Infosys Limited Earnings Report for Q4 and FY '24

Introduction

Infosys Limited (NYSE: INFY) recently held its earnings conference call to discuss the financial results for the fourth quarter (Q4) and the fiscal year (FY) ended 2024. The call was hosted by Mr. Sandeep Mahindroo and featured remarks from CEO & MD Mr. Salil Parekh and CFO Mr. Jayesh Sanghrajka. This report details the company's achievements, financial metrics, and forward-looking guidance.

Company Performance

For the fiscal year 2024, Infosys reported a revenue growth of 1.4% in constant currency terms, achieving a total revenue of $18.56 billion USD. The company’s operating margin for the full year stood at 20.7%. During the year, Infosys secured $17.7 billion in large deals, comprising 90 contracts. The fourth quarter alone saw large deal wins totaling $4.5 billion, reflecting strong client trust and confidence in Infosys' capabilities.

Quarterly Financial Highlights

Revenue and Profitability

For Q4, Infosys reported flat year-on-year revenue growth in constant currency terms and a sequential decline of 2.2%. The operating margin for Q4 was 20.1%. Notably, the company experienced a one-time impact due to the renegotiation and re-scoping of a contract with a significant financial services client.

Generative AI Initiatives

Infosys is witnessing excellent traction with clients in the generative AI space, with projects spanning software engineering, process optimization, customer support, advisories, and sales and marketing. The company has generated over 3 million lines of code using generative AI models and has been recognized globally for its AI management excellence, achieving the ISO 42001:2023 certification.

Cloud Services

Infosys' cloud services continue to grow robustly. The company collaborates closely with leading public and private cloud providers, integrating cloud technologies with AI and data services to enhance enterprise data readiness and operational efficiency.

FY 2025 Guidance

Looking forward, Infosys has provided a revenue growth guidance of 1% to 3% in constant currency terms for FY 2025. The operating margin guidance for the year is anticipated to be between 20% and 22%. The company expects normal seasonal trends, with stronger growth in the first half of the financial year compared to the second half.

Strategic Acquisitions

Infosys announced the strategic acquisition of a company in the engineering services space, broadening its capabilities and market reach. This acquisition is expected to further boost its service offerings and contribute to growth in FY 2025.

Dividend and Capital Allocation

The Board declared a dividend of ₹20 per share for FY 2024, along with a special dividend of ₹8 per share. This brings the total payout for the fiscal year to 85% of free cash flow, aligning with Infosys' capital allocation policy. The company aims to continue its commitment to shareholder returns, with plans to increase regular dividends progressively.

Operational Metrics

Employee Metrics

Infosys reported a reduction in employee attrition, with the rate falling to 12.6% from 20.9% in the previous year. The total headcount stood at over 317,000 employees at the end of Q4, with a utilization rate (excluding trainees) of 83.5%.

Cash Flow and Liquidity

The company’s free cash flow for FY 2024 was $2.9 billion, a 14% increase over the previous year. The free cash flow for Q4 was notably strong at $848 million, reflecting improved working capital management and efficiency. Infosys' cash and cash equivalents totaled $4.7 billion at the end of the quarter, with a yield on cash of 7.1% and a return on equity of 32.1%.

Peer Comparison and Market Position

In comparison with its peers, Infosys demonstrated strong performance across multiple financial ratios:

• Gross Profit Margin: 30.10%, trailing the peer average by 9.73%.
• Operating Profit Margin: 20.77%, well above the peer average of 8.89%.
• Net Profit Margin: 17.06%, significantly higher than the peer average of 1.09%.
• Return on Equity (ROE): 32.51%, compared to a peer average of 21.47%.
• Current Ratio: 229.09%, demonstrating strong liquidity.
• Debt to Equity Ratio: 9.48%, indicating conservative leverage.

Conclusion

Infosys Limited has achieved commendable growth and maintained strong financial health amidst challenging market conditions. The strategic emphasis on large deals, generative AI, and cloud services has positioned the company for sustained growth. With a robust financial outlook for FY 2025 and a continued focus on margin improvement, Infosys is well poised to deliver value to its shareholders and clients alike.