Infosys Q4 profit misses estimates but full-year revenue guidance beats expectations | 10 key takeaways

Profit in dollar terms fell by 2.9 percent QoQ to $752 million in Q4FY22.

For the full year FY22, profit surged 14.3 percent to Rs 22,110 crore compared to the previous year on strong revenue and operating growth, though margin contracted.

2) Revenue

Consolidated revenue during the March 2022 quarter increased by 1.3 percent to Rs 32,276 crore on a sequential basis and the same in dollar terms grew by 0.7 percent QoQ to $4,280 million, missing expectations. Average revenue estimates of analysts polled by CNBC-TV18 were at Rs 32,867 crore and $4,365 million respectively.

Quarterly revenue growth in constant currency terms came in at 1.2 percent, which too was much lower than CNBC-TV18 poll estimates of 3.2 percent for Q4.

Digital revenues, which contributed 59.2 percent to total revenue, grew by 1.8 percent QoQ to $2,532 million in Q4FY22.

In FY22, Infosys clocked a 21.1 percent growth in revenue at Rs 1.21 lakh crore compared to the previous year, while dollar revenue growth was 20.3 percent at $16.31 billion.

The topline growth in terms of constant currency at 19.7 percent for FY22 was within the company's guidance range of 19.5-20 percent.

"..delivered $16.3 billion in revenues with the highest annual growth in the last decade of 19.7 percent in constant currency with a robust operating margin of 23 percent. Growth was broadbased, supported by continued momentum in large deal wins," the IT company said in its BSE filing.

Salil Parekh, CEO and MD, said the broad-based performance was driven by deeply differentiated digital and Infosys Cobalt-led cloud capabilities, powered by ‘One Infosys’ approach. "We continue to gain market share as a result of sustained clients’ confidence in our ability to successfully navigate their digital journeys."

3) Guidance

Infosys expects revenue growth in constant currency in the range of 13-15 percent for the current financial year 2022-23, which was better than CNBC-TV18 poll estimates of 12-14 percent.

The operating profit margin for FY23 is estimated to be in the range of 21-23 percent against analysts' expectations of 22-24 percent.

4) Deal Wins

The next-generation digital services and consulting firm reported deal wins with a total contract value (TCV) of $9.5 billion for the financial year 2021-22, and $2.3 billion for Q4FY22.

The company added one client each in the $100 million+ bucket and $10 million+ category. Its active clients count at the end of March 2022 was 1,741, up from 1,738 clients as of December 2021.

5) Operating Performance

The operating profit in Q4FY22 declined by 7 percent sequentially to Rs 6,956 crore with margin contracting at 21.5 percent, down by 200 bps compared to the previous quarter.

In the full year, operating profit at Rs 28,015 crore surged 13.8 percent compared to the previous year, but margin fell by 150 bps to 23 percent, which was still within the guidance range of 22-24 percent.

6) Expenses

Operating expenses (selling and marketing expenses, and administrative expenses) increased by 2.7 percent sequentially to Rs 3,048 crore in Q4FY22, while tax expenses for the quarter at Rs 1,848 crore fell by 12.9 percent QoQ.

The full-year operating expenses surged by 11.4 percent to Rs 11,628 crore compared to the previous year, while tax costs rose by 10.5 percent to Rs 7,964 crore during the same period.

7) Other income

The company has seen a significant increase in other income at Rs 587 crore, growing by 27.9 percent compared to December 2021 quarter, while in the full year, other income increased by 4 percent to Rs 2,095 crore compared to the previous year.

8) Employee Metrics

The company had a total headcount of 3.14 lakh at the end of March 2022, up by 7.5 percent compared to 2.92 lakh employees as of December 2021.

The voluntary attrition (last twelve months from IT services) stood at 27.7 percent by end of March 2022, increasing from 25.5 percent as of December 2021.

The utilisation levels including trainees declined to 80 percent in the quarter ended March 2022, as against 82.7 percent in the previous quarter and even the same excluding trainees has seen a drop, coming in at 87 percent against 88.5 percent during the same period.

9) CFO Comments

"In a year marked by intense supply-side challenges, Infosys delivered strong financial performance – EPS growth of 15.2 percent, free cash flows surpassing $3 billion and return on equity of 29.1 percent, driven by client-centricity and rich capabilities," said Nilanjan Roy, Chief Financial Officer at Infosys.

He further said with a robust demand environment ahead, Infosys envisaged making appropriate long-term investments in capability building across sales, delivery and innovation. However, "we plan to neutralise some of the impact through aggressive cost optimisation programmes and value-led pricing driven by service and brand differentiation. This, along with post-pandemic normalisation of expenses, is reflected in the margin guidance."

10) Capital allocation

For FY22, Infosys said the board has recommended a final dividend of Rs 16 per share. "Together with the interim dividend of Rs 15 per share already paid, the total dividend per share for FY22 will amount to Rs 31, which is a 14.8 percent increase over FY21."

With this, the company has announced a total dividend of approximately Rs 13,000 crore for the full year.