Q4 2023 Infosys Limited Earnings Call
Ladies and gentlemen, good day and welcome to the Infosys Limited earnings Conference call.
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Please note that this conference is being recorded I now hand, the conference over to Mr. Sandeep Mahindra, Thank you and over to you Phil.
Thanks Linda.
But it can be because as I mentioned again.
Can you guys hear on this call this year named David <unk> CFO and other members of the senior management team.
In fact, the call with some remarks on the performance of the company.
You shouldn't be completed quarter NDA.
Subsequent to which the call will be opened up for questions.
We've made that anything could be.
I would look at the future is a forward looking statement.
As we did in conjunction with that is that the company faces.
I think they can make mention of even if they have a look at it now probably with ACC, which can be found on www dot ETP that jewelry.
I would now like to pass it on to Kevin.
Thanks, Andy.
Good evening and good morning to everyone on the call and thank you for joining us.
For the full year financial year, 'twenty <unk> had a good performance.
North of 15, 4% in constant currency.
Our digital business grew 25, 6% now being 62, 9% of overall revenue.
Cost services grew again at one 9%.
We saw broad based growth across our business segments with most in double digits.
We had 26% growth in Europe , and 10% in the U S.
And 95 large deals with a value of $9 8 billion for the year with 40% next week.
Operating margin for the full year was 21%.
Hey, good free cash flow of $2 $5 billion India.
You shouldn't have continued to decline in each of the quarters through the year.
You got leveraging <unk> AI capabilities.
Capabilities for their clients and within the company.
We have active projects with clients.
Working with generative AI platforms.
Specific areas within their business.
We haven't trained open source generating platforms.
There are no software development libraries.
We anticipate generating AI to provide more opportunities for work with our clients and enable us to improve our productivity.
Yes.
In Q4, we saw changes in the market environment.
During the quarter, we saw unplanned project ramp downs in some of our clients and delays in decision making.
It resulted in lower volumes. In addition, we had some one time revenue impact.
While we saw some signs of stabilization in March the environment remains uncertain.
Good good.
Q4 year on year growth of eight 8% in constant currency in quarter on quarter decline of three 2%.
Our operating margin was 21% for the quarter and we had $2 1 billion in large deals in the quarter.
We generated $713 million of free cash flow in the quarter.
Our pipeline of large deals is extremely strong several of these mega deals.
Several of these opportunities are for cost and efficiency program.
Consolidation projects.
Some industries, such as financial services, and mortgages asset management and investment banking.
Hi Tech and <unk> are more impacted leading to uncertainty in spend and delays in decision making.
U S is more impacted than Europe .
Keeping in mind the current environment, we have further expanded our internal efficiency and cost program to work on up good evening onsite ratio optimization shabu.
Subcontract, our office consolidation and unpriced.
We anticipate this program will build a path to higher margin in the medium term.
We are committed to investing and not be pulling this P D.
We are committed to working with our clients as they deal with changes in the economic environment.
Based on our sustained momentum in financial year, 'twenty, three with a strong pipeline of opportunity, especially focused on cost efficiency and consolidation.
While also keeping in mind the uncertain.
Environment, our revenue growth guidance for this financial year is 12% to 7% in constant currency.
Operating margin guidance for this financial year is 20% to 22%.
With that let me hand, it over to the London.
Thanks, and good evening, everyone and thank you for joining this call.
I think it was a Europe through home mirroring broader macroeconomic conditions.
Report extremely strong and it's one with 20% year on year constant currency, which reduced to 11, 2%. It makes two due to the slowdown in verticals like Telecom Hi Tech.
And then parts of financial services.
Q4 came in lower than expected due to some specific client ramp downs in discretionary spend and delayed client decision, making on new deals.
You shouldn't we had some one off revenue impacts, including project cancellations et cetera.
The above we deal with it or anything, but a strong 15, 4% growth in constant currency, leading to continued market share gains.
Margin for Q4, and if I can see we're at 21% in line with our guidance.
Free cash conversion to net profit quite frankly wasn't the I, 85% if quite frankly, if it grew by one 3% in dollar at nine 7% benign outcome.
Guiding metrics are strong with a number of 50 million times, increasing to 70 500 million client count increasing to 40, and 200 million client count increasing to 15.
Long term our M. P M voluntary attrition declined to 29%.
Annualized attrition reduced by almost 4% sequentially and is the lowest in the last nine quarters. This is also well below pre pandemic levels.
Coming to Q4 performance revenue grew by 8.8 to 10 year on year and declined by three 2% sequentially in constant currency terms due to the reasons mentioned earlier.
Utilization declined to 80% on the back of Hawkiness in demand do you expect the utilization to improve gradually in the coming quarters as they start getting deployed.
We will calibrate the hiring for FY 'twenty to 'twenty four based on the available pool of employees with expectations and attrition trends.
Q4 margins were up 21%, which is a decline of 50 basis points sequentially Media company plus some sequential margin movement that we had to even go up 50 basis points on cost optimization include introduction and popcorn fix.
60 basis points benefit from reduction in P. F T X, which is supposed to get customer support are offset by a headwind up about 70 basis points from a drop in utilization and the balance 90 basis points with a combination of revenue one time items mentioned above partially offset by the savings.
Q4, EPS grew by 0.2% in dollar terms and 9% in rupee terms on a year on year basis.
Balance sheet remains strong and debt free consolidated cash and equivalents stood at $3.8 billion at the end of the quarter free cash flow for the quarter was robust at $713 million with a conversion of 95% of net profit.
Cash balance of six 6% in Q4.
The board has recommended a final dividend of $17 five zero per share, which will result in a total dividend of <unk> 34 per share for FY2023.
31 per share for effect when you do an increase of $9.07 per share for the app, including the final dividend and recently concluded buyback. We have returned 86% of Ses to shareholders over the last four years under our current capital allocation policy.
In Q4, we completed the open market share buyback of 9300 crore rupees buying back one 4% of shares at an average buyback price of repeats 15 39, what's the maximum buyback price of repeat 18 50.
Although we increased one 2% in FY2023 from 29, 1% in FY 'twenty two as a result of higher payouts of Investor.
Turning to our segment performance largely as momentum continued and we signed 17 argued in Q4 P. C. V was dollar to a $2 1 billion with 21% net new five large deals led manufacturing for Nf L. Three and CRM to eat in life Sciences, and high Tech and one in U R.
Why is it not split by 10 in the Americas and seven in Europe .
Going forward, we find 95 like deal with D. C V up $9 8 billion with 40% mezzanine.
They're coming to the water segment performing financial services vertical was impacted by budgeting delays at the start of the year led by macroeconomic uncertainties company, that's coupled with softness in mortgages.
Asset management and investment banking.
We have a strong pipeline and large deal wins in areas like in store production support cybersecurity and business operations, resulting in better visibility for FY 'twenty full do you have a very diverse portfolio of clients in the U S N, hence exposure to multiple regional banks with less than 2% of our overall revenues, we do not anticipate any material.
Back on our operations as a result of recent using regional banking segment.
Retail there is heightened focus on accelerating digital transformation to enable topline growth with regard ensuring the right programs to Mikes My daughter, why why there is some pressure on discretionary spending companies are prioritizing investments in key areas like E Commerce platform supply chain management systems and customer engagement tools.
Matter of fact, they segment continues to ramp up of large deal wins and benefits of vendor consolidation. There is increased focus on digital spend including opportunities on E. R&D five G in industrial Iot.
The energy prices and interest rates, coupled with continuous supply chain disruptions are impacting spend on the run side of the business, especially in Europe .
Communications segment is with the increased opex pressures cost cutting ramp downs and delayed decision, making demand for ideas and solutions are moving from cost take out the revenue growth side with heavy for different customer success clouded.
Cloud and mobility remain top drivers besides eruption.
<unk> pipeline remains strong, but gives us the confidence of growth opportunities in the coming quarters.
Other than the momentum in energy utilities resources and services like wait and see what the brokered by large deal win.
Our renewed strategy to rebuild at our offerings and developing integrated energy as a service solution and the focus on in the journey to net zero initiative has positioned us well ahead of competition.
Why do you think the laser kicking up discretionary spend predicts the cost take out and vendor consolidation initiatives continue to pick momentum.
We expect our revenues to grow by 4% to 7% in constant currency terms in FY 'twenty for a pipeline of large deals remains extremely strong with increased focus on cost takeout programs operating margin guidance stands at 20% to 22% the margin guidance factor in growth assumptions for FY 'twenty full impact of utilization employee cost increases further.
Amortization of costs like travel facilities et cetera, and we continue to focus on various cost optimization and efficiency improvement measures.
We looked beyond FY 'twenty four we believe we have various lever to generate more efficiencies like improving utilization, reducing sub con improving pyramid apart from growth acceleration and potentially pricing increases, which will enable us to aspire for higher margins over time with that.
We can open up the call for questions.
Thank you very much ladies and gentlemen, we will now begin the question and answer session.
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Yes.
Our first question is from the line of Yogesh Aggarwal from HSBC. Please go ahead.
Yeah, Hi, good evening.
Last question for me.
In the quarter was a week our guidance set up but it looks very solid leg that'd be Oh, just mathematically you look at the sequence and build up from here. So is that 7% based on some macro pick up or is it what you see today is 7% is possible.
And related to that and then engender the demand and the growth picked up for school big So I'll be back to post three equal they'd go to yourself, 567% odd effect when people worries about now and they and we can see it pick up a from FY 'twenty five and then I have a follow up.
Hi, This is cellular I didn't catch the second one I'll go with the first question and then we can just repeat the second one.
On the guidance, what we have built it with today is what we see with the Beasley of shoes.
And the ongoing work that we have.
And then put the range between four and 7% there are different scenarios in which different things happen. We've widened the band two <unk> three point given the uncertainty in the environment.
We also have a very strong large deal pipeline.
Mega deals in the pipeline of course visa always binary.
The strength of the pipeline and I do believe that there is ways that we can achieve the high end of the band of the guidance.
Okay.
He was asking the second question was the four to say then is almost going back to pre COVID-19.
Or is it a is it like the new normal again or we can expect some pick up a gain from a cycle and decide.
That is one and also telling I wanted to ask you on the recent management they did.
That's what essentially you have to president and CEO now all T not their.
For whatever reason so.
Has it impacted the business by any chance and is it what's the new structure that you wonder if replace them or is it is the news that there doesn't need president tend to feel.
So on the first one.
And of course, you know you don't want to provide a view on the guidance are beyond.
Beyond this financial year.
Underlying the way we see the business.
D C. Two growth drivers are in there.
We're well positioned on good in terms of capabilities and track record are one is on digital transformation comprising of cloud and other elements and one is on cost efficiency automation and.
An additional element, which was on consolidation that comes in through that we see.
Both of those drivers working.
Seen a reduction in the digital transformation.
Our work to date.
See more in the cost and efficiency and consolidation play today.
Going through depending on where the client is what the environment is and we feel comfortable for both of those drivers to work overtime.
In terms of the structure.
We have put in place a structure for the delivery organization, which has already rolled out.
In the next few weeks will rollout the new structure for the SSD. So we feel good.
The leadership.
Cool that we have within the company, who are moving up to take a broader role in the larger room are that they will step up and deliver what we're driving to.
Very helpful. Thank you so much.
Thank you.
Our next question is from the line of Bryan Bergin from TD Colin. Please go ahead.
Hi, Good evening. Thank you wanted to ask on the growth outlook at the midpoint of your 4% to 7% range can you give us a sense on how much of the backlog is already in the hand versus having to go out and convert upon the pipeline to achieve that growth target and does the.
So you have to sign in that pipeline to hit the target you have for relative to prior years.
At this time.
Yeah.
Hi, This is Sally and thanks for that.
We don't have a specific.
Number there that we share externally what I can sort of share is.
We see it.
Through this past financial year, we've had a good large deals between nine 8 billion with 40% net new.
And we see a set of very strong active relationships some of them are expanding to the other two other work.
And then we saw in Q4 during the quarter. Some some ramp downs so keeping those factors in mind, we built the guidance of 4% to 7%.
And we see that we have the ability to deliver on that guidance.
Yeah.
Okay and my follow up.
On margins here.
I did internal efficiency programs that you're going to progress upon permitting office consolidation and other items is there a stated target of cost reduction that you're expecting to achieve a.
Run rate about op margin expansion, just trying to get a sense of how you think about the structural margins of the business, assuming the efficiency initiatives inside it.
Yeah.
So they are we've put together an internal plan with them.
Targets in a let's say a road map for each of the sub categories that we outlined and a few others.
And we have a view to drive that through the next sort of a period here in the coming quarters.
We have not shared that target externally, but our view is to make.
Make sure that we put in place or execute on that guerilla programs in place.
And deliberate do that in the medium term.
Thank you.
Thank you. Our next question is from the line of uncles withdraw from J P. Morgan. Please go ahead.
Hello. Thank you. The first question is on I, just wanted to get a bit more colors you can on the reasons for the delay sharpness on revenues and margins.
This is the guidance what why did it surprise you and how much of the demand environment has existed through the quarter or what's is what probably given the last 30 days that's the first one.
This is leading to what we saw there was a light.
During the quarter as the quarter progressed we.
We saw.
On some client ramp downs on program and this was across our different sectors telecom.
Retail high Tech and financial services.
Mortgages are investment banking asset management, and that was something which was unplanned as he went through.
And then additionally, we had.
Some one time impact, which we saw in the quarter as well.
What do you would you be able to elaborate on the one time impact on it.
Yeah, well I think firstly the.
The majority of the decline in volume led.
The balance of the revenue at one time was which is a combination of specific client issues.
Moving the impact of cancellations is that because that's just a topline impact are more.
More and more over and above the volume impact so that's.
That's the state of play are really for the quarter.
Okay. Thank you on the guidance I just wanted to get a sense I'm looking at you know what happened in the quarter and the uncertainty in the environment are you turning more conservative.
For the guidance setting process for F 'twenty for.
Both on the revenues and the margins versus what you may have been before and also along with that if you can check what's the visibility that you have at the moment for the full year versus what you may have had you know at the beginning of last year.
Sure Dan on the guidance are you took into account what we see typically as we close the year in March on what to do that in new large deals and overall, new DS and the ongoing work that we have.
Across our client base and that that basically becomes the foundation of our guidance typically again.
Well.
We don't have a detailed view of our Q T. In Q4, so we have typically estimate from from.
Other years that we use and that that's the same approach we've used the shift from what we see as we look out and the same on margin.
We finished the year at 21% utilization in Q4 is low compared to what we want to target.
Have a very strong efficiency and cost program, but within that program. We are very clear that from an employee perspective, we will continue with our commitment with employees and so the utilization will go up through the quarters.
In the medium term, we will get that in fact back into the margin and that's how we built the 'twenty to 'twenty two margin guidance.
Understood and just a last question on the leadership I think this was attempted before but my stab at it would be I mean, clearly there's been departures as you like.
Acknowledge.
Some of them have gone to competition, probably been drive hungry. It appears going forward do you think youre, losing muffin and increasing the rules and responsibilities that are more concentrated leadership deep.
At least I've seen from the outside at a time when the industry is facing a tough repeated this year.
I'm, sorry, I'm glad I didn't follow you said will be have concentrated leadership, Oh, yeah, because I mean, I mean, they're considered leadership doesn't basically more roles and responsibilities.
As an example on yard or the London store versus having see other senior leaders, helping us with the wider leadership team.
Ah Okay.
It won't be a machine and what we know is you know within the company. There's a very strong set of leaders are across different route.
Many of US are on delivery many of them are now stepped up.
And clearly any any room as you start to step up to delivery leadership within a large company like enforces becomes more concentrated and that has been announced and rolled out and the same thing happened with FX.
We are rolling that out in the coming weeks are the S. S segment of course is a large segment for us. So those those will be concentrated in that sense. So we will have a leadership structure with very strong responsibility for several other senior leaders.
Understood. Thank you and best of luck.
Thank you. Our next question is from the line of Cummins Eaton Centre with Jefferies. Please go ahead.
Yeah, Hi, I have a couple of questions. The first question is on the guidance. Once again, Oh, you know is it a back.
Back into the or you don't.
The guidance as you even go through the course of the year and the related question to the guidance is that given the deterioration in the macro environment, along with a huge mess up and for Q, along with weak savings do you think there'd be no need no more draw when I would say watch for in your guidance for FY 'twenty four.
You don't have the process of being tightened and he puts them back with visa.
Hi, This is <unk> on the.
Revenue growth guidance out there that the thinking is really spread over over the four quarters, Oh I would I'm not sure I would say, it's a friday it all back but it's based on what we see in the large deals today and also in the pipeline that we have.
We do have some mega deals in the pipeline so that gives us some vintage to the guidance <unk>, given where those deals will come it'll be later on in the center.
The second one so he was a remote conservative is that the point none of US has the process of a guy who didn't have been tightened, although even or forecasting process has it been taken given the magnitude of spot. Mrs are in our revenue was in the quarter, which obviously would have shrunk to U S well.
Have you basically Oh, I mean, they've been better cushion greater cushion in your guidance for FY 'twenty four or is the process and the underlying assumptions the way it used to be started cookie.
So we have.
Try to put in place.
What is changing or not changing and uncertain economic environment, which there you saw some of these impact so those factors have been taken in this guidance.
Okay I have a second question that I had is on profitability of every company where do you.
I want to upgrade at a certain base of profitability.
And in this case you don't just stop credibility has been drifting down and that the guide the profitability guidance of down 20% to 22% which is a.
Kind of a new rule.
You know how should one think about the.
Underlying operating assumptions behind these these veins are you know, but the process of upgrading for large deals and how does that deal with the.
Our underlying base of its profitability as they should know that the assumption that you have.
Is this a are you know so how should one think about structural profitability excuse me.
Yeah. So I think if you step back a bit due to the last year and the off I mean basically be cord shaving off with.
The demand side.
Three.
The compensation hikes in 15 months stretch salaries.
You know all that in a way has made a structure.
Patient right.
I don't know if you have a bulk of that today is a universe that you think that you know 80% utilization wherever you want to be at a much higher level than the permit does not address it shouldn't because you have to get talent from any of that when the market was hot so we've seen a lot of these things during this.
In a period, where we can identify these buckets up on you know right into 11 into off the fence. So I mean, we were clear that we had to go behind this.
Getting the volumes in right and we knew we had time to correct the margin structure right and therefore, that's fundamentally what we still believe in our guidance is yesterday at a midpoint that we ended the year at 21, and we have enough flexibility into the guidance between when you could bring to them.
For anyone who gets the mid point of that.
To take care of you know firstly of course, there may be some headwinds coming because of compensation there could be something on travel, but at the same time, you'll have a revise up improving our utilization at 80% clearly which is.
That'd be one of the lowest I've seen we have other opportunities of improving the pyramid, because it'll be higher bench come to the double whammy of course, one of you have the idea at a cost of the bank and at the same time, you have a very rich set them at.
The moment you start moving fresh air into the pyramid, you'll get a double benefit of cost that I talked about are they from the bench and the quality of the permit them through on the production side.
That said I'm going to take to inefficiencies and all these other lever we stopped using typing ex that cross selling going on in conversations how are we building for like Wow aspiration continues to be that we continue to look at improving margins from where we up the guidance I guess the reflection of it gives us the flexibility in this.
We've ended up with anyone of you sort of consistently during the last yeah that's right.
Sorry to interrupt me that I didn't know that you don't see uncertainty might be turning revenue Brooklyn costs right. They don't need scale wins and I don't remember exactly when they stood out and I presume that the labor market because those are cool you'd all four so why bring down the lower end of the bank actually.
Yeah. So I think those two families that many of them won't be levered will take time to prepare and because it's a different situation of all my all my telephone rooms.
Will you have to deploy levered when youre growing at 10% plus is what many of you in that 4% to 7% right. So for instance, your fresh eyes, how fast can you deploy them. When you are growing at 4% is a different pay it wasn't what they were deploying at seven vessels. What are you deploying it back right. So all that's been steady way into the structure, it's not that you can.
Could you please add one to over 19 my utilization.
80 to 85, you don't ship the onsite offshore because in a way a floor volumes again.
Has that.
No overhang on on how fast can be deployed but like I said, when we started that we ought to be one of these inefficiencies or it's a very visible to us.
And we know we can deploy many of these are you know sort of neither of which we have to continue to aspire for higher margin profile.
Hmm.
Okay got it thank you so much.
Thank you. Our next question is from the line of Banca Kapoor from CLSA. Please go ahead.
Yeah, hi, thanks for the opportunity.
Linda just continuing on <unk> question I don't imagine so two things one what kind of timeframe are you looking at for this year's Vijay.
I used to come to first quarter.
And what kind of are you expecting what kind of margin impact do you foresee of that but it would be similar to last year or do you think this could be lower this year.
Yeah. So this is gonna be continuously evaluated and we have built him like I mentioned into our guidance of compensation and we will take a decision during the year. We're looking at would be in a market context with competitive context. So no decision has been taken it yet.
So the the hike may not happen in the first quarter is that what you're saying.
I'm this woman that's been taken for the hike.
Understood and in the at the lower.
Lower end of the guidance are you keeping a buffer for some kind of a potential pricing pressure that might come in during the course of the year is that is that the headwind, which you would see as a major one.
When you're guiding for a quintuple the central.
I don't think I'm in a specific name because on pricing I think I guess that we are you know like 21%.
The midpoint between 'twenty to 'twenty four it just happens to be for anyone and like I said, there may be some headwinds there may be some tailwind and of course, they are pushing us continuing to do better than you do our margins as well so nothing specific like that in terms of our pricing.
We feel kind of thing.
Okay, and if I look at the net new deal wins, probably this was the lowest since we had from the start of the pandemic. I mean was this mainly due to clients delaying decisions on B awards towards the last two days order and are you building any kind of a conversion of this to get to that seven plus.
There'd be a buttoned up the guidance.
And then one of the things we have seen in the pipeline is a slowing in decision, making so large deals are staying.
And the pipeline a long ago.
Having said that.
The net new or even the quantum of large deals as you've discussed in the past there is always volatility the visa only deals with $50 million and not every thing it's not a fully recruited lets say bookings value.
So we've always seen that that volatility in the past we think.
The large deal pipeline that'd be after they reach which happens to be a very large pipeline and some mega deals and then we have the ability to drive them.
To margin I'm, sorry, our growth guidance as we run through the <unk>.
So just to clarify are put into the guidance. We are expecting some of those mega deals to convert during the course of the year.
I would not be so specific in that too.
To say, we'll do it based on what we do have a large pipeline with a mega deal and we anticipate that some of those Oh, we will allow us to get a get to the <unk>.
Higher band of the guidance.
Thank you.
Thank you. Our next question is from the line of <unk> <unk> from Nomura. Please go ahead.
Thank you for the opportunity Celine.
This quarter, we hired certain unanticipated anything externally wins.
That led us to Miss our guidance of 16 to 16 and hot, especially you know how severe it upgrade it at the end of the movie.
Do you think you could have considered already showing a profit warning you know so I think that this will go beyond your control because they sent the message will be really.
Starting in smoking and to talk with.
Well I think if you look good year over you said, 16% are angry at 15.4, and with a 21% margin and we were at 21% as well so.
I'm not sure what the question differently.
Well you know it did when it was coming from you don't get a D. C band at the end of Q3.
Signaled little possibly hard because of the confusion.
After controlling.
Of course things have changed there are macro situations beyond our control.
There were some cancellations.
Good practice.
During the quarter right.
For this situation of all kinds of all during the quarter, it's not as if suddenly on one day, we wake up and so I believe that the quality and diversification during the.
All of that as well.
Okay. That's a good question and so I'm, sorry, but I think in the press conference you mentioned M&A would be an unfortunate D wave.
Some of the global companies could consider selling the captives.
But do you foresee a meaningful deployment of capital for that particular purpose this year.
The number of such captive contributions are in your pipeline.
I saw an enemy.
I think we have a strong balance sheet, the ability to do something smaller or medium or large.
Today, we are in.
Let's say, we look at many opportunities are.
We will see how those fit in.
They know there is sort of components to it a strategic fit of course valuations, which are much more reasonable today, a cultural fit of those companies.
The ability for us to integrate that in and so all of those we keep in mind and if instead of.
It needs to meet those points for us of even look at those opportunities.
Thank you sell it and all the best.
Thank you.
Question is from the line of Ashwin Mehta from Ambit capital.
Please go ahead.
Hi, Thanks for their boss.
Oh, what does it need to get off this one off client issue and then visit it wears out like we saw last year in the same quarter, a rather weak yogurt line the contract provision secondly.
Secondly is it a single client on my client issue that we are talking about.
And in which segment have you seen this client issue and I have a follow up.
Yeah.
Yeah. So like I said earlier this is a one off client.
Revenue issues and they are now.
<unk> clients.
Next set of clients and some of it is a provision against them. Some may come back from May not come back and some of it is also linked to cancellations are right because the revenue impact also beyond the volume impact from cancellations.
Yeah, I mean, there's a there's a mixture of clients there.
And the 10% decline that we've seen in U S. Telecom is it related to this.
These client issues because that appears to be a pretty steep decline.
But then declining.
In the U S telecom business of yours.
Yeah.
No I don't think anything specific and coming out of these issue really.
Okay and the last one is if I look at your guidance imply.
It implies a 2.9% sequential growth or whether they explore the courtyard.
The last we saw this X after COVID-19 so it wasn't a FY 16.
So what drives such a high growth come first for us.
And then on certain in mining.
Yeah.
Yeah.
Yeah.
Did they show you just see that again I didnt follow that.
So do I see huge yard requirement for your top end of guidance is around 2.9% sequential every quarter.
This is something that takes off for FY 'twenty people, we've seen lost in FY 16.
So in an uncertain demand environment, what drives such a high growth comfort.
Sure there are what we've seen with her guidance is.
We have some good large deals that we closed in the previous financial year, and we have a pipeline a rich.
Which gives us a large pipeline several of them. They've got these are the opportunity to have those come into our mix and gave us a flow through the year.
So would you say the sub $50 million BD flow is where the traction is much stronger than what appears in the greater than $50 million. So there could be announced at the kidney.
I don't have a view that we shared typically under non large D. A.
<unk> is one of the components that we used to build out the guidance.
Sure.
Thanks, a lot and all.
Yeah.
Thank you. Our next question is from the line of Gordon.
Stanley. Please go ahead.
Hi, Thanks for taking my questions. So first is the conversion of the order book to revenue if I look at your fiscal 'twenty three.
We entered the year with a net new living off.
Roughly $3.8 million, which generated incremental revenues of $1 $900.
Entering fiscal 'twenty four with them.
That usually means of $3 $9 billion, which is pretty similar to last year.
But the guidance implies a incremental revenues off a balloon or dumping point just trying to understand like what has changed that is driving significant downtick in the incremental revenue with a very similar net new wins.
Wins in your book.
Yeah. So I think also part of it is the make new wins and the phasing of that right and I think in FY 'twenty. Two you would have seen them more towards the proudly.
Uh huh.
And if you're seeing in FY2023.
I think the quad last quarter point.
But he has also maintained as you know.
It has been a visa quota because it would be up for the six month gap between that deal and then like before it comes into revenue. So I think partly as the phasing, but the underlying I think we've had strong deal wins on both sides than a person bigger makes me I think it's part of a great style.
The Mexican children during the year.
So it has to do with D. A C V throat being weaker than the D. C. Visa is that like a fan understanding.
So it could be could be also the timing of it right. So I'm, just saying that it would be net new like for instance in quarter four and somebody had mentioned is about 22%. So that will reflect in FY 'twenty four going forward. Initially and then of course as new deals ramp up that's a separate a volume impact, but the phasing of it.
Then within that is also to be seen.
The good news to come.
Alright. The second question is around the comment that you made it all the stabilization that you've seen in March. So is it fair to say that your guidance is assuming things are likely to improve sequentially from here on in this is divorced or it's difficult to say that the worst is behind us.
Yeah.
Yeah at this stage, we're not seeing any.
Any of those things.
We are saying is we saw some thing that even when the environment is uncertain.
We are watchful and agile.
One of the reasons, we've expanded the margin I'm, sorry, the growth guidance band.
It used to take that into account.
Our last question from me on the margins so how much of the margin downtick is.
Primarily a cost issue, which will rectify over a period of time and how much of it is a kind of flexibility you have given it to you all set to go after other deals which may have a fundamentally different contract profitability. Thank you.
Oh, that's a fantastic [laughter] Ah Ah well like I said I've been really explain how we've done the margin guidance. We've ended at 91 that there's a midpoint of 20 to 22, we have some headwinds we had some tailwind and this margin allows us that flexibility.
Well of course, we couldn't do their desire to improve that.
Thank you.
Thank you.
We'll take our next question from the line of these going to believe from a product.
Management. Please go ahead.
Yeah, Good evening Cancun jump at the opportunity a couple of clarifications are due to unplanned downtime cancellations. Oh, you said, we have seen a sharp decline, 2% same quantum that of any Oh I would imagine from just 50 basis points and even based on that punishing enough margin to gain utilization and cancellation that impact.
With them so much in propulsion to 3.2% fall in your opinion are logically.
This decline of this magnitude should having failed a much bigger margin impact given the cost recalibration is to prepare them to me at all so just curious is there any sizable pass through element, which would've gotten rolled off which would have also led to better than any other claim audience at any deferred cost component, which will come on because in the subsequent quarters.
That's what we as we went through the margin walk Oh, and you have to go back to Oh.
We have cleaned up multi element I think they're quite clear of how the margin has moved from 21, 5%.
One.
Sure.
And the second part.
The reason why I'm also asking about this pass through component, there's a C. D scan them the sentiment overhang sort of unfolded from tank much Oh switch never try to 15 working days and the revenue was almost a year and half to 4% sort of guidance or expectations, which means that it's $180 million revenue stream.
Looks quite a bit what part of it being working days of invoicing. So again.
Conversely is there a deferred revenue component, which can come into subsequent quarters. Since you also mentioned something about the provision reversal of one offs.
Yeah.
No I'm not getting carried.
Good question really are.
No what I was asking was but in general the macro some commingled hang on pointed out in the last one on beef I think I would just say that they were the oldest shortfall up you know I've had happened in the last like a month or something to that.
Oh yeah.
Yeah, so so you're saying that the 100% of shortfall is evenly spread from the beginning of the cooperation and not necessarily even need to be today.
Yeah of course, the one thing you might have a different issue, but the biggest the majority of the drop in revenue because of volume and lifestyle instead, because they're pretty much off the 15th and we'd actually seen my stabilizing so it wasn't the initial half of those are off the quarter.
Okay. Thanks.
Thank you. Our next question is from the line of Surendra Goyal from Citigroup. Please go ahead.
Yeah, Hi, good evening.
So my first question was on the revenue guidance just wanted to confirm that the guidance is all organic in nature.
Yes, the guidance is all organic.
Yeah.
Second question is on margins so far in Atlanta.
So while I understand that your guidance is on visa and whatnot.
But how do you really think about medium term margins took a common question we've been getting from investors given the direction of margins is cannot be 18% couple of years down. The line. So I know you can't quantify it but just wanted to understand how you think about when you get into margins.
Well I think.
Isn't it earlier on the question to cover less than.
You know if you have to step back and you see you know during this period of Covid.
You know for us to go after in a very balanced the constrained environment the impact on the cost structure of the company. All across you know per capita costs went up but it made Scott.
We do a combination of compensation such as that.
What are you doing skewed you know.
Basically fundamentally you are going behind these large deals we didn't have time to really optimize on all of these leave us upon a record 11.3%. All these inefficiencies we saw but like we have continuously said we will have to figure that we knew that we had to go and grab that volume and we would have enough time to subsequently actually stopped.
Unwinding those inefficiencies and then this is the cost optimization program, we run a throughout there you know and that's where we still think these inefficiencies still exists across our U play VIX is a classic one I mean, you have to think through that 80% as we mentioned.
Yeah, I mean, it's got a double whammy on cost like I mentioned earlier I think we will continue to target an end of cycle improve our margins in 'twenty to 'twenty, two really gives us that flexibility and for anyone gets happens to be the midpoint, where it ended.
Yeah.
Oh sure I get the data.
My question was more medium term because in good demand scenario.
Margins go down because the supply side issues and in fact demand scenario, possibly could go down because oh.
Is it pricing or automotive or other visa.
If you don't think.
Yeah.
Thank you.
Our next question is from the line of Keith Bachman from BMO capital. Please go ahead.
Yes. Thank you I had two questions also could you talk about what the growth rate of the backlog in the pipeline.
During the March quarter.
And how that differed during the December quarter.
Just trying to understand the magnitude you called out volume was the major driver.
How did it impact the overall backdrop and within that context could you give us a sense of you called out several one time.
Events for customers could you give a quantification about what that was.
In the quarter.
Yeah.
So we don't quantify that but like I said the majority of our has been because of volumes and the balance has been because of the onetime other cros flying some of them related to cancellation on about a.
The region.
Yeah.
Okay.
You don't want to give a characterization of what that was.
Those cancellations were a quantification of it.
No I don't think anything else, we have to add to this.
Okay. Okay I wanted to my second question relates to pricing in the previous question I think.
Just trying to get it I'm not sure I understood the answer, but if you think about the guidance that you provided.
On the one side, but perhaps I would think that you'd get cola benefits associated with your contracts, but.
A lot of your customers frankly, they're experiencing the same economic weakness you are and therefore couldn't negotiate candidly tougher pricing as we look out over the.
The next 12 months in other words, what price reductions because they are experiencing economic opinion as well. So maybe just talk how are you thinking about like for like pricing.
As you look out over the next 12 months in terms of the forecast that we provided or the guidance excuse me that you provided.
Yeah. So I think if you see pricing again, Rick and I won't say I don't know how many of the pricing element has been building.
So this is a program we started about a year and a half back.
And it is a combination of two or three things. One is you know the renewal discounts, which clients come back when the programs are ending and basically off the productivity increases that would be renewal stage, which we I guess loosely calling discounts now that is something which we have really cold over the last few years our base.
Maybe pushing back on their renewal because they are the ways. We can get productivity is ready, but that's something we can actually.
It's been quite a lot in fact clients understand that we have to also provide our own talent and the talent.
Current market to compensate their teams so that's something because they've learned to appreciate as well. So that's one part of it back into the program would be run on basically digital pricing wherever they're going often they get the bill.
And it's a combination of you know how we've changed the pricing model Interlinking the points since the newly acquired subsidiaries would have higher pricing it could be more broad based pricing outcome based pricing.
And innovative pricing construct for that second third essential hygiene work off you know having pulled out clauses into our you know msas and how fast how much you can execute them implement to a different question, but at least with Bakken deals going in at least you have a starting point to negotiate with the client as well.
So it's all three we look at in terms of existing deals new deals and renewals.
And of course, you have clients, where we are going to push the food grade level. Some clients off of that can be plowed back into the employee pet and some clients and it depends on market, a fast who are going through their own sort of.
Concerns on their environment, maybe more difficult and therefore literally half the football season, which we literally client by client to see everything get.
An improvement can be underlying oxygen realization.
So what is the underlying assumption associated with the guidance for FY 'twenty four and how is that different.
What you've experienced so we don't really stay absolutely absolutely we don't break out break down our guidance into volume and price if you want to call it that way.
I can say.
More just directionally is it the same better or worse, just kind of direction Oklahoma.
Yeah, we we wouldn't expect pricing to improve right now.
I can give you a sense of what it was last year, how am I going to listen to but yeah, we have got pricing improvement baked into our overall plan.
Okay fair enough many thanks.
Thank you. Our next question is from the line of Alicia from JM Financial. Please go ahead.
Hi, good evening and thanks for taking my question.
We've seen some divergence in and Maclean behavior that you have talked about versus what some of our largest deals that I've spoken about.
Ronnie.
In March are stabilizing.
What we did yesterday.
Actually before we did that second and discretionary spend are you now see that that's actually run before they're not canceled.
We have seen cancellation in the project.
In that context, just wanted to understand the nature of these.
These projects, which have been canceling I D.
Additionally are there also a vendor consolidation deals that you might have lawsuit.
Yeah.
Oh.
The.
What we shared with some of the.
Our projects our programs were stopped and an unplanned way during the course of the quarter.
These.
Not resulting from a vendor consolidation. These are resulting from decisions that the clients are typically made on their spend given the environment. There. Please.
Okay. Okay sure. Thank you and all of them.
Thank you ladies and gentlemen that was the last question for today I now hand, the conference over to the management for closing comments.
So.
So thanks, thanks, everyone for joining us.
As we said through the call.
First for the full year, we had a good growth good margin good cash collection, we saw during the quarter some situations.
Sure new situations during the quarter with the changing environment.
I have a strong guidance for next year for up to 7% growth that we have a good guidance on our margin. We've put in place are even more emphasis on our cost and efficiency plan, which has many components are at a detailed level and we look to see that benefit come through.
Oh, what a monkey.
BDO and aspire to a higher margins.
We have an extremely strong pipeline with large deals and some mega deal, especially on cost efficiency automation.
That we feel the business.
And in a good position and we have the ability to work through a different environment on digital transformation and all in cost efficiency consolidation.
As the course of the year develops and so we look forward to executing on that and and connecting with you at the end of.
Q1, thank you.
Thank you.
Ladies and gentlemen on behalf of Infosys limited that concludes this conference.
You for joining us and you may now disconnect your lines.