Performance of Infosys for the Third Quarter ended December 31, January-2002 Nandan M. Nilekani Managing Director, President and Chief Operating Officer Nandan M. Nilekani Managing Director, President and Chief Operating Officer
Safe Harbour Certain statements in this release concerning our future growth prospects are forward-looking statements 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, 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, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, 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 of governmental fiscal incentives, political instability, 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, 2001 and quarterly report on Form 6-K for the quarters ended June 30 and September 30, These filings are available at 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 statement that may be made from time to time by or on behalf of the company.
Agenda Financial Performance Operational Performance Client acquisition and significant projects undertaken Human resources Infrastructure Outlook for the future
Financial Performance
The Quarter at a Glance (Indian GAAP) 23% Total income (Rs.cr) Exports (Rs.cr) 23% Operating profit (Rs.cr) Q3 01Q Q3 01Q Q3 02 Q3 01
The Quarter at a Glance (Indian GAAP) PBT (Rs.cr) 30% 24% PAT (Rs.cr) 24% Basic EPS (Rs) Q3 01Q Q3 01Q Q3 02 Q
Highlights Q3 FY 02Q2 FY 02 9 Months FY 02 Indian GAAP Y-O-Y Growth Income 23.0% 45.7%43.7% PAT from ord. activities 23.9%30.9%35.3% New clients Repeat business 85.7%90.0%90.2% Headcount Gross addition Net addition Period end headcount 10,663 10,55410,663
Highlights (Indian GAAP) (Rs.cr) FY2002FY2002FY2001 % growth over Q3Q2Q3Q2 02Q3 01 Income S/w development expenses Gross profit S,G&A expenses (0.5)20.7 Operating profit Depreciation Operating profit after depreciation Other income Provision for investments--(13.08)-- PBT Provision for tax PAT from ordinary activities
Highlights (Indian GAAP) (Rs.cr) FY2002%FY2001 % Growth 9 Months Income S/w development expenses Gross profit S,G&A expenses Operating profit Depreciation Operating profit after depreciation Other income (12.4) Provision for investments--(13.08)(1.0)- PBT Provision for tax PAT from ordinary activities Extraordinary items Net profit after ext. items
(Rs.cr) Dec 31, 01%Dec 31, 00% LIABILITIES Shareholders’ funds1, , Total liabilities1, , ASSETS Fixed assets Investments Deferred tax assets Current assets Cash & equivalents Accounts receivables Other current assets Less: Current liabilities(396.80)(20)(256.90)(20) Net current assets1, Total assets1, , Balance Sheet Summary
FY2002 FY2002FY2001FY2002FY2001LTMLTM Q3Q2Q39 Months9 MonthsDec 01Dec 00 North America70.9%71.1% 73.6%71.4%74.3%71.4%74.9% Europe19.4%18.9%18.8%19.4%18.1%19.6%17.7% India1.9%1.8%1.5%2.1%1.3%2.0%1.4% Rest of the world7.8%8.2%6.1%7.1%6.3%7.0%6.0% Total100.0% 100.0%100.0% 100.0%100.0%100.0%100.0% LTM – Last Twelve Months Region wise Revenue (%)
Operational Performance
Highlights Software revenues in US dollar terms grew by 0.2% for the current quarter as compared to the quarter ended September 30, Revenue growth comprised volume growth of 3.4% offset by a price decline of 3.2%
Utilization Rates
Revenues by Project type FY2002FY2002FY2001FY2002FY 2001LTMLTM Q3Q2Q39 Months9 MonthsDec 01Dec 00 Fixed Price35.1%29.9%29.4% 30.7%28.0%30.2%28.9% Time & Materials64.9%70.1% 70.6% 69.3%72.0%69.8%71.1% Total100.0% 100.0%100.0% 100.0%100.0%100.0%100.0% LTM – Last Twelve Months
Onsite-Offshore Revenue split FY2002FY2002FY2001FY2002FY2001LTMLTM Q3Q2Q3 9 Months 9 Months Dec 01Dec 00 Onsite49.9%50.3%51.4% 50.3%52.8%49.8%52.2% Offshore50.1%49.7% 48.6% 49.7%47.2%50.2%47.8% Total100.0%100.0%100.0% 100.0%100.0%100.0%100.0% LTM – Last Twelve Months
Customer Concentration FY2002FY2002FY2001FY2002FY2001 Q3Q2Q3 9 Months 9 Months Top client contribution to revenues5.5%6.4%7.7% 6.2%7.5% Top 5 client contribution to revenues 24.1%25.3% 28.1% 24.6%25.9% Top 10 client contribution to revenues 38.3% 39.7%42.5% 39.7%38.5% Million dollar clients* Five million dollar clients* Ten million dollar clients* LTM – Last Twelve Months
Diversifying Customer Risk
YearAR% ofDSO (mn$) Revenue Dec 31, Dec 31, Mar 31, Accounts Receivables
Client Acquisition and Significant Projects Undertaken
Client acquisitions during the quarter was 33 as compared to 28 in the previous quarter Established new alliances with world leaders in various domains including manufacturing, retail and financial services To help SunAmerica transform its legacy Policy Administration System to a new web-based architecture Creating a roadmap and an implementation plan for an Enterprise Portal for a banking, insurance and asset management leader in Europe that is one of the largest global financial conglomerates Clients added in the retail segment include Target Corporation, America’s fourth largest general merchandise retailer Software Services
Won an engagement from the largest independent supplier of heating, ventilating, air conditioning and refrigeration equipment in the US Assisting the European operations of a leading Fortune 500 electronics and hi-technology products manufacturer in developing an end-to-end solution for its executive level reporting The Hertsmere Borough Council of National Health Service, UK was added to the client portfolio with a business consulting engagement Infosys is the only Indian company to be included in the UK Government’s single-window Services Catalogue (S-Cat) aimed at government departments who wish to purchase IT services Signed up with a Fortune 500 company that is a world leader among air express delivery carriers Software Services
Chosen to work with Texas Instruments, the world leader in real-time technologies Successfully designed, developed and deployed an online insurance loyalty portal for a large Fortune 100 insurance company in Japan Successfully implemented a web-based online funds transfer application for an insurance industry major Partnered with Aizawa Koatsu Concrete KK, to develop new applications including logistics management and sales and purchase systems
Banking Products Infosys’ core banking solution, Finacle TM was implemented in Cosmos Cooperative Bank, one of India’s oldest banks, and ABN India Entered into an agreement with ICICI to offer India’s first end-to-end financial fulfilment product, enabling online financial transactions between enterprises Forged a strategic partnership with Accenture, Nigeria, for delivery of services and solutions
Human Resources
Total employees strength at 10,663 as on December 31, 2001, up from 9,831 as on March 31, 2001 and 8,910 as on December 31, 2000 Net addition of 109 employees during the quarter as compared to 607 during the quarter ended September 30, 2001 151 lateral employees joined during the quarter 9,361 software professionals as on December 31, 2001, up from 8,656 as on March 31, 2001 and 7,824 as on December 31, 2000
Infrastructure
Capital expenditure of Rs cr was incurred during the quarter As of December 31, 2001, the company had 22,39,500 sq. ft of space capable of accommodating 11,350 professionals and 13,00,000 sq. ft under construction including the Infosys Leadership Institute
Outlook for the Future
Indian GAAP Quarter ending March 31, 2002 Income from software development services and products expected to be between Rs. 636 cr and Rs. 660 cr Earnings per share expected to be between Rs and Rs Fiscal year ending March 31, 2002 Income from software development services and products expected to be between Rs. 2,560 cr and Rs. 2,584 cr Earnings per share expected to be between Rs and Rs
Summary
Reported a comfortable quarter Pricing pressure continues Business environment remains challenging Effective cost management Established new alliances with world leaders in various domains Prepared to seize business opportunities
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