Infosys: Growth accelerates in Q2 with resilient operating margins

Infosys

2021/10/14 10:47

PR92297

 

BENGALURU, India, Oct. 13, 2021 /PRNewswire=KYODO JBN/ --

 

- Double digit growth across segments

- Revenue guidance for FY22 revised upwards to 16.5%-17.5%

- Margin guidance retained at 22%-24%

 

    Infosys (NSE: INFY) (BSE: INFY) (NYSE: INFY), a global leader in

next-generation digital services and consulting, delivered a strong Q2

performance with YoY growth increasing to 19.4% and sequential growth

accelerating to 6.3% in constant currency. Growth was broad-based across

geographies and segments with the largest geography, North America growing at

23.1% and the largest segment, Financial Services growing at 20.5%, YoY in

constant currency. Large deal momentum continued with TCV of $2.15 billion in

Q2. Operating margin for the quarter was resilient at 23.6%. The Board has

announced interim dividend of `15 per share for FY22.

 

    "Our stellar performance and robust growth outlook continue to demonstrate

our strategic focus and the strength of our digital offerings. As we witness a

strong market opportunity with global enterprises rapidly accelerating their

digital journeys, our sustained investments in expanding capabilities,

including the differentiated cloud play, Infosys Cobalt™, has uniquely

positioned us to continue serving our clients effectively, gain market share

and emerge as the preferred cloud and digital transformation partner in the

market," said Salil Parekh, CEO and MD. "Given this continued momentum we have

further increased our revenue growth guidance to 16.5%-17.5%", he added.

 

    42.4% YoY

    CC Digital growth        

 

    19.4% YoY

    6.3% QoQ

    CC Revenue growth        

 

    23.6%

    Operating margin        

 

    12.7% YoY

    Increase in EPS

    (INR terms)        

 

    $2.15 bn

    Large deal signings

 

    1.  Key highlights:

    For the quarter ended September 30, 2021

 

    -  Revenues in CC terms grew by 19.4% YoY and 6.3% QoQ

    -  Reported revenues at $3,998 million, growth of 20.7% YoY

    -  Digital revenues at 56.1% of total revenues, YoY CC growth of 42.4%

    -  Operating margin at 23.6%, decline of 1.8% YoY and 0.1% QoQ

    -  Basic EPS at $0.17, growth of 13.0% YoY

    -  FCF at $712 million, YoY growth of 5.6%; FCF conversion at 97.1% of net

profit        

 

    For six months ended September 30, 2021

    -  Revenues in CC terms grew by 18.1% YoY

    -  Reported revenues at $7,780 million, growth of 21.0% YoY

    -  Digital revenues at 55.0% of total revenues, YoY CC growth of 42.2%

    -  Operating margin at 23.6%, decline of 0.4% YoY

    -  Basic EPS at $0.34, growth of 19.0% YoY

    -  FCF at $1,575 million, YoY growth of 12.3%; FCF conversion at 109.5% of

net profit

 

    "In order to harness the full potential of the market opportunity, we are

expanding our college graduates hiring program to ~45,000 for the year.

Simultaneously, we continue to strengthen employee value proposition including

health and wellness measures, reskilling programs, appropriate compensation

interventions and enhanced career growth opportunities", said Pravin Rao, Chief

Operating Officer. "With over 86% of Infoscions in India having received at

least one dose of 'vaccination', we are now preparing to embrace the hybrid

work model. We have equipped employees with the resources they need to be

productive, cyber secure, stay connected, and maintain a work-life balance. Our

talent strategy also factors in expanded hiring pools that include new

communities and work locations", he added.

 

    "Our operating margins for Q2 were resilient; the impact of enhanced

employee value proposition initiatives was offset by strong operating

parameters, cost optimization and operating leverage. We will continue to

invest in our employees to remain a preferred employer-of-choice and seamlessly

fulfill client demand", said Nilanjan Roy, Chief Financial Officer. "Cash

generation remained robust. We have executed the capital allocation policy with

the successful closure of share buyback and step up in interim dividend to `15

per share", he added.

 

    2.  Capital Allocation

    The company has completed the open market share buyback on September 8 at

an average price of ~INR 1,649 per share (compared to maximum Buyback Price of

INR 1,750 per share). Consequently, the share capital of the company has

reduced by 1.31%. With this, the company has returned ~82% of the free cash

flow for FY20 and FY21 through dividends and buyback.

    The Board has announced interim dividend of `15 per share for FY22.

 

    3.  Client wins & Testimonials

    -  Infosys recently launched Infosys Equinox to help enterprises securely

deliver hyper-segmented, personalized omnichannel commerce experiences for B2B

and B2C buyers. Eric Nelson, Chief Information Officer North America, The Kraft

Heinz Company, said, "Infosys Equinox serves us as a digital hub powering over

250 of our global brand sites, B2B ecommerce and recipe sites, as well as

direct-to-consumer (D2C) initiatives. We are able to launch new brand sites in

as little as 3 to 5 days. The platform also supports our hyper-personalization

initiatives and distills real-time insights for our marketing programs. With

Infosys Equinox, we at Kraft Heinz are well set to offer richer, more

personalized, and meaningful experiences to our consumers."

    -  Infosys inaugurated its Automotive Digital Technology and Innovation

Center in Stuttgart, Germany last quarter, furthering its strategic commitment

to drive innovation and IT infrastructure transformation in the automotive

sector. "As software becomes modular and IT infrastructure continues to scale,

Daimler will take three simultaneous steps to transform its IT landscape:

consolidation, scaling and modernization. Through establishing the Infosys

Automotive and Mobility GmbH in Germany, Infosys is committed to grow with us

in the automotive industry and provide exciting career opportunities for our

employees. The center will also set new standards for cloud and infrastructure

services in the automotive industry. We're delighted that through this

partnership, Daimler will strengthen its overall technology investment and

partnership strategy," said, Jan Brecht, Chief Information Officer, Daimler and

Mercedes-Benz.

    -  Infosys collaborated with Goldman Sachs to digitally transform their

Client Services Helpdesk using ServiceNow Platform. "Infosys truly partnered

with Goldman Sachs by providing best practices and guidance in our service

management transformation journey. They collaboratively worked with us to

understand our pain points and challenges. Based on their experience, Infosys

ensured that the solution was aligned with our requirements and expectations,

thus resulting in improved agent productivity and enhanced user experience.",

said, Robert Naccarella, Managing Director, Goldman Sachs.

    -  Frost Bank and Infosys recently launched a new mortgage loan product

offering. "Offering mortgage loans along with our other consumer loan products

is integral to meeting our customers' evolving needs and bringing the Frost

experience to more Texans," said, Phil Green, Chairman and CEO at Frost Bank.

"Working with a world-class company like Infosys will allow us to be involved

in the entire process from start to finish and bring our industry-leading

customer service experience to mortgages."

    -  Infosys and The Economist Group announced a new strategic partnership

around sustainability. Lara Boro, CEO, The Economist Group, said, "A

sustainable future will depend on creative collaboration. This exciting

partnership with Infosys shows how pooling strengths can accelerate innovation

and amplify impact in the pursuit of progress."

    -  BankDhofar, one of the leading banks in Oman, was able to successfully

complete a three-phase modernization program leveraging the Finacle Digital

Banking Suite. Abdul Hakeem Omar Al Ojaili, Chief Executive Officer,

BankDhofar, said, "We are glad that BankDhofar Vision 2020 is today a reality

with a new digital-first banking platform, powered by Infosys Finacle. We are

glad that our transformation program covering technology upgrade, channels

upliftment, process improvement, data restructuring, branch modernization, and

culture transformation are well underway, allowing no room for disruption to

the end customer. Post go-live, we believe BankDhofar ranks the highest in

terms of technology leadership, and functional coverage. We are now well

positioned to offer our customers a world-class banking facility with the new

platform, either at the branch or through digital channels, as we strive to

strengthen our leadership position in the Sultanate."

    -  Universities and Colleges Admissions Service (UCAS), UK, recently

announced a major core technology collaboration with Infosys. Sander Kristel,

UCAS' Chief Operations Officer, said, "I cannot emphasise enough the importance

of this new agreement with Infosys, and the benefits to UCAS staff and

customers. It represents a real shift in our partnership, and will focus

extensively on automation, innovation, and efficiency across the business,

which is key to delivering on our strategy for the future."

    -  Infosys Living Labs partners with venture capital investment arms of

global enterprises to mutually enrich portfolios of tech innovators. "We are

excited to partner with Infosys to help our portfolio companies scale new

heights by providing them access to Infosys' global client base. Infosys brings

its rich heritage of delivery excellence and global access to our portfolio

companies. We are a growth investor in lighthouse technologies and Infosys

Living Labs provides a great opportunity to bring best in class technology

innovations to clients while de-risking the adoption of startup solutions for

Infosys clients." said, Matthew Koertge, Managing Director, Telstra Ventures.

    -  Infosys Public Services recently launched a blockchain network to

modernize public recordkeeping for County of Riverside in California. "As

Riverside County's Assessor-County Clerk-Recorder, our goal is to provide

recordkeeping, record issuance, and property valuation in a timely, secure, and

cost-effective manner," said, Peter Aldana, Assessor-County Clerk-Recorder at

County of Riverside. "Adoption of blockchain technology will greatly advance

our digital transformation journey towards our goal."

 

    4.  Recognitions

    -  Infosys won the 2021 Microsoft US Partner Award for demonstrating

excellence in Azure AI capabilities

    -  Infosys won four Stevie® Awards for great employers 2021

    -  Ranked #1 by HfS in the Banking and Financial Services Providers Top 10,

2021

    -  Ranked as a leader in Gartner - Magic Quadrant for IT Services for

Communications Service Providers, Worldwide

    -  Ranked as a leader in The Forrester Wave™ - Application Modernization

and Migration Services, Q3 2021

    -  Ranked as a leader in Everest - Data and Analytics (D&A) Services PEAK

Matrix® Assessment 2021

    -  Ranked as a leader in Everest - Envisioning the Connected Future: 5G

Engineering Services PEAK Matrix Assessment 2021

    -  Positioned as a leader in IDC - MarketScape Asia/Pacific Managed Cloud

Services 2021 Vendor Assessment

    -  Positioned as a leader in IDC - MarketScape Worldwide Life Science R&D

ITO Services Vendor Assessment

    -  Positioned as a leader in IDC MarketScape - European Smart Manufacturing

Service Providers 2021 Vendor Assessment

    -  Positioned as a leader in NelsonHall - Wealth and Asset Management NEAT

Evaluation 2021

    -  Ranked as a leader in Constellation - Public Cloud Transformation

Services: Global

    -  Positioned as a leader in Constellation - Customer Experience Operation

Services: Global

    -  Positioned as a leader in Constellation - Campaign to Commerce: Best of

Breed Commerce Platforms

    -  Positioned as a leader in Everest Microsoft Dynamics 365 Services PEAK

Matrix® Assessment 2021

    -  Infosys Finacle rated as a leader by Forrester in Forrester Wave™:

Digital Banking Engagement Platforms, Q3 2021 report

    -  Infosys Finacle rated as a leader by Forrester in Forrester Wave™:

Digital Banking Engagement Hubs, Q3 2021 report

    -  Positioned as a leader in IDC MarketScape: Worldwide B2B Commerce

Services for Industrial Manufacturing 2021 Vendor Assessment

    -  Infosys positioned as a leader in the ISG Provider Lens™ Cybersecurity

Services and Solutions 2021 for U.S.

    -  Infosys ranked as a North America Utilities leader in ISG Provider Lens™

2021 Report

    -  Infosys rated as a leader in ISG Provider Lens™ SAP HANA Ecosystem

Services in U.S. 2021 and Germany 2021 Quadrant Report

    -  Infosys rated as a 'Global' leader in ISG Provider Lens™ 'Internet of

Things – Services and Solutions 2021' report.

    -  Infosys positioned as a leader in 'Next-Gen Private/Hybrid Cloud - Data

Center Services and Solutions 2021' in ISG Provider Lens™ for U.S.

    -  Infosys positioned as a leader in 'Network - Software Defined Solutions

and Services 2021' in ISG Provider Lens™ for Australia, U.K., and Nordics

Region

    -  Infosys rated as a leader in 'Avasant Digital Talent Capability 2021'

RadarView™

 

    About Infosys

    Infosys is a global leader in next-generation digital services and

consulting. We enable clients in more than 50 countries to navigate their

digital transformation. With over four decades of experience in managing the

systems and workings of global enterprises, we expertly steer our clients

through their digital journey. We do it by enabling the enterprise with an

AI-powered core that helps prioritize the execution of change. We also empower

the business with agile digital at scale to deliver unprecedented levels of

performance and customer delight. Our always-on learning agenda drives their

continuous improvement through building and transferring digital skills,

expertise, and ideas from our innovation ecosystem.

 

    Visit www.infosys.com to see how Infosys (NSE, BSE, NYSE: INFY) can help

your enterprise navigate your next.

 

    Safe Harbor

 

    "Certain statements in this release concerning our future growth prospects,

financial expectations and plans for navigating the COVID-19 impact on our

employees, clients and stakeholders 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 COVID-19 and the

effects of government and other measures seeking to contain its spread, risks

related to an economic downturn or recession in India, the United States and

other countries around the world, changes in political, business, and economic

conditions, 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,

unauthorized use of our intellectual property and general economic conditions

affecting our industry and the outcome of pending litigation and government

investigation. 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, 2021. 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

    Extracted from the Condensed Consolidated Balance Sheet under IFRS as at:  

    (Dollars in millions)

 

                                            September 30, 2021        March 31, 2021

    ASSETS                 

    Current assets                 

 

    Cash and cash equivalents                     2,432                           3,380

    Current investments                               671                              320

    Trade receivables                                    2,711                           2,639

    Unbilled revenue                                     1,268                           1,030        

    Other Current assets                               1,002                           938

 

    Total current assets                                 8,084                           8,307

 

    Non-current assets                

    Property, plant and equipment

    and Right-of-use assets                           2,429                          2,519

    Goodwill and other Intangible assets       1,080                          1,115

    Non-current investments                         1,360                           1,623

    Unbilled revenue                                      102                              81

    Other non-current assets                         1,240                           1,180

 

    Total non-current assets                          6,211                           6,518

 

    Total assets                                              14,295                         14,825

 

    LIABILITIES AND EQUITY                 

 

    Current liabilities                 

 

    Trade payables                                          428                            362

    Unearned revenue                                     592                            554

    Employee benefit obligations                    301                            276

    Other current liabilities and

    provisions                                                  2,409                          2,072

 

    Total current liabilities                              3,730                          3,264

 

    Non-current liabilities                 

 

    Lease liabilities                                         587                             627

    Other non-current liabilities                     501                             432

 

    Total non-current liabilities                      1,088                           1,059

 

    Total liabilities                                          4,818                           4,323

 

    Total equity attributable to equity

    holders of the company                            9,420                           10,442

    Non-controlling interests                          57                               60

 

    Total equity                                               9,477                           10,502

 

    Total liabilities and equity                        14,295                          14,825

 

 

 

    Extracted from the Condensed Consolidated statement of Comprehensive Income

under IFRS for:

    (Dollars in millions except per equity share data)

 

 

                                3 months ended      3 months ended     6 months ended      6 months ended

                                September 30,        September 30,        September 30,        September 30,

                                2021                        2020                       2021                        2020

 

    Revenues                       3,998                        3,312                      7,780                       6,433

    Cost of sales                  2,675                        2,125                      5,184                       4,196

 

    Gross profit                    1,323                        1,187                      2,596                       2,237

 

    Operating expenses:                                

      Selling and

      marketing expenses     167                           153                         336                          305

      Administrative

      expenses                       215                           194                        423                          385

 

    Total operating

    expenses                         382                           347                         759                          690

 

    Operating profit               941                           840                         1,837                       1,547

 

    Other income, net (3)      65                             70                           142                          128

 

    Profit before

    income taxes                    1,006                        910                         1,979                       1,675

    Income tax expense         272                           255                          540                         456

 

    Net profit (before

    minority interest)             734                            655                         1,439                       1,219

 

    Net profit (after

    minority interest)             733                             653                         1,437                      1,212

 

    Basic EPS ($)                   0.17                            0.15                        0.34                        0.29

 

    Diluted EPS ($)                0.17                            0.15                        0.34                        0.29

 

 

 

    NOTES:

    1.  The above information is extracted from the audited condensed

consolidated Balance sheet and Statement of Comprehensive Income for the

quarter and six months ended September 30, 2021 which have been taken on record

at the Board meeting held on October 13, 2021.

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

downloaded from www.infosys.com.

    3.  Other Income is net of Finance Cost.

 

    IFRS-INR Press Release:

https://www.infosys.com/investors/reports-filings/quarterly-results/2021-2022/q2/documents/ifrs-inr-press-release.pdf

 

    Fact sheet:

https://www.infosys.com/investors/reports-filings/quarterly-results/2021-2022/q2/documents/fact-sheet.pdf

 

 

    Logo: https://mma.prnewswire.com/media/633365/Infosys_Logo.jpg

 

    Source: Infosys

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