Infosys (NYSE: INFY) Announces Results for the Quarter Ended December 31, 2017 (1)

BENGALURU, India, January 12, 2018 /PRNewswire/ --

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, 12 Ene. (Logo: http://mma.prnewswire.com/media/610722/I... ) -

- 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**

**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-ja...

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

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