Conference Call with Wipro Management and Analysts on Q2FY21 Performance and Outlook. Listen to the full earnings transcript.
Conference Call with Wipro Management and Analysts on Q1FY21 Performance and Outlook. Listen to the full earnings transcript.
Key Highlights of Results from Thierry Delaporte, CEO and Managing Director
I am deeply honored to lead Wipro, an extraordinary company and an exemplary corporate citizen with a deep technology heritage built on a strong foundation of values. I have great respect for the work done by the Azim Premji Foundation, its 67% economic ownership of Wipro adds greater meaning to what we do.
Profitable growth will be the most important priority on my agenda. I am confident that we will be able to deliver longterm, sustainable growth in the interest of all our stakeholders. The pandemic is changing the way we work, and we are responding accordingly.
This was one of the toughest quarters when we started - we had very little visibility, but ended up with an amazing quarter.
We expanded the margins during the quarter, despite lower revenues, on the back of solid execution of several operational improvements and rupee depreciation. We also continued to sustain robust cash generation with Operating Cash Flows at 174.9% of Net income. Profitable growth is our most important agenda.
In IT Services, Wipro continued its momentum in winning large deals with our customers.
Wipro has been selected by John Lewis Partnership, one of the UK’s leading retail groups, as a strategic partner to help drive its retail transformation agenda. As part of this, Wipro will deliver state-of-the-art technology infrastructure services, leveraging its capabilities in Cloud, Digital, Cyber Security, Wipro HOLMES our Artificial Intelligence (AI) and Automation Platform
Gross Revenue was Rs 149.1 billion ($2.0 billion1 ), an increase of 1.3% YoY. IT Services Segment Revenue was at $1,921.6 million, a decrease of 5.7% YoY
Non-GAAP2 constant currency IT Services Segment Revenue decreased by 4.4% YoY. IT Services Operating Margin3 for the quarter was at 19.0%, an expansion of 0.6%YoY
Net Income for the quarter was Rs 23.Rs billion ($316.5 million), an increase of 0.1% YoY. Earnings Per Share for the quarter was at Rs 4.20 ($0.06), an increase of 5.7% YoY
Operating Cash Flows was at Rs 41.8 billion ($553.6 million), which is 174.9% of Net Income Performance for the quarter ended June 30, 2020
Wipro has been awarded a strategic, multi-year infrastructure modernization and digital transformation services engagement by Germany-based energy company E.ON. Wipro will transform E.ON’s legacy data center operations to a hybrid cloud model by leveraging its strong energy value chain expertise in a prosumer driven world, Boundary Less Enterprise (BLE) framework and Wipro HOLMES™.
Wipro’s consumption-based hybrid cloud hosting strategy will ensure a superior and secure customer environment spanning Perimeter & Endpoint security, threat detection & response, and Privileged Access Management (PAM)
Wipro has also won a managed services contract from a multinational European automobile manufacturer to modernize and automate its engineering operations, leveraging Digital Rig, the client’s differentiated digital solution. With its strong domain expertise, globally-integrated delivery model and Wipro HOLMES, Wipro will drive major transformations to enhance service quality and user experience.
Wipro has won a strategic multi-year engagement with a leading global investment management firm to transform and manage its entire technology development services and infrastructure. The scope includes applications development and maintenance, quality engineering services, and infrastructure services comprising datacenter operations, networks, and service desk support.
This contract adds to the operations engagement that the customer awarded Wipro last year. Wipro will leverage its strong digital expertise and hyper automation capabilities powered by Wipro HOLMES to transform the client’s application and infrastructure estate, driving additional synergies via an integrated technology-infrastructure-operations construct.
Full Conference Call between Wipro Management and Analysts on Q4FY20 results and overall financial year. Listen in to the full transcript.
Wipro's Executive Committee and Management Team joined virtually on the call.
Key Highlights
- These are unprecedented times and I am proud of all the team has come together to keep processes going.
- Revenues in Q4FY20 grew 0.4% in constant currency terms within the guidance, and grew 3.9% for the full year in constant currency. In March as the Covid crisis deteriorated, key markets like US, UK, Europe, we saw accelerated impact to our systems.
- Our Rupee revenues 4.2% growth for this fiscal year. Expanded our IT services margins by 0.2% to 18.2% for the full year. That helped grow operating profit by 5.8%. Buyback got completed by September; other income grew 8% YoY.
- Effective tax rate was lower by 1.7% during this year. Overall net income YoY grew YoY at 8%. Because of reduction in outstanding shares due to buyback, growth in EPS FY20 was 11.2%. We have $3.4 bn dollars in net cash and $44.4 bn in gross cash. Better realizations overall. Good cash position to continue to look at opportunities.
- Our realization rate for this quarter was 73.95 compared to 72.09 from previous quarter
- Good year on operating cash flow and free cash flow. Operating cash flow as % of EBITDA of 81%, FCF as % of Net Income 81%. Slightly lower cash flows in last quarter. Some salary payments that happen once in a few years, which impacted some of our numbers by upto 30%.
- We quickly activated our covid management task force headed by our COO. The team consisted of leaders across our major verticals. Our topmost priority remains the safety and well-being of our people and stakeholders.
- We were able to move by early March most of our people globally to work from home. In India this started on March 15. This involved getting approvals from our customers as well. SLA performance has been stable.
- Demand environment: We are very much in the middle of the crisis. We already see budget reductions, discretionary spends, and requests for contract restructuring. Airlines, energy, oil and gas, auto, retail, travel and hospitality are experiencing immediate and deeper impact.
- Fashion retailers, home improvement retailers, restaurant businesses, department stores, are significantly affected right now. These businesses are cutting costs and trying to move to Omnichannel solutions.
- Struggling verticals: Oil and gas is hit due to oil price falling. Auto manufacturing is where both demand and supply have been disrupted. Retail except grocery stores is struggling. These have been highly impacted.
- Verticals where we are seeing opportunity: Communications, utilities. Banking is seeing some positive impact with refinancing, loans and grants, government support programs. With logistics customers we are seeing traction around supply chain management. While healthcare is seeing decline in elective health treatment, emergency and COVID response has resulted in some demand here particularly in hospitals.
- We have decided to temporarily suspend quarterly guidance, and will resume when we have some clarity on the length of the crisis.
- Focus is on defending revenues and increasing market share. We expect demands on working capital to increase, but believe we are comfortably placed.
- Saw some disruption in regular payment cycles from some customers. We had a good first two weeks in the quarter 1 now and we think we will see that normalize now.
- There are certain verticals where some organizations have a fundamental question mark on their business model. We are also getting a lot of requests on postponement of discretionary spend.
- We also see requests for higher efficiency in spending, which means lower revenue but also more opportunity. For example, there is a big demand in cloud infrastructure as more people work remotely. We have our own virtual desk offering, and that presents a big opportunity - we are seeing good traction here as businesses invest in remote collaborative working.
- There are ongoing a lot of conversations with a lot of clients on postponements, or reducing costs for the customers. It will be difficult to quantify exact number but this is concentrated in retail, travel, oil&gas, auto, hospitality.
- As bad if not worse than GST is our assessment of the impact on businesses. The focus of our customers has been to be up and running and ensure business functioning.
- A large portion of our business has become fixed price, locked in for 3-4 years.
