Infosys (NYSE: INFY) Announces Results for the Quarter Ended December 31, 2017
Infosys (NYSE: INFY) Announces Results for the Quarter Ended December 31, 2017
PR71864
BANGALORE, India January 12, 2018/PRNewswire=KYODO JBN/ --
Reported year-on-year revenue growth of 8.0% in USD terms for the quarter
and 24.3% operating margin
1. Highlights of financial results for the quarter and nine months ended
December 31, 2017
(Logo: http://mma.prnewswire.com/media/610722/Infosys_Logo.jpg )
- Q3 revenues grew year-on-year by 8.0% in USD terms; 5.8% in constant
currency terms
- Q3 revenues grew sequentially by 1.0% in USD terms; 0.8 % in constant
currency terms
- Q3 operating margin improved to 24.3% from 24.2% in Q2 18
- Q3 EPS at $ 0.35, year-on-year growth of 46.1% and sequential growth of
38.2%
- Q3 EPS of $ 0.35 includes positive impact of $ 0.10 from Advance Pricing
Agreement (APA) with the US IRS
- 9 months year-on-year revenue growth at 6.5% in USD terms; 5.6% in
constant currency terms
- Q3 cash flow from operating activities were at $ 657 mn, compared to $ 441
mn in Q2 18
- Utilization excluding trainees at all-time high of 84.9%
- Q3 standalone attrition declined to 15.8% from 17.2% in Q2 18
- FY 18 revenue guidance in constant currency retained at 5.5%-6.5%
- FY 18 operating margin range unchanged at 23%-25%
Financial Highlights
Consolidated results under International Financial Reporting Standards
(IFRS) for the quarter ended December 31, 2017
- Revenues were $ 2,755 million for the quarter ended December 31, 2017
- Operating profit was $ 669 million for the quarter ended December 31, 2017
QoQ growth of 1.4%; YoY growth of 4.5%
- Net profit was $ 796 million for the quarter ended December 31, 2017
QoQ growth of 37.6%; YoY growth of 45.4%
- Basic EPS at $ 0.35 for the quarter ended December 31, 2017
During the quarter, on account of the conclusion of an APA with the US IRS,
net profit has increased which has led to an increase in Basic EPS by $ 0.10
for the quarter
Consolidated results under International Financial Reporting Standards
(IFRS) for the nine months ended December 31, 2017
- Revenues were $ 8,134 million for the nine months ended December 31, 2017
YoY growth of 6.5% in reported terms; 5.6% in constant currency terms
- Operating profit was $ 1,966 million for the nine months ended December
31, 2017
YoY growth of 4.3%
- Net profit was $ 1,915 million for the nine months ended December 31, 2017
YoY growth of 19.9%
During the nine months period ended December 31, 2017, on account of the
conclusion of an APA with the US IRS, net profit has increased which has led to
an increase in Basic EPS by $ 0.09
"It is a privilege for me to be appointed as the CEO & MD of Infosys,
helping our clients navigate the digital future and employees build new skills
and capabilities. Our Q3 performance is strong. We had 8% year-on-year growth
and 24.3% operating margin with US$ 593 million of free cash flow," said Salil
Parekh, CEO & MD. "We are progressing towards stability and are well positioned
to serve our clients in the new areas of demand," he added.
"Increased adoption of our digital offerings and new services helped
stabilize price realization. We were able to grow client relationships across
revenue categories," said Pravin Rao, COO. "During the quarter, we provided
compensation increases and higher variable payouts to our employees. Our
investments in employees continues to deliver results as reflected in lower
attrition."
"Our operating margins were stable on the back of broad-based improvement
in operational efficiency parameters. Our cash generation continued to be
robust during the quarter," said M.D. Ranganath, CFO. "We successfully executed
the share buyback of Rs. 13,000 crores in line with our capital allocation
policy."
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 December 31, 2017**
*FY 17 constant currency rates - AUD/USD - 0.75; Euro/USD - 1.09; GBP/USD -
1.30
**Currency rates as of December 31, 2017 - AUD/USD - 0.78; Euro/USD - 1.20;
GBP/USD - 1.35
3. Board and Management Changes
Based on the recommendations of the Nomination and Remuneration Committee,
the Board in its meeting held on December 2, 2017 appointed Salil Parekh as the
Chief Executive Officer and Managing Director of the Company with effect from
January 2, 2018 for a period of 5 years, subject to the approval of
shareholders and other regulatory requirements, if any. The Board re-designated
Pravin Rao as the Chief Operating Officer and Whole Time Director with effect
from January 2, 2018 upon stepping down as the interim Chief Executive Officer
and Managing Director in accordance with the terms of his appointment. Further,
Pravin Rao shall hold the office of Whole Time Director up to August 17, 2022.
The postal ballot notice dated January 3, 2018 seeking the approval of
shareholders including the terms of appointment of the above changes is
available on the Company's website at the following link-
https://www.infosys.com/investors/Documents/postal-ballot-jan2018.pdf
Rajesh K. Murthy, President, has resigned from the company for personal
reasons. His last date with Infosys will be January 31, 2018. The Board places
on record its deep appreciation for his commitment to Infosys over the last 26
years and wishes him the very best for his future endeavours.
4. Committee of Directors
The Committee of Directors was formed on April 13, 2017 to support and
advise the management in executing the Company's strategy. With the appointment
of Salil Parekh as the CEO and Managing Director of the Company, the Committee
of Directors stands dissolved with effect from January 12, 2018.
5. Update on Shareholders consultation by SRC
The Company has completed the previously announced shareholder
consultation. The feedback received was presented and taken on record by the
Board on January 11, 2018
6. Signing of the Advance Pricing Agreement ("APA") with the US Internal
Revenue Service
Infosys has concluded an Advance Pricing Agreement ("APA") with the U.S.
Internal Revenue Service ("IRS"). Under the APA, Infosys and the IRS have
agreed on the methodology to allocate revenues and compute the taxable income
of the Company's U.S. operations. This agreement covers financial years from
2011 to 2021. The APA will enhance predictability of Infosys' tax obligations
in respect of its U.S. operations.
In accordance with the APA, Infosys has reversed tax provisions of
approximately US$ 225 million made in previous periods which are no longer
required (both under International Financial Reporting Standards and Indian
Accounting Standards). Further, in line with the APA, Infosys expects to payout
approximately US$ 233 million due to the difference between the taxes payable
for prior periods as per the APA and the actual taxes paid for such periods.
This amount is expected to be paid over the next few quarters.
The reversal of the tax provisions of approximately US$ 225 million had a
positive impact on the consolidated Basic EPS for the quarter ending December
31, 2017 by approximately US$ 0.10. Further, on account of the APA methodology,
Infosys expects its overall effective tax rate to be lower by about 100 basis
points for future periods covered under the APA.
7. 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 INR 5 each
from the eligible equity shareholders of the Company for an amount not
exceeding INR 13,000 crore. The shareholders approved the said proposal of
buyback of Equity Shares through the postal ballot that concluded on October 7,
2017. The Buyback offer comprised a purchase of 11,30,43,478 Equity Shares
aggregating 4.92% of the paid-up equity share capital of the Company at a price
of INR 1,150 per Equity share. The buyback was offered to all eligible equity
shareholders (including those who became 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 Company concluded the
buyback procedures on December 27, 2017 and 11,30,43,478 equity shares were
extinguished. The Company has funded the buyback from its securities premium
and general reserve. In accordance with section 69 of the Companies Act, 2013,
the Company has created 'Capital Redemption Reserve' of $ 9 million equal to
the nominal value of the shares bought back as an appropriation from general
reserve.
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 200,000+
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 http://www.infosys.com to see how Infosys (NYSE: INFY) can help your
enterprise thrive in the digital age.
Safe Harbor
Certain statements in this release including those concerning our future
growth prospects, predictability of the Company's tax obligations in respect of
its US operations, the amount and timing of tax payments to be made by the
Company, the impact on consolidated Basic EPS, and the Company's overall
effective tax rate for future periods, are forward-looking statements 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 the profit margins
for client contracts that are executed in whole or in part by the Company's US
operations, as well as changes in US tax laws. Additional risks that could
cause actual results to differ materially 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 http://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. In addition, please note that any
forward-looking statements contained herein are based on assumptions that we
believe to be reasonable as of the date of this press release. 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)
December 31, 2017 March 31, 2017
ASSETS
Current assets
Cash and cash equivalents 3,226 3,489
Current investments 389 1,538
Trade receivables 2,057 1,900
Unbilled revenue 573 562
Prepayments and other current assets 891 749
Income tax assets 84 -
Derivative financial instruments 13 44
Total current assets 7,233 8,282
Non-current assets
Property, plant and equipment 1,853 1,807
Goodwill 583 563
Intangible assets 94 120
Investment in associate - 11
Non-current investments 957 984
Deferred income tax assets 184 83
Income tax assets 863 881
Other non-current assets 122 123
Total non-current assets 4,656 4,572
Total assets 11,889 12,854
LIABILITIES AND EQUITY
Current liabilities
Trade payables 79 57
Derivative financial instruments 1 -
Current income tax liabilities 397 599
Client deposits 24 5
Unearned revenue 362 274
Employee benefit obligations 227 209
Provisions 71 63
Other current liabilities 1,040 954
Total current liabilities 2,201 2,161
Non-current liabilities
Deferred income tax liabilities 100 32
Employee benefit obligations 8 -
Other non-current liabilities 36 24
Total liabilities 2,345 2,217
Equity
Share capital- `5 ($0.16) par value 2,400,000,000
(2,400,000,000) equity shares authorized, issued
and outstanding 2,173,143,893 (2,285,655,150),
net of 10,805,896 (11,289,514) treasury shares
as of December 31, 2017 (March 31, 2017),
respectively 190 199
Share premium 243 587
Retained earnings 11,099 12,190
Cash flow hedge reserve - 6
Other reserves 161 -
Capital redemption reserve 9 -
Other components of equity (2,158) (2,345)
Total equity attributable to equity
holders of the company 9,544 10,637
Non-controlling interests - -
Total equity 9,544 10,637
Total liabilities and equity 11,889 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 Nine months Nine months
ended ended ended ended
December 31, December 31, December 31, December 31,
2017 2016 2017 2016
Revenues 2,755 2,551 8,134 7,639
Cost of sales 1,773 1,601 5,208 4,832
Gross profit 982 950 2,926 2,807
Operating expenses:
Selling and marketing
expenses 136 131 405 402
Administrative expenses 177 179 555 519
Total operating expenses 313 310 960 921
Operating profit 669 640 1,966 1,886
Other income, net 149 121 413 347
Share in associate's
profit / (loss) - - - (1)
Write-down of investment
in associate - - (11) -
Profit before income taxes 818 761 2,368 2,232
Three months Three months Nine months Nine months
ended ended ended ended
December 31, December 31, December 31, December 31,
2017 2016 2017 2016
Income tax expense 22 214 453 635
Net profit 796 547 1,915 1,597
Other comprehensive
income Items that will
not be reclassified
subsequently to profit or loss:
Re-measurements of the net defined
benefit liability/asset 2 (1) 3 (10)
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 valuation of investments,
net (4) - 2 -
Fair value changes on
derivatives designated as
cash flow hedge, net 1 4 (6) 4
Foreign currency
translation 229 (189) 182 (243)
Total other comprehensive
income, net of tax 228 (186) 181 (254)
Total comprehensive
income 1,024 361 2,096 1,343
Profit attributable to:
Owners of the Company 796 547 1,915 1,597
Non-controlling interests - - - -
796 547 1,915 1,597
Total comprehensive income
attributable to:
Owners of the Company 1,024 361 2,096 1,343
Non-controlling interests - - - -
1,024 361 2,096 1,343
Earnings per equity share
Basic ($) 0.35 0.24 0.84 0.70
Diluted ($) 0.35 0.24 0.84 0.70
Weighted average equity shares used in
computing earnings per equity share
Basic 2,275,074,804 2,285,651,730 2,282,186,771 2,285,638,678
Diluted 2,276,381,570 2,286,229,042 2,284,287,492 2,286,076,462
NOTES:
1. The unaudited Condensed Consolidated Balance sheets and Condensed
Consolidated Statements of Comprehensive Income for the three months and nine
months ended December 31, 2017 have been taken on record at the Board meeting
held on January 12, 2018
2. A Fact Sheet providing the operating metrics of the company can be
downloaded from http://www.infosys.com
3. Other income for three months and nine months ended December 31, 2017
includes interest on income tax refund of $ 31 million and $ 41 million
respectively
4. During the quarter ended December 31, 2017, on account of the conclusion
of an Advance Pricing Agreement ("APA") with the U.S. Internal Revenue Service
("IRS"), the Company has in accordance with the APA, reversed income tax
expense provision of $ 225 million which pertains to previous periods which are
no longer required. Consequently, profit for the period has increased and
therefore has led to an increase in Basic earnings per equity share by $0.10
for quarter ended December 31, 2017 and $0.09 for nine months ended December
31, 2017
5. 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:
Fact Sheet:
Contacts:
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
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