Infosys (NYSE: INFY) Announces Results for the Quarter and Year Ended March 31, 2018
BENGALURU, India, April 13, 2018 /PRNewswire/ --
- Revenues from Digital offerings at $ 2.79 billion (25.5% of total revenues) for FY 18 which grew at 3.6% sequentially in Q4 in constant currency terms
- Entered into a definitive agreement to acquire WongDoody Holding Company, Inc., a US-based digital creative and consumer insights agency
- FY 18 revenues grew by 7.2% in USD terms, 5.8% in constant currency terms, with operating margins at 24.3%
1. Highlights of financial results for the quarter and year ended March 31, 2018
- Q4 revenues grew year-on-year by 9.2% in USD terms; 6.4% in constant currency terms
- Q4 revenues grew sequentially by 1.8% in USD terms; 0.6 % in constant currency terms
- Q4 operating margin improved to 24.7% from 24.3% in Q3 18
- Q4 Basic EPS at $0.26; year-on-year growth of 10.8%
- FY 18 Basic EPS at $1.10; year-on-year growth of 17.8%
- FY 18 Basic EPS of $1.10 includes positive impact of $0.09 from Advance Pricing Agreement (APA) with the US IRS concluded earlier in the year
- Board recommended a final dividend of INR 20.50 per share ($0.31 per ADS*) and a special dividend of INR 10 per share ($0.15 per ADS*)
- FY 19 revenue guidance in constant currency at 6%-8%; FY 19 operating margin range at 22%-24%
*USD/INR exchange rate as at March 31, 2018
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Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter ended March 31, 2018
- Revenues were $2,805 million for the quarter ended March 31, 2018
YoY growth of 9.2%; QoQ growth of 1.8% - Operating profit was $693 million for the quarter ended March 31, 2018
YoY growth of 9.3%; QoQ growth of 3.6% - Net profit was $571 million for the quarter ended March 31, 2018
YoY growth of 5.3%; QoQ decline of 28.2%; Q3 FY 18 net profits included positive impact of $225 million on account of conclusion of an APA with the US IRS - Basic EPS at $0.26 for the quarter ended March 31, 2018
Consolidated results under International Financial Reporting Standards (IFRS) for the year ended March 31, 2018
- Revenues were $10,939 million for the year ended March 31, 2018
YoY growth of 7.2% in reported terms; 5.8% in constant currency terms - Operating profit was $2,659 million for the year ended March 31, 2018
YoY growth of 5.5% - Net profit was $2,486 million for the year ended March 31, 2018
YoY growth of 16.2%
FY 18 net profits included impact on account of conclusion of an APA with the US IRS
"I am pleased with our healthy revenue growth, profitability, and cash generation in Q4. Our robust performance is a reflection of the strong impact we have with our clients and the dedication of our employees. 'Navigating Your Next' is our aspiration of how we will partner with each one of our clients," said Salil Parekh, CEO. "We will execute our strategy around the four pillars of Scaling our Agile Digital business which is today US$2.79 billion in revenue, Energizing our client's Core technology landscape via AI and automation, Re-skilling our employees, and Expanding our localization in markets such as US, Europe, and Australia."
"Revenue productivity per employee was stable during the year as the benefits of automation and newer services kicked in. Employee utilization remained healthy," said Pravin Rao, COO. "During the quarter, we provided highest level of variable payouts in several years. We will be rolling out compensation increases for a large part of our workforce effective April 1st."
"Our operating margins during the quarter and fiscal 2018 were resilient due to unwavering focus on productivity and operational efficiency, leading to a robust cash generation. During the year, the company implemented the capital allocation policy including the successful closure of $2 billion share buyback program in December 2017 and healthy increase in Dividend Per Share for the year," said M.D. Ranganath, CFO. "Our margin guidance reflects our emphasis on digital-led growth and focused investments in this journey."
2. Outlook for FY 2019
The Company's outlook (consolidated) for the fiscal year ending March 31, 2019, under IFRS is as follows:
- Revenues are expected to grow 6%-8% in constant currency*;
- Revenues are expected to grow 7%-9% in USD terms based on the exchange rates as of March 31, 2018**
*FY 18 constant currency rates - AUD/USD - 0.78; Euro/USD - 1.18; GBP/USD - 1.33
**Currency rates as of March 31, 2018 - AUD/USD - 0.77; Euro/USD - 1.24; GBP/USD - 1.42
3. Capital Allocation
The Board, in its meeting on April 13, 2018, reviewed and approved the Capital Allocation Policy of the Company after taking into consideration the strategic and operational cash requirements of the Company in the medium term.
The key aspects of the Capital Allocation Policy are:
- The Board has decided to retain the current policy of returning upto 70 % of the free cash flow of the corresponding Financial Year in such manner, as may be decided by the Board from time to time, subject to applicable laws and requisite approvals, if any. Free cash flow is defined as net cash provided by operating activities less capital expenditure as per the consolidated statement of cash flows prepared under IFRS. Dividend payout includes Dividend Distribution Tax (DDT).
- In addition to the above, out of the cash on the Balance Sheet, the Board has identified an amount of upto INR 13,000 crores ($2 billion*) to be paid to shareholders in the following manner:
- A special dividend of INR 10 per share ($0.15 per ADR*) resulting in a payout of approximately INR 2,600 crore (approximately $400 million*) in June 2018
- Identified an amount of upto approximately INR 10,400 crore (approximately $1,600 million*) to be paid out to shareholders for the Financial Year 2019, in such a manner, to be decided by the Board, subject to applicable laws and requisite approvals, if any. Further announcements in this regard will be made, as appropriate, in due course.
*USD/INR exchange rate at 65.00
4. Dividend Payout
For the Financial Year 2018, the Board recommended a final dividend of INR 20.50 per share ($0.31 per ADR) amounting to INR 5,349 crore ($821 million) including DDT. After including the interim dividend of INR 13 per share, the total dividend for Financial Year 2018 will amount to INR 33.50 per share resulting in a payout of INR 8,771 crore ($1,349 million) including DDT, which will amount to approximately 70% of free cash flow for the Financial Year 2018. The total dividend of INR 33.50 per share is approximately 30% higher than total dividend of INR 25.75 per share for Financial Year 2017.
The aggregate dividend including the special dividend of INR 10 per share ($0.15 per ADR) works out to INR 43.50 per share ($0.67 per ADR) resulting in an aggregate dividend payout of approximately INR 11,371 crore (approximately $1,749 million), including DDT.
5. Lead Independent Director
The Board appointed Kiran Mazumdar-Shaw, Independent Director as the Lead Independent Director of the Board.
6. Acquisition
On April 13, 2018, the Company entered into a definitive agreement to acquire WongDoody Holding Company, Inc., a US-based digital creative and consumer insights agency for a total consideration of up to $75 million including contingent consideration and retention payouts, subject to regulatory approvals and fulfillment of closing conditions.
7. Review of Subsidiaries
In the quarter ended March 31, 2018, on conclusion of a strategic review of its portfolio of businesses, the Company initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to as "Skava") and Panaya (collectively referred to as the "disposal group"). The Company anticipates completion of the sale by March 2019 and accordingly, assets amounting to INR 2,060 crore ($316 million) and liabilities amounting to INR 324 crore ($50 million) in respect of the disposal group have been reclassified and presented as "held for sale".
On reclassification, an impairment loss of INR 118 crore ($18 million) in respect of Panaya has been recognized in the consolidated profit and loss for the quarter and year ended March 31, 2018. The corresponding write down in the investment value of Panaya in the standalone financial statements of Infosys Ltd. is INR 589 crore ($90 million).
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 are forward-looking statements regarding our future business expectations, the amount and timing of future dividends and other potential future payments to shareholders, and the intent to identify potential buyers for Skava and Panaya and the anticipated timing to complete such sales, 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 those relating 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, capital allocation policy and the ability and timing to identify buyers for Skava and Panaya and to successfully complete such sales. 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. 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 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 at
(Dollars in millions except equity share data)
March 31, 2018 March 31, 2017
ASSETS
Current assets
Cash and cash equivalents 3.041 3,489
Current investments 982 1,538
Trade receivables 2,016 1,900
Unbilled revenue 654 562
Prepayments and other current assets 662 749
Derivative financial instruments 2 44
7,357 8,282
Assets held for sale (4) 316 -
Total current assets 7,673 8,282
Non-current assets
Property, plant and equipment 1,863 1,807
Goodwill 339 563
Intangible assets 38 120
Investment in associate - 11
Non-current investments 883 984
Deferred income tax assets 196 83
Income tax assets 931 881
Other non-current assets 332 123
Total non-current assets 4,582 4,572
Total assets 12,255 12,854
LIABILITIES AND EQUITY
Current liabilities
Trade payables 107 57
Derivative financial instruments 6 -
Current income tax liabilities 314 599
Client deposits 6 5
Unearned revenue 352 274
Employee benefit obligations 218 209
Provisions 75 63
Other current liabilities 1,036 954
2,114 2,161
Liabilities directly associated with assets held
for sale(4) 50 -
Total current liabilities 2,164 2,161
Non-current liabilities
Deferred income tax liabilities 82 32
Employee benefit obligations 7 -
Other non-current liabilities 42 24
Total liabilities 2,295 2,217
Equity
Share capital- INR 5 ($0.16) par value
2,400,000,000 (2,400,000,000) equity shares
authorized, issued and outstanding 2,173,312,301
(2,285,655,150), net of 10,801,956 (11,289,514)
treasury shares as at March 31, 2018 (March 31,
2017), respectively 190 199
Share premium 247 587
Retained earnings 11,587 12,190
Cash flow hedge reserve - 6
Other reserves 244 -
Capital redemption reserve 9 -
Other components of equity (2,317) (2,345)
Total equity attributable to equity holders of the
company 9.960 10,637
Non-controlling interests - -
Total equity 9,960 10,637
Total liabilities and equity 12,255 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 Year ended Year ended
ended March ended March March 31, March 31,
31, 2018 31, 2017 2018 2017
Revenues 2,805 2,569 10,939 10,208
Cost of sales 1,793 1,614 7,001 6,446
Gross profit 1,012 955 3,938 3,762
Operating expenses:
Selling and marketing expenses 147 133 552 535
Administrative expenses 172 188 727 707
Total operating expenses 319 321 1,279 1,242
Operating profit 693 634 2,659 2,520
Other income, net[(4)(5)] 82 112 495 459
Share in net profit/(loss) of
associate, including
impairment[(6)] - (4) (11) (5)
Profit before income taxes 775 742 3,143 2,974
Income tax expense[(3)] 204 199 657 834
Net profit[(3)] 571 543 2,486 2,140
Other comprehensive income
Items that will not be
reclassified subsequently to
profit or loss:
Re-measurements of the net defined
benefit liability/asset, net 6 3 9 (7)
Cumulative impact on reversal of
unrealized gain on quoted debt
securities on adoption of IFRS 9 - - - (5)
Equity instruments through other
comprehensive income, net 1 (1) 1 (1)
Items that will be reclassified
subsequently to profit or loss:
Fair valuation of investments, net (2) (2) - (2)
Fair value changes on derivatives
designated as cash flow hedge, net - 2 (6) 6
Foreign currency translation (164) 441 18 198
Total other comprehensive
income/(loss), net of tax (159) 443 22 189
Total comprehensive income 412 986 2,508 2,329
Profit attributable to:
Owners of the Company 571 543 2,486 2,140
Non-controlling interests - - - -
571 543 2,486 2,140
Total comprehensive income
attributable to:
Owners of the Company 412 986 2,508 2,329
Non-controlling interests - - - -
412 986 2,508 2,329
Earnings per equity share[(3)]
Basic ($) 0.26 0.24 1.10 0.94
Diluted ($) 0.26 0.24 1.10 0.94
Weighted average equity shares
used in computing earnings per
equity share
Basic 217,32,77,060 228,56,54,881 225,53,32,322 228,56,39,447
Diluted 217,48,08,512 228,66,52,003 225,75,73,870 2,28,63,96,745
NOTES:
- The unaudited condensed consolidated Balance sheets and Statement of Comprehensive Income for the three months and year ended March 31, 2018 have been taken on record at the Board meeting held on April 13, 2018
- A Fact Sheet providing the operating metrics of the Company can be downloaded from http://www.infosys.com.
- 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 quarter ended December 31, 2017 and the year ended March 31, 2018 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 the year ended March 31, 2018.
- In the quarter ended March 2018, on conclusion of a strategic review of the portfolio businesses, the Company initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to as "Skava") and Panaya (collectively referred to as the "disposal group"). The Company anticipates completion of the sale by March 2019 and accordingly, assets amounting to $316 million and liabilities amounting to $50 million in respect of the disposal group have been reclassified as "held for sale". On reclassification, the disposal group has been measured at the lower of carrying amount and fair value less cost to sell and consequently, an impairment loss of $18 million in respect of Panaya has been recognized in the consolidated profit and loss for the quarter and year ended March 31, 2018. The disposal group does not constitute a separate major component of the company and therefore has not been classified as discontinued operations
- Other income includes $41 million towards interest on income tax refund for the year ended March 31, 2018
- During the year ended March 31, 2018, the Company has written down the entire carrying value of the investment in its associate DWA Nova LLC amounting to $11 million. The write-down in the carrying value of investment in associate DWA Nova LLC during the quarter and year ended March 31, 2017 was $3 million.
IFRS-INR Press Release: https://www.infosys.com/investors/reports-filings/quarterly-results/2017-2018/q4/Documents/IFRS-INR-press-release.pdf
Fact Sheet: https://www.infosys.com/investors/reports-filings/quarterly-results/2017-2018/q4/Documents/fact-sheet.pdf
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
+1-408-375-2722
Chiku.Somaiya@infosys.com
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