WIPRONSEQ4 FY 2022May 02, 2022

Wipro Limited

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47turns

7analyst exchanges

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Management on call

Aparna Iyer

Key numbers — 40 extracted

rs,

p of the year that has gone by, I'll elaborate on the demand environment, provide details on sectors, markets, service offerings, and share a business outlook for the quarters ahead. I'll start by a

10.4 billion

ead. I'll start by acknowledging that we've had an outstanding year; we’ve delivered revenues of $10.4 billion at an industry-leading growth of 27%-plus in constant currency terms. Crossing $10 billion of rev

27%

d an outstanding year; we’ve delivered revenues of $10.4 billion at an industry-leading growth of 27%-plus in constant currency terms. Crossing $10 billion of revenue is a significant landmark for us

10 billion

of $10.4 billion at an industry-leading growth of 27%-plus in constant currency terms. Crossing $10 billion of revenue is a significant landmark for us and we are now aiming higher. Revenue growth has be

30%

-fourth of our revenue just this year. Our order bookings in ‘Annual Contract Value’ terms grew 30% year-on- year. And we are finishing off the year with the highest ever pipeline. wipro.com Th

17.7%

agility into our processes, and help us serve our customers better. Operationally, we delivered 17.7% operating margins which is ahead of our stated range. Finally, our net income in absolute terms i

13%

r stated range. Finally, our net income in absolute terms is the highest ever, which grew by over 13% year-on- year, and EPS expanded by 17% year-on- year. No doubt, it has taken a tremendous amount

17%

e in absolute terms is the highest ever, which grew by over 13% year-on- year, and EPS expanded by 17% year-on- year. No doubt, it has taken a tremendous amount of discipline and determination to rema

3.1%

on to our Q4 performance and the demand environment. Our revenue growth during the quarter was at 3.1% in constant currency terms and 28.5% year-on- year. We've been consistently growing at or over 3%

28.5%

and environment. Our revenue growth during the quarter was at 3.1% in constant currency terms and 28.5% year-on- year. We've been consistently growing at or over 3% for six quarters now. Our growth con

1% in constant currency terms and 28.5% year-on- year. We've been consistently growing at or over 3% for six quarters now. Our growth continues to be broad-based across all our key markets, service

38%

r bookings, and our overall growth rates. In fact, look at the order book, this quarter has grown 38% year-on- year in terms of annual contract value. We continue to close large transformation deal

Guidance — 20 items

Aparna Iyer

opening

“The conference call will be archived, and a transcript will be made available on our website.”

Thierry Delaporte

opening

“CAS Group's deep client relationships and strong domain expertise, combined with Wipro's execution capabilities will deliver an end-to-end professional services solution, and immediate impact on clients.”

Thierry Delaporte

opening

“This will be well above the pre-pandemic margin levels.”

Thierry Delaporte

opening

“We have also partnered with Project HOPE.”

Thierry Delaporte

opening

“Before I close, a word on our outlook for the next quarter.”

Thierry Delaporte

opening

“While we don't provide an annual guidance, I want to confirm that we expect to grow in double-digit for FY'23 as well.”

Thierry Delaporte

opening

“On margins, for the medium term we hold 17%, 17.5% band; however, for the next two to three quarters, we will see slightly lower margins.”

Jatin Dalal

opening

“We have guided for Q1 at 16% to 18% year-on- year growth as guidance, which converts in sequential terms to 1% to 3%.”

Kumar Rakesh

“But when I look at the revenue which we have disclosed over the last two years, the CAGR appears to be about 11%, within which there is a large acquisition as well.”

Jatin Dalal

“It's neither conservative, nor any other way that we have changed our guidance stance.”

Risks & concerns — 12 flagged

The uncertainties and risk factors are explained in our detailed filings with the SEC.

— Aparna Iyer

And are all those acquisitions already well integrated and no risk, is coming from execution of integration of those acquisitions done by Rizing?

— Kumar Rakesh

While it would be a double-digit, but it would be a far higher slowdown in growth from FY'22 level compared to where the industry is likely to be.

— Kumar Rakesh

To your second question on financial integration, or financial consolidation of Rizing and the relative impact on the margins, it's difficult to call out at this juncture exactly, but, you could take a proxy of our previous amortization range as a percentage of the purchase price we are paying, and I think that would be ballpark, an accurate number for you to wipro.com assess, and their profitability is very similar to a good onsite consulting firm will deliver on a consistent basis.

— Jatin Dalal

Is there any risk especially on the financial services side, which is leading to any elongation in decision-making from the clients?

— Pankaj Kapoor

Based on what we are seeing today, looking at the pipeline or talking to our clients, no signs of slowdown either.

— Thierry Delaporte

So we stay close to it, we talk constantly to our clients, but today, no real sign of slowdown.

— Thierry Delaporte

So, it's almost four quarters since we announced a major deal win and I understand that these deals are cyclical, and it is very difficult to predict the timelines, but four quarters is a reasonable timeframe to look at the success of how our large deal strategies working.

— Pankaj Kapoor

From a full year perspective, the kind of investment that we are planning and the kind of wage pressures that you have in the first half, do you think that the margins could be significantly at a risk in FY'23 on overall year basis versus FY'22?

— Pankaj Kapoor

Pankaj, it difficult to look into the future because we are also dealing with an external environment.

— Jatin Dalal

So, even after Capco, if I look at the fourth quarter margin over first quarter margin, at EBITDA level, there is close to a difference of 200 basis points, while at EBIT level, the difference is 70 to 80 basis points as a whole and we are talking about a further decline in the next two, three quarters from the levels of fourth quarter as a whole.

— Sandeep Shah

Only so to say external variable for all of us to watch out and not wipro.com just us as company, but as an industry, is the continued pressure on talent and what we'll have to do in FY'23 for that and we will see how FY'23 therefore pans out.

— Jatin Dalal

Q&A — 7 exchanges

My first question was regarding the recent acquisition of Rizing. What I wanted to understand that was a significant part of the business appears to be built through acquisitions done over the last two, three years. And you spoke about that this company is in a space of high growth SAP, cloud implementation. But when I look at the revenue which we have disclosed over the last two years, the CAGR appears to be about 11%, within which there is a large acquisition as well. So how do you see this company operating? And are all those acquisitions already well integrated and no risk, is coming from

Rajan Kohli

It is true that company has had several acquisitions over the last five to seven years, but they have not made so many acquisitions over the last two to three years. They made one very big acquisition of a company called Attune. Most of the other acquisitions are fully integrated, and Attune is more or less integrated with the core business. And Attune has a very good recovery post-pandemic. As fashion and retail was the most impacted business during the pandemic. But now, as we come out of the pandemic, those industries have seen very good recovery. So, we are quite confident of both the qual

Just a clarification on the guidance. So we've heard that this year normal Q3 to Q4 season actually would not quite play out. Typically, Q4 has slightly higher working days due to higher holidays in Q3 and Q1 should therefore definitely have more working days than Q4. But that doesn't seem to be coming through and in a buoyant demand environment, is this something to do with say the deal anniversary in Wipro what we should be thinking about the guidance?

Thierry Delaporte

I hope I would respond to your question your voice was not always clear. But what we're trying to understand is the nature of this guidance into seasonality. What I would recommend is look at the seasonality quarter-after-quarter, the sequential growth of five or six of our competitors and us in the last six quarters. And you will see that, we are probably if not the only one, one of the only one to have been consistently above 3% every quarter. And reality is that because of the nature of the contract one day or the size of an opportunity or deal, you have some quarters a little more, some qu

I have two questions for Thierry and one for Jatin. Thierry, so while ACV growth was quite strong, the TCV of large deal win was soft on a quarter-on- quarter basis. How much of that has a rub off effect in the near-term performance? Was that one of the factors that kind of drove your guidance to 1% to 3% versus a trajectory of 2% to 4% in the last few quarters?

Thierry Delaporte

I've always said that going after large deals is a strategy, it's an important priority for us and we are gearing up to. We have a nice pipeline, we have a lot of good opportunities, we have deals that we could expect to close in the next few quarters and so we are on it. And I have zero doubt that that will trigger some nice deals. I see it as being us coming on top of the sales activity that we drive quarter-after-quarter. If you look at the performance in sales of the last quarters, it's been strong. So, it's actually been strong, but coming from smaller or mid-size type of deals. We have w

My first question is on the outlook that you see for the Capco business, specifically, given the current macro headwinds that we see in Europe. So, how what kind of a pipeline or what kind of a deal activity do you see for Capco? Is there any risk especially on the financial services side, which is leading to any elongation in decision-making from the clients?

Thierry Delaporte

By definition, Capco being a consulting business has a shorter cycle if you like, and therefore, the visibility typically you would have on a business like this is not in a few quarters. However, I would say the business continue to be very strong. In fact, I was just trading some messages with Lance, and the outlook continues to be really solid. I think, this company, because of its impact and the ability to help bank, financial institution and insurance to drive transformation programs, they're really helping those companies to improve their productivity and address some of their efficiency

My question is broadly more about a clarification. You indicated about double-digit revenue growth guidance for the year. Is it organic or is it our acquisition closed so far, how one should look at it?

Thierry Delaporte

The guidance we give for the growth is organic. So it's based on the parameter as of today. Based on the acquisition we have closed so far, that is right understanding? wipro.com That is right, you're accurate in your assessment, it is all the acquisitions which are closed as of today. That's what we have counted and therefore we have not counted Rizing, which is announced, but not closed. Second question is about the margin, slightly medium term rather than near term which you indicated. Now when we did Capco, we indicated our organic business will operate at 19% and Capco because of the amor

So just six to seven months back, we have issued a press release, talking about $1 billion worth of investment, of which $750 million will be inorganic in building the cloud capabilities. So, whether Rizing is a part of this $750 million plan, or this would be over and above that?

Jatin Dalal

Rizing is in the right space and certainly it's part of our consulting capabilities and that's how you should see it. So that means it's a part of it as a whole? And second question is in terms of margins. So, even after Capco, if I look at the fourth quarter margin over first quarter margin, at EBITDA level, there is close to a difference of 200 basis points, while at EBIT level, the difference is 70 to 80 basis points as a whole and we are talking about a further decline in the next two, three quarters from the levels of fourth quarter as a whole. So the question is, growth is turning around

Thank you all for joining the call today. In case, we couldn't take your questions, you can please feel free to reach out to the investor relations team. And have a nice weekend ahead. Wipro Limited (NYSE: WIT, BSE: 507685, NSE: WIPRO) is a leadi ng gl obal i nformation technology, c onsulting and business process s ervices company. W e harn ess the power of c ognitive computing, hyper-automati on, r obotics, cloud, analytics and em ergi ng technologies to help our c lients adapt to the digi tal world and make them successful. A company r ecognized globally for i ts co mprehens ive portfolio o

Management

Speaking time

Thierry Delaporte

Jatin Dalal

Moderator

Ravi Menon

Gaurav Rateria

Pankaj Kapoor

Dipesh Mehta

Aparna Iyer

Rajan Kohli

Kumar Rakesh

Opening remarks

Aparna Iyer

Thank you. A warm welcome to our Q4'22 Earnings Call. We will begin the call with Business Highlights and Overview by Thierry Delaporte - Chief Executive Officer and Managing Director, followed by a Brief Overview on our latest acquisition, Rizing, by Rajan Kohli -- Managing Partner, IDEAS Business Line, and then a Financial Overview by our CFO – Jatin Dalal. We also have with us as a part of the management, Stephanie Trautman, our Chief Growth Officer, and Saurabh Govil -- Chief Human Resources Officer. After the initial comments from the management, the operator will open the bridge for Q&A. Before Thierry starts, let me draw your attention to the fact that during the call, we may make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act 1995. These statements are based on management's current expectations and are associated with uncertainties and risks, which may cause the actual results to differ materially from those expected. The u

Thierry Delaporte

Thank you, Aparna. And good evening, everyone. Thank you all for joining us today. To those of you joining us from the US, good afternoon. Fridays are often known to bring good news. So, today is no different, at least for us. In my opening remarks, I will sum up of the year that has gone by, I'll elaborate on the demand environment, provide details on sectors, markets, service offerings, and share a business outlook for the quarters ahead. I'll start by acknowledging that we've had an outstanding year; we’ve delivered revenues of $10.4 billion at an industry-leading growth of 27%-plus in constant currency terms. Crossing $10 billion of revenue is a significant landmark for us and we are now aiming higher. Revenue growth has been our fastest ever in absolute terms. We've added one-fourth of our revenue just this year. Our order bookings in ‘Annual Contract Value’ terms grew 30% year-on- year. And we are finishing off the year with the highest ever pipeline. wipro.com Through the year,

Rajan Kohli

Thank you, Thierry. It's my pleasure to say a few words about our acquisition of Rizing. SAP is the market leader in ERP supply chain management and human capital management. It is growing rapidly due to increased cloud adoption and the post-pandemic economic recovery. Meanwhile, rise with SAP, a comprehensive cloud ERP offering, is gaining traction as it helps companies develop new cloud- based business models to fuel their growth and transformation. Given this deep and broad growth profile for SAP, this is strategically important acquisition for four reasons: One, this presents complementary capability. Rizing deep industry expertise in SAP enterprise asset management, human capital management, and SAP for consumer industry positions them as a sought-after advisor of clients complex SAP transformation. This offers cross- sell opportunities into our client base, as well as up-sell to lead with consulting. Two, complementary customers in industry, where we have strong presence. Rizing

Jatin Dalal

Thank you, Rajan, and I will quickly cover the financial highlights. We had an excellent year; we grew 27.3% in reported terms, 28.5% in constant currency terms, delivered 17.7% in operating margin, and 19% ETR which resulted in industry-leading EPS growth of 17%. We delivered and converted consistent cash flows. Our operating cash flow as a percentage of net income was 91%. Our free cash flow as percentage of net income was 75%. We had after paying dividend that we declared in March end, $4.6 billion of cash, gross of debt and $2.6 billion of cash, net of debt as of 31st March. wipro.com We have $3.5 billion of FOREX hedges as on 31st of March. And we delivered 75.91 as the realization rate in Q4. We have guided for Q1 at 16% to 18% year-on- year growth as guidance, which converts in sequential terms to 1% to 3%. We'll be very happy to take your questions from here.

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