Infosys Limited American Depositary Shares

and welcome to the Infosys earnings conference call. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindru. Thank you and over to you, sir.

Thanks, Margaret. Hello, everyone, and welcome to... ...to discuss Q1F521 financial results. This is Sandeep from the investor relations team in Bangalore. Joining us today on this call is CEO and MD, Mr. Saral Parekh, CEO, Mr. Praveen Dao, CFO, Mr. Nilanjan Roy, along with other members of the senior management team. We'll start the call with some remarks on the performance of the company by Salil, Praveen and Nilanjan before opening up the call for questions. Please note that anything which we say which refers to our outlook for the future is a forward-looking statement which must be written in conjunction with the risk that the company faces. A full statement and explanation of these risks is available in our filings with the ATC which can be found on www.atc.gov. I'd now like to pass it on to Sandeep.

Thank you, Sandeep. Good evening and good morning to everyone on the call. I trust each of you and your loved ones are safe and healthy. We've had an exceptionally good quarter in our first quarter of this financial year. I'm extremely proud of what we have achieved as a team. The results for Q1 were strong across multiple dimensions. Revenues, continued differentiation in our digital offerings, large deal wins, operating margins, collection and cash flows and reduction in employee attrition. Let me share with you some highlights. Our revenues grew at 1.5% year on year in constant currency terms. Digital revenue grew at 25.5% year on year in constant currency and now accounts for 44.5% of our revenue. We delivered 22.7% operating margins which is an expansion of 220 basis points year-on-year and 160 basis points sequentially. This was achieved after rewarding our employees with higher variable pay. Our employees have displayed incredible dedication and resilience and have been an integral part of our Q1 performance. Large deal wins were at $1.7 billion for the quarter. Large deal pipeline has improved over the past three months, as clients look at expanding engagements with us due to their trust in us and our exemplary service delivery in the crisis. Our voluntary attrition in IT services is down to 11.7%. Increased focus on collections yielded results, and this was evident in our operating cash flow of $783 million for the quarter. Our balance sheet remains strong with cash and investment position at 3.8 billion with no debt. I'm also happy to report that yesterday we announced a landmark digital transformation engagement with Vanguard. We will partner with Vanguard to drive the digital transformation of their record-keeping services onto a cloud-based platform. Coupled with our strong Q1 results, This gives us a powerful foundation for the rest of the year. While achieving these outstanding results in Q1, our focus and attention has been for the well-being of our employees and the highest level of service delivery for our clients. We have focused on the safety and hygiene of the environment in our office locations. and also leverage our technology infrastructure to enable 99% of our 240,000 employees across 46 countries to work from home. For our clients, we've ensured the highest level of service. The extensive digital investments we have made over the past several years enable us to operate with tremendous stability and combat uncertainty with resilience. This is serving to increase the trust that our clients have in us. we reoriented our client focus with speed to the new and emerging needs, cloud and digital, cost efficiency and automation, and consolidation discussions. Our investment in localization in the U.S. over the past several years, resulting in six digital centers, college hiring, and the majority of our U.S. workforce being local, helped us to better manage the evolving visa regulations in the U.S. our business model is more resilient as we look ahead. We have put in place a comprehensive cost program and cash management program as the crisis started and it has provided us significant benefit and will form the basis of our operating approach for this financial year. We remain committed to support the communities we live and work in In India, we've provided medical support, food supplies, technology support and contact tracing for government agencies. We're also providing medical and contact tracing support in the U.S. and U.K. to different government bodies. Notwithstanding the large stimulus programs in the U.S. and Europe, there are still economic uncertainties in those markets and there are still emerging medical scenarios. There are also emerging medical outcomes in India that are not fully known. However, with what we have learned in Q1 and ongoing strong plan contacts, we feel the strength of our franchise is coming through clearly. And with that, we will reinstate our guidance. For the full financial year, our revenue growth guidance is 0% to 2% year-on-year in constant currency. Our operating margin guidance for the full year is 21% to 23%. With our continued attention to client needs, employee well-being, cost and cash focus, and strong client reaffirmation, I'm more convinced now that we will emerge stronger from this crisis. With that, let me hand over to Karim. Thank you. Thank you, Salim. Hello, everyone. The pandemic has created an unprecedented impact on global economies and the way businesses function. At Infosys, our primary focus has been on employee safety and client continuity. Thanks to our evolved GCP measures, we have been able to respond well to the situation through multiple measures for employees like enabling work from home for our global workforce, health and safety measures, evacuation of stranded employees, enhanced support, remote engagement, overnight policy changes, and extended communication. On the client side as well, we responded very swiftly in enabling them to run their operations seamlessly, which is visible in our strong and resilient 421 performance, which I will now touch upon. Plans have recognized us for the speed, security and effectiveness of our remote enablement efforts. Our steps on supply enablement and plan centricity led to lower impact of COVID on quarter one compared to what we were expecting at the start of the year. Despite the COVID related challenges, we registered 1.5% year on year revenue growth in constant currency terms in quarter one. Financial services, high tech, life sciences and healthcare segments witnessed positive growth on a year-on basis, while communications, manufacturing and energy utilities resources and services segments were sloppish. Detail segments saw weakness as expected. Geography-wise, Europe grew by 4.4% year-on-year in constant currency while North America remained stable. As expected, utilization in quarter 1 was lower. However, on-site utilization remained steady for quarter 1 after a drop in early part of the quarter. This was due to our extended focus on cost optimization and hiring trees. On-site offshore effort may deteriorate slightly from quarter 4, but was better than quarter 1 FY20 by 70 bits. Only 10% of the revenue impact in quarter 1 FY21 was due to supply side issues as we have achieved remote work enablement for over 99% of our employees. Large deal means we are healthy at 1.74 billion for quarter 1. This excludes the largest ever deal signed in Infosys history that we have closed in quarter 2. We won 15 large deals in quarter 1 out of which 5 deals were in financial services, 3 deals in retail, energy utility resources and services and high tech and 1 deal in manufacturing. Region wise 13 were from America and 2 were from Europe. Share of new deals was 19%. From this quarter we will be disclosing voluntary attrition for IT services The key monitorable for us. Voluntary attrition for IT services declined to 11.7% compared to 20.2% in quarter one last year. This is significantly lower than our comfort band of 14 to 15%. Let me talk about some broad teams that are playing out before I touch upon the segments. Plans are looking at building resiliency in their operations, improving efficiency and cutting costs. There is a growing interest in remote workplace solutions, employee experience, cloud solution and cyber security. There is growing acceptance that take-off digitization must accelerate. There is weakness in spending, especially in the area of discretionary spend as clients continue to focus on preserving cash and maintaining liquidity. All this translates to a deep pipeline which is robust, with focus on cost takeout, digital transformation, captive takeover and vendor consolidation. We are increasingly seen as a preferred partner for clients due to our focus on digital capabilities, differentiated localization strategy and improved geographical footprint. Moving to the business segments, financial services after an initial drop in early part of quarter one saw a cost of recovery in business volumes and deals during the quarter. especially in US and APAC banking. Strength in the vertical was also driven by high levels of remote enablement for our employees in different geographies. We see some softness in the capital markets and cards and payment sectors. Likewise, near zero interest rates are also expected to affect profitability of banks. On the positive side, we had multiple deal signings in quarter one, In early quarter 2, we find the largest ever deal in interest history in this vertical. Detail segment remains under pressure with plants in non-grocery, apparel, lifestyle and fashion, restaurants, logistics segment seeing demand contraction and supply chain disruptions. Non-food, non-home and health CPG companies are also in similar turmoil. As the challenges persist, we see clients looking for opportunities to improve efficiency of their tech spend, and we continue to see a robust pipeline of deals in this segment. Performance in communication segments stabilized on a sequential basis, although clients, especially in media and entertainment industry, are under pressure due to weaker advertisement spend and cancellation of events. Network resilience and business continuity remain highest priority, while companies are also investing in digital channels. We expect some delays in 5G rollouts due to COVID-19 related disruptions. Energy utility resources and services vertical is seeing pressure due to lower activity in energy and resources segment. However, we have been making deals in the segment and a continuous strong pipeline make us hopeful on the future prospects despite near-term volatility. Similarly, in manufacturing sector, We have seen weakened performance on a sequential basis due to demand, production and supply chain disruptions and this is expected to continue in near term. Auto and aero structures are majorly impacted with factory closures, delays and cancellations in aircraft purchases and so on. We remain, however, encouraged by new account openings and steady deal pipeline in this segment. Our digital portfolio and progress continue to grow. In the last quarter, we have been rated as leader in seven services-related capabilities across digital pentagon areas by industry analysts. With that, I will hand over to Niranjan. Hi, Praveen. Good evening, everyone. I hope all of you are well and healthy with your families and loved ones. As we mentioned during the last quarter, when we recited by Sajid and Praveen earlier, The company's priorities during the quarter were focused on three key dimensions. Firstly, ensuring that we continue to stay relevant to clients and meeting our delivery commitments whilst keeping the health and safety of employees as paramount. Revenues in quarter one were $3.121 million and grew 1.5% year-on-year in constant currency terms, which is satisfying in the context of the larger economic crisis and competitive context. Secondly, tight management of cost and cost control initiatives. This was a combination of a three-pronged approach which we adopted. A, cost avoidance measures like hiring freeze, reskilling bench talent to improve utilization, etc. These measures were critical to avoid any margin deterioration in the quarter. B, short-term discretionary cost cuts, some enforced by COVID like travel. and other cuts from professional charges, marketing, rate negotiation with vendors, etc. MC are ongoing strategic cost levers of automation, pyramids, on-site mix, and sub-cons. Consequently, operating margins increased to 22.7% compared to 21.1% in Q4, and expansion of 160 basis points explained as follows. 70 basis points benefit from rupee depreciation offset by impact of revenue hedges and cross-currency. 230 basis points benefit due to lower travel and visa costs. 110 basis points benefit due to lower SGMA costs as mentioned above. These were offset by 150 basis points headwind due to operational parameters like lower utilization, higher onsite mix, and lower RTP. And 100 basis points increase in salary costs including higher variable pay costs and others as we rewarded teams in the time of this crisis. As you can see from the above factors, some of these are, of course, one-time temporary gains, whilst others are long-term structural improvements. The final priority during the quarter was focused on cash and liquidity in the midst of this crisis. FCS of $728 million grew 50% year-on-year and was at a record high, supported by robust collections despite some increases due to client extension requests, government tax deferrals in some jurisdictions, and tight capex controls. FTF as a portfolio of net profit was a creditable 130%. While we aim to increase capital return to our shareholders, we continue to maintain a very strong debt-free and liquid balance sheet. Cash and investments at the end of Q1 were $3.8 billion, excluding the $536 million year-marked for dividend payout made in early July. Yield on cash balance declined to 6.11% in Q1 compared to 7.06% in Q4, due to declining interest rates in India. Quarter one was also marked the 20th consecutive quarter of positive forex income, despite significant currency water challenges globally. Return on equity increased to 27.7% compared to 25.9% in quarter 420. EPS dollar growth was 3.8% and 13.1% in rupee terms on a year-on-year basis. Our margin aspiration in these test times was focused on resilience and stability And consequently, our operating margin guidance remains unchanged as last year within the band of 21 to 23%. With that, we can open up the call for questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Anyone who would like to ask a question, please press star and one at this time. The first question is from the line of from Bank of Montreal. Please go ahead.

Hi. Thank you very much. I wanted to ask two questions, if I could. The first question is on your revenue comments for the year. You just posted 1.5 year-over-year constant currency growth, and you're talking about kind of 0 to 2% for the year. It would seem to me that if the economy is improving in the backdrop, if it is improving, that growth would actually improve during the course of the year. But I just wanted to hear a little bit about what the system takes that we should be thinking about over the next couple quarters as it relates to revenues. And I have a follow-up question, please.

Thanks, Keith. This is Ali. I'll address that point of the revenue. What we saw as we came into the close of the quarter was a good large deals win that we shared at 1.7 billion. And then we had the announcement yesterday with a strong partnership with Vanda. And in addition, we've seen as we pivoted to the new needs of our clients, especially focused on the cloud area or the area of cost efficiency and automation or the area of consolidation, that we could see some good traction in those areas. That gave us the confidence with respect to demand outlook and revenue. However, there is still the global medical situation playing out. While, as I said in my opening comments today, the broad economic indicators in our major markets are more positive, we still don't have complete control on the medical situation in those markets or indeed in our market, in our geography in India. Keeping all of those factors in mind, we first decided that It was time to reinstate guidance. And second, to clearly communicate that we were looking for growth this year. And that's how we came to a view of 0% to 2% guidance in constant currency trends.

Okay, great. My follow-up question then is on workforce. And what I mean by that is, the distribution of work. In the June quarter, onsite was 28 and offshore was 72. And given there's still, this is an election year in the U.S., politics and visas will probably increasingly be an issue regardless of which party wins. But how are you thinking about the distribution of work over the next 12 to 18 months that may or may not be related to visas, but I would think it's going to be harder, a lot easier. But if you could just talk about the distribution of work over the next 12 to 18 months and how you think about where work gets done. And that's it for me. Congratulations on a very strong quarter, given the background.

Thank you, Pete, for the question. I'll start with a specific set of comments and Praveen may add a few thoughts on the work distribution. One of the things we put in place a couple of years ago or more actually was an extreme focus on localization within the U.S. And while we obviously had no inkling about the situation that has developed today both with no travel in the crisis and the changing visa regulations, the fact that we recruit locally and we have a majority of our team in the U.S. that's local and we have a college recruitment program and a full pyramid, all of those help us to mitigate these scenarios both on travel and both on visa. Let me pause there and Praveen, if you want to add anything, please. Yeah. Thanks, Anil. So our on-site ratio has degraded just marginally as compared to quarter four. It's at 28%. And when we compare about a year back, it was actually, I mean, it's better by 76 points than what it was in FY20. So from this perspective, we have, I mean, if you look back over several quarters, we have seen that on-site ratio vary within a narrow band. And even when I look at all the deals that we have won, nature of work distribution and in fact solution for all the deals that we have had, we have always had a combination of on-site, offshore and we have not seen any significant difference. Obviously, depending on the life cycle of the product, there will be need for lot more on-site at such particular part of the life cycle and there are times when you can do significant work offshore. So we don't expect that to change and more importantly in dealing with the current pandemic, we have been able to do all functions whether it is onboarding, whether it is delivering on client commitments without any loss of productivity. even selling as well has been done remotely so there are so in the new normal I think our experience that we have learnt in various life cycle activities will come to bear and going forward while we don't see any significant difference in the onsite offshore ratio we will also probably see much more usage of remote ways of working so in that sense A good percentage of things can be worked anywhere. I mean, wherever we are, it doesn't necessarily have to be in front of the client. Okay, great. Thank you.

Congratulations.

Thank you. The next question is from the line of Divya Nagarajan from UDSC. Go ahead.

Thanks for taking the question, and congratulations on a very strong execution in a very tough quarter. The guidance was also an unexpected surprise. But kind of going to, I think you've already explained in great detail some of the factors that drove this. My question is, how much of your wins this quarter, according to you, have come from share gains versus increased customer requirements on certain topics like digitalization and migration to the cloud that you addressed? That's question number one. Question to Praveen, I think you have disclosed that the voluntary attrition has come back, and I do understand that you don't want to disclose involuntary, but could you talk about any employee realignment that you had in the quarter, specifically around what you had in terms of the existence during the quarter?

Hi, Divya. Thank you for that question, those questions. On the first one, We don't have specific on share gains. What I think we see for sure is as we look around, there is some distance we have found with the extreme work we've done in work from home and service delivery that Kaveen referenced earlier. And we find more discussions with clients in engaging with us as we look at a variety of options for their needs. We also see that our performance is stronger than what the industry analyst organizations have suggested for the industry. And so we feel that could indicate a market gain. And those are the sort of factors we consider. But I don't have a specific in terms of what we think with individual peers and so on. On the second part, Praveen, over to you, please. Yeah. Thanks, Salil. Divya, just to add on the first part, one way to look at it is if you look at the large building, 1.74 billion, 19% of net new. In some sense, that's come at the expense of someone else. So that's one way of looking at it. But again, there will always be an element of new and existing and it's very difficult to in any granular level water comes from taking share from peers. On the attrition, as I said, voluntary attrition is about 11.7%. And we have, I mean, we don't have any structured plan to let go people or anything. Being a high performance company, we always have strong focus on performance and wherever people are not delivering, we let them go. And this happens periodically once a year for some set of people and every six months for other set of people. So, there is nothing new. I mean, we have not done anything differently from an involuntary appreciation perspective. I mean, whatever practices we have followed historically, the same thing we have continued this quarter after.

Got it. My last question is to Nilanjan. You started the year with the top end of the guidance in terms of the margins. So how should we think about the puts and takes for your full year band still being at 21 to 23?

Yeah, Divya, so as we mentioned, for us it's very important to show margin stability and resilience. This was also the theme we adopted last year when we said we want to show the 21-23. And that's the same guidance we are keeping. Of course, as we see, the start of the year has been at the higher end. But we know some of these costs may creep up in terms of things like promotion or compensation, et cetera. And, you know, these are – and travel costs may open up once we, you know, the pandemic is applied faster. So these are things which are still unknown. So for us, it's more about the band in which we operate and to get stability and resilience around these numbers.

Thanks. Thanks for taking my questions. Yes, Dr. follow-up. I kind of missed what the net new number that Praveen said. It was a little bit puzzled. If you could just clarify that and thanks again and have a good year.

19% the reality mentioned.

Got it. Thank you.

Thank you. The next question is from the line of Edward from Wells Fargo. Please go ahead.

Hi. Good afternoon. Good evening. I was curious just if you could differentiate between the trends in outsourcing-related work, because it sounds like some of the newer opportunities have more of an outsourcing feel to them relative to discretionary work, and then what the implications are for margins. Thank you.

Hi, and this is Tali. Let me start with some observations on that. What we see is really more traction in what we've defined as a digital portfolio. Digital consists both of discretionary and multi-year contracts. So we've not seen, at least at this stage, a separation. Clearly, some level of discretionary work in the quarter was slow and stopped, especially earlier in April. And as we go through May and June, some of that started to come back. However, we've not seen a huge separation because there are new projects which are digital-oriented, which are also discretion, because that's the traction we have. And equally, there are new multi-year contracts which we start to see which contain outsourcing-like elements but which are focused on automation and efficiencies. In terms of impact to margin, nothing more granular than that, at least at this stage from us. The one point to add, what we've shared before, but to reiterate, our digital portfolio margins are typically higher than the average of the company.

My other question is if you could give some color on the pace of – you know, moving forward on the part of your clients, Europe versus the U.S. Is one ahead of the other? And maybe within Europe differentiate between the United Kingdom and the continent. Thank you.

Karim, would you be able to take that one, please? Yeah, I can start out. So, overall... I mean, if you notice in this quarter, we had superior performance in Europe on a year-on-year basis. Europe grew by 4.4% on constant currency, whereas North America was flattish. So, in general, we have seen – I mean, we have not seen too much of – I mean, even historically, we have looked at – past quarter performance, we have not always seen Europe performing relatively better. But from a sector perspective, if you look at from a banking and financial services perspective, we are seeing probably a lot more traction in America's attack at this stage than in Europe. Whereas in most of the other sectors, we are not seeing too much of difference between Europe or North America. Thank you.

Thank you. The next question is from the line of Nisan Parmanathan from InvestTech. Please go ahead. Nitin Padmanabhan from Investec. Your line is in the talk mode. Please go ahead with your question. I would request Nitin to unmute yourself from your handset and go ahead with your question, please. Due to no response, we'll move to the next question, which is from the line of Brian Bergen from Coven. Please go ahead.

Hi, all. Thank you. I want I wanted to ask on COVID-related engagements, contract tracing, remote enable for clients, things like that. Was that a material contribution to large-scale signings or 1Q revenue? And if so, can you give us a sense of how much that might be?

I think I understood the point. The question was, if COVID-related work, which is contact tracing, et cetera, is that a material part? If that's the question, no, it's not a material part. We are helping in some situations and scenarios, but it's not a material part of our revenue. Okay, that's helpful.

The second question I have, Just work from home, how are clients thinking about long-term work from home, the model for services? So in some of the large deals you won during the quarter, how was work from home accounted for? Are there stated delivery mix factors being made in contracts or anything like that, or is it too early to call there?

I'll start off, and Praveen might have some color to add to it. The way today that we are engaging with clients is, clients are extremely comfortable to look at work-from-home scenarios in different fashions. So one is constrained to how the medical situation evolves, and another is defined around what could the post-medical scenario look like and what should be the work-from-home situation. So we find a lot of flexibility in the clients, the way they're engaging with us, in defining those situations. We even have very useful examples. For example, in the U.S., in certain geographies, we've been able to do new work with clients where work from home enables us to deliver across the U.S. in different geographies to different client locations. So today there's a lot of flexibility. We don't have a sense how this will continue, but for now we see flexibility.

Okay. Thank you for that. Just the last one here. On your outlook for fiscal 21, did you change anything in the process, do you think, in how you typically arrive at guidance, particularly on revenue growth?

The process itself, I think, first, as you know, we did not provide a guidance in the first, as we started Q1. There, we looked at this quarter, gained some experience, and saw some traction, especially in the wins. And then there is a model for how things would look. There are some considerations which I should reiterate that I shared in the opening comments. Everything about the medical situation is not yet stabilized, as you well know. And so we try to take into account the stimulus and how we've seen some of our clients respond and our pipeline expand. but it still has some uncertainty, which is obviously different from how the process is run in any other sort of typical year. Thank you.

Thank you. The next question is from the line of Parag Gupta from Morgan Stanley. Please go ahead.

Hi, good evening, everyone, and thanks for taking the question, and congratulations on a fantastic quarter. You know, Salil, my first question was to you. It was kind of going back to the revenue guidance bit. So while you just did explain a little bit on the process, but the question I had is that, you know, when we spoke at the end of the fourth quarter, you did mention that one of the reasons for not providing a guidance was uncertainties on the medical situation. And, you know, primarily with respect to a second wave of infections, lockdowns, either globally or in India. Now, given that that situation probably still, you know, kind of lingers, but you have provided a guidance. So, you know, does that mean that some part of the potential risks are built into the lower end of the guidance? Or do you think that could pose downside risk if you see a big spike up in infections and lockdowns globally as well? So I just wanted to kind of get clear on that front. So what we've tried to build in is what we see as a situation today, which is, you know, We typically found both from a demand perspective, so how clients are working, and from a supply perspective, how we've enabled work from home. We've adapted, the environment has adapted to the way to work around or within the medical crisis. It's not to say that if things have a step function different outcome, In either of those scenarios, we would not have to re-look at things. But there is some level of understanding, not a complete understanding, of how to engage in it. As Taneen shared earlier, the fact that through our technology enablement, we are managing to enable over 99% of our employees to work from home. We are also able to add new employees into the company. We're able to do transitions, We're able to work with clients and save situations. That gives us some level of comfort to start to work in this environment. But of course, if there is a different kind of an unusual medical situation that arises, we would have to re-look at things. But given where we are today, we felt it was the right thing to start to reinstate the guidance. Got it. That's pretty clear. And the other bit was on DSSI. Again, you know, you did mention in the previous one, it's called that, you know, while banking is holding up right now, you know, there is a possibility of, you know, loan loss defaults or credit card defaults, you know, later in the year. I just wanted to understand, based on the conversations you're having with your customers and potential customers, are you seeing some of those risks subside given the stimulus measures? or do you still see a fair chance of some of these risks coming to the fore in the next few quarters? My sense is, and if you'd like to add after that, please, my sense is those risks are still there. As I looked at some of the provisions that a couple of the large banks have taken this in the last few days, for their Q2 numbers, at least the money center banks in the U.S. market, you can see that they've expanded those set of provisions, which would mean they see something of that nature possibly in the future quarters. We've not seen anything in discussions. It's more modeling or implication of some of the analysis that our leadership in financial services have done that would give us a view that there is a possibility of those things. Maybe over the next few quarters, so we don't have a sense of the timing, but that still sort of is in the background, yes. Got it. Thank you, and all the best for the year. Thank you.

Thank you. The next question is from the line of Moshe Khadri from Red Bush Security. Please go ahead.

Hey, thanks for taking my question, and another congrats on the performance for the quarter. Two questions. First, you know, appreciate the guidance for the year, 0% to 2% constant currency growth. How do we suggest modeling the quarters down the road for the next two, three quarters? And then you indicated that the pipeline looks pretty strong. Can we get some color in terms of where we're seeing, you know, some of the demand kind of coming through the pipeline? Thanks.

On the quarterly motion, I think, as you know, we don't provide specific quarterly guidance in the way we look at revenue or margin. And so I don't have a simple answer for that. We do have a sense around the full year, but we don't provide the guidance for quarterly. On the pipeline, we see good traction in some of these newer areas which relate to cloud or digital, which relate to There's a lot of discussions on cost efficiency and automation with discussions on cyber security, workplace transformation. Our leadership team have built a new set of offerings which are more tailored for this environment and we see traction of those offerings with our clients and we see possibility of some consolidation opportunities. So those are the sorts of things we think will be more in the mix in the coming quarters.

And just a follow-on for the pipeline question, if I'm looking at the entire pipeline of business, is there a way to quantify which portion is actually coming in for new roles versus new logos?

Thanks. We do have that view internally, but typically, unfortunately, we don't share that information externally.

All right, guys. Thank you.

Thank you. The next question is from the line of Susheel Guntupalli from Motilal Aswal Financial. Please go ahead.

Yes, good evening, gentlemen. Congratulations on a great performance. My first question is to Salil. I'm sure you would have seen the performance of some of your competitors and had done some competitor benchmarking. Of course, their performance was also very resilient even in the current context. However, Infosys seems to be a few miles ahead on multiple accounts in this quarter. So if you take a step back and introspect, what do you think are the underlying factors that have driven this delta? Is it merely a function of the differential portfolio mix or something else? Would like to know your thoughts on this.

Thanks for that question. I think there are a few good factors that we can think of. One, of course, the fundamental, I think we have an extremely strong franchised has been built over the years, and that resilience is coming through quite nicely now. I think first, one of the points Praveen mentioned, there was an extreme focus on ensuring client service delivery and employee safety, and that we moved faster. In fact, we have a small business in China, and we learned from how that situation developed which was a couple of months earlier, and that gave us a little bit of a time advantage to put things in place a little bit faster, but our technology infrastructure, which enabled work from home, made a significant difference. The second, we pivoted, I think, quite quickly to the new needs, to the new sales opportunities, and that's given us some good traction and even the pipeline expansion in the quarter. The third, we've had A good focus on the way we built our digital capabilities, and that, as you can see, is getting more and more traction in this environment with clients. And for the approach we put in place for localization a few years ago, where we really built a completely new business model, recruiting from colleges, building digital centers in Europe and U.S., and hiring locally, that has helped us managed a little bit better with the travel and the upcoming visa changes and so on. So those are some of the factors. I'm sure there might be others, but at least those come to mind. Sure, Salil.

Thanks for the answer. And it looks like pricing and cash collection have not been a big problem so far. So do you see the worst on these variables to be completely behind by this quarter? or can some of it actually show up in the subsequent quarters? What are your expectations on that?

I'll request the luncheon to address that, please. Yeah, sorry. So, as we mentioned, we have seen some pricing pressure and some requests from clients for extended payment terms, and I think that's very, very normal in these times. We have long-standing relationships with these clients over the years, and it's very important for us to continue working with these clients when they need it. So, It's difficult to predict, you know, in the future how it goes because a lot of it has got to do with what's the impact of the, you know, crisis on the clients going forward. But like we said that we continue to work with them and we have a strong balance sheet as well. So that makes us more confident where we are.

Thanks and all the rest of you.

Thank you. The next question is from the line of James Reesman from Satyahana. Please go ahead.

Hi. Let me echo the congratulations. This is Jamie at Susquehanna. I just wanted to ask, Praveen, in your prepared remarks, you mentioned that there was some modest supply chain impact from disruption to the revenue. I was wondering if you could help us quantify that or give us some additional characterization of the supply chain impact. And then as a follow-up, I'll just do it now. Also, Praveen, in answer to a previous question, I think that you had responded about the relative growth in the VFS sector between Europe and the U.S., but it was a little hard for me to hear. If you could just repeat that one. So the first on the supply chain, the second on the banking.

Thank you. Sure. So on the supply chain, what we said is if we look at the revenue impact on a quarter-on-quarter basis, cost and currency had 2% regrowth. Only about 10%, less than 10% could be attributed to supply issues. 90% was more demand issues. So it was significantly lower than what we have seen in the last quarter. So, as Salim mentioned, today we have more than 99% of people unable to work from home and the percentage of people required to work from offices due to client requirement has also come down dramatically. So, we are doing good there. Second one, on the banking, BFSI, basically, I mean, the message is overall in the beginning of the quarter, there were some concerns regarding We had seen some initial drop, but as the quarter progressed, we started seeing some fast recovery in the business volumes and deals during the quarter. And this was particularly in US and APAC. On the negative side, we continue to see some softness in the capital markets and cards and payment sector. And similarly, like I have discussed in this call, the near zero interest rates could also impact profitability of banks and banks it could potentially have some bearing on the tech spending. But on the positive side, we have seen multiple deal signings. In fact, out of the 15 deals, large deals, 31 in quarter one, five were from DSSI space. And we just saw in early quarter two, we saw the Vanguard deal as well. So, net-net, it's a mixed thing, but we remain, I mean, given the increased volume that we have seen coming back early in the quarter and towards later of the quarter and large deal deals, we remain optimistic about the sector.

Great. Thank you for the call, or I'll drop back into the queue.

Thank you. The next question is from the line of Uncle Ludhra from J.P. Morgan.

Please go ahead. Thank you, and great execution, and thank you for the resumption of guidance. Could you elaborate, as you went through the quarter, which parts of the business surprised you positively and negatively in terms of signings and execution, maybe in terms of industry, geographies, or services? Thanks, Ankur, for the question. The view in terms of signings or execution, as the quarter progressed, we saw more and more positivity actually across the sectors. Even some of the sectors that were significantly impacted earlier in the quarter, we saw a little bit of positive action. Overall, as you saw, sectors like manufacturing, retail was still quite difficult in the quarter. And then, of course, what we saw in high-tech is really extremely strong in this market, and Praveen shared some views in an earlier discussion, and Anjan also shared some views on that. We think there is a set of resilience which really comes from a lot of spend which is geared towards companies executing more digital work, more cloud work, more work on cyber and data, and those are the sorts of things that look positive as the quarter progresses. And on that note, if I could dig a bit deeper, it's been two and a half years since you scoped out the focus towards digital services through your digital pentagon and your investments towards that in the last few years. How is demand changing due to the pandemic in parts of your digital portfolio? Are there areas where you're seeing a lot more success and areas where you are lighter and have scope for bulking up in the direction of the new demand? If I understood the question, there's definitely... Areas, for example, cloud, which are just going even faster than our overall digital business. Cyber security is good. I know all of the digital areas we are finding to be today in good shape, but some like cloud are expanding even faster. Okay, and the second part of the question, Salim, was are there any areas where you think you've been lighter in terms of where the demand is going where you may look to bulk up in future? In our scale, okay. I don't know if you're lighter, but in a sense, you've seen at least two of the acquisitions we've done have been with SaaS cloud services players in the last 12 months. We think there is more of it that we can do. In a sense, we're not lighter, but we see the demand actually in a very good position. So we will look to see how we can add to such capacity. on most of the areas in that pentagon, we actually have ideas and open discussions. So if a lot of those things mesh up well, pricing, culture, etc., then we are looking to do some more additions. Last question for Nilanjan. Nilanjan, you've highlighted the margin walk for the quarter. I just wanted to get a sense of You know, clearly at the upper end of the guidance, right, you've highlighted some of the areas with potential downside. How do you think about the need to balance investments outside of, you know, maybe promotions coming ahead as we, you know, as we look for growth, not just for this year, but also for next year? Yeah, so I think as the year progresses, we will take a very, you know, structured view of how the market is operating, what we need to do to be competitive, because a lot of this is also driven by the competitive context. And therefore, some of these calls we will take as the year progresses. I think the investments which are very, very critical and we continue doing are re-skilling of talent. So in this time, you know, when Bench was higher, tremendous amount of, you know, re-skilling of people looking at new digital skills. Those are the kind of investments we continue to do because in the long run, sustainable advantage will only come as we create that differentiation of competitions. Thank you.

The next question is from the line of Rod Bergeron from Deep Dive Equity. Please go ahead.

Hey, guys. Again, congratulations on the execution in this environment. Related to that, as you look longer term concerning your work-from-home percentage, are you able to share a view at this point on where you think the long-term plan will be in terms of how many employees will be working from home? And then the follow-up to that is, can you give us a sense of the structural margin benefit that you receive based on the percentage of your staff that's working from home?

Praveen, do you want to go ahead? Yeah, I can take it, and I can probably ask Neelanjan to comment on the second part. See, overall, from our perspective, we are really looking at a hybrid model where we people should have ability to work from home or work from office in a seamless manner and the same set of people I mean there may be set of people who are at times working from office at times working from home. So it's in our mind it's immature to attribute some percentage to it because a lot of things depend on nature of work, client comfort and things like that. So our endeavor has been to make sure that we build in enough systems, processes, tools and capabilities where we can feel the flips which and also right now what we have seen is technologically we are able to deliver good quality without compromising on service levels or quality to the clients. But in the long run we need to really figure out how do you continue to engage with employees when they are working in a remote manner. We have already seen many people have adopted wealth. Some people do have stress levels and other things. How do you deal with that? More importantly, for new people coming on board, how do you create, how do you inculcate your values and culture? So there are a lot of unanswered questions. The easy part is the technology thing which we have solved, but there are a lot of unanswered questions and there will be a lot of learning as this evolves. So, I mean, we are actually I mean, from our perspective, we are making sure that we have a flexible model and we continue to evolve and learn from feedback that we have seen and continue to invest in this model. But difficult to, I mean, at this stage, we are not really venturing into assigning a guess on how much we'll be working from office, how much we'll be working from home. Yeah, on your question on margins, in this quarter, basically, we said the benefit on margins from lower travel and visa cost is about 230 basis points and that's the biggest impact. We will, of course, have to see as the world opens up in terms of travel and, you know, people are back, you know, taking flights, et cetera, meeting clients, so that we will have to see as the new normal. But on a long-term basis, going from the work from home, I think, again, this has to be played out. Yes, at one end, you may see some benefits on facilities, et cetera, but at the same time, you have to invest in facilities in terms of social distancing. You have to invest in communication costs as people work from home. You will have to invest in more cybersecurity bandwidth. So it's going to be a big bag in terms of what comes out of this. And as Praveen mentioned, it is also something about a hybrid model of, you know, work from home. It's not that, you know, the entire population will be working from home at a certain percentage. It's going to be hybrid office and work. So we'll have to see how that plays out.

Great. Thanks for the color. I'll follow up with other questions. Thanks.

Thank you. Ladies and gentlemen, that was the last question. for today. I now hand the conference over to the management for closing comments.

I would like to pass on to Farid for his closing comments.

Thanks, Sandeep. Thank you, everyone, for joining the call and for your questions. We are really delighted with the results that we've had in Q1. We see extremely strong client relationships, good affirmation of what we've done, very good work from home and really client service delivery activities that Praveen shared with you, a strong continued focus on cash and collections that Nilanjan shared with you, and a real pivot to what our clients are looking for in the new environment in terms of cloud, digital, consolidation, cost and efficiency and automation. With all of those, we feel we are in a good position. Of course, there are uncertainties as we go forward, but we feel from the experience you had in Q1, we stand to see this financial year in a somewhat better light. Thank you, everyone, for joining the call. Take care.