling interests              -            -            -          -

                                     477          652        1,072        982

Earnings per equity share

Basic ($)                           0.25         0.24         0.49       0.46

Diluted ($)                         0.25         0.24         0.49       0.46

Weighted average equity shares

used in computing earnings per

equity share

Basic                 2,285,865,361 2,285,641,710 2,285,762,186 2,285,632,081

Diluted               2,287,526,183 2,285,949,303 2,287,882,534 2,285,875,988

        

NOTE:  

1. The unaudited Condensed Consolidated Balance sheets and Condensed

Consolidated Statements of Comprehensive Income for the three months and six

months ended September 30, 2017 have been taken on record at the Board meeting

held on October 24, 2017  

2. A Fact Sheet providing the operating metrics of the company can be

downloaded from www.infosys.com

3. During the quarter ended June 30, 2017, the Company has written down the

entire carrying value of the investment in its associate DWA Nova LLC, an

Infosys Innovation Fund Investment. The impact of write down on Q1 18 net

profit is $11 million

IFRS-INR Press Release:

https://www.infosys.com/investors/reports-filings/quarterly-results/2017-2018/q2/Documents/IFRS-INR-press-release.pdf

Fact Sheet:

https://www.infosys.com/investors/reports-filings/quarterly-results/2017-2018/q2/Documents/fact-sheet.pdf

Contact

Investor Relations

Sandeep Mahindroo

+91-80-3980-1018

Sandeep_Mahindroo@infosys.com

Media Relations     

Sarah Vanita Gideon

+91-80-4156-3998

Sarah_Gideon@infosys.com

Chiku Somaiya

+1-7136706752

Chiku.Somaiya@infosys.com

Source: Infosys