Tata Consultancy Services reports large deal wins, Digital demand mark Strong Q3
MUMBAI, India, Jan. 11, 2018 /PRNewswire/ -- Tata Consultancy Services (BSE: 532540, NSE: TCS), the leading IT services, consulting and business solutions firm reported its consolidated financial results according to IFRS and Ind AS, as on December 31, 2017.
Financial Highlights for Quarter Ended December 31, 2017
-- Revenue at $4,787 Mn, +9.1 % Y-o-Y; +1% Q-o-Q
-- Constant Currency revenue growth of 6.2% Y-o-Y; 1.3% Q-o-Q
-- Net Income at $1,012 Mn, +1.2% Y-o-Y; +1.1% Q-o-Q
-- Operating Margin at 25.2%, an expansion of 0.1% Q-o-Q
-- Net Cash from Operations at $1,206 Mn i.e. 119.2% of Net Income
-- Earnings Per Share at $0.53
-- Dividend per share of ` 7Proposed record date 23/01/18; Payment date
31/01/18
Business Highlights for Quarter Ended December 31, 2017
-- Retail vertical turns around: +3% Y-o-Y; +6.4% Q-o-Q (CC)
-- Digital revenue at 22.1%, +39.6% Y-o-Y; +13.9% Q-o-Q (CC)
-- Strong client metrics: 3 clients added in $50M+ band, 7 in $20M+, 9 in
$10M+ and 15 in the $5M+ band
-- IT Attrition rate (LTM) down further by 0.2% Q-o-Q to 11.1%
-- Total employees: 390,880; Gross addition: 12,534 employees
Commenting on the Q3 performance, Rajesh Gopinathan, CEO and MD, said: "We wrapped 2017 with a strong performance in the December quarter, marked by the signing of industry-defining deals, robust client metrics and broad-based demand across industry verticals. As lagging parts of our portfolio turn around, and areas of softness reduce, we are well placed for stronger growth ahead."
Mr Gopinathan added: "Progressive organizations looking to take advantage of new opportunities in the Business 4.0 era are ramping up their Digital investments, and TCS has emerged as their preferred transformational partner. We signed our first $50Mn+ deal in Digital this quarter, crossing an important milestone in the mainstreaming of Digital technologies. The investments we have been making over the last few years in Research and Innovation, and in building intellectual property, are giving us a distinct edge in the market in winning such large transformational programs."
N. Ganapathy Subramaniam, Chief Operating Officer & Executive Director, said: "We had a very good quarter marked by excellent operating metrics all across. New deal ramp-ups, increasing traction in Digital, robust demand pick up in Retail and continuing momentum in most of our industry verticals gave us strong volume growth in a seasonally weak quarter. Our reputation for superior execution, combined with our platform capability, positions us well to close mega deals."
V. Ramakrishnan, Chief Financial Officer, said: "Concerted efforts by all our teams and tighter working capital management resulted in very strong cash conversion this quarter. The long view we have historically taken with many of our key investment decisions, be it our geographic forays or new cloud-based platform businesses, is now beginning to yield results. Several of the key deals we signed this quarter, are a vindication of that strategic patience."
Q3 Segment Highlights(1)
Industries: Most industry verticals grew above company average in Q3. The Retail and CPG vertical showed a strong turn around, growing 6.4% Q-o-Q. Growth was led by Energy & Utilities (+8.5% Q-o-Q), Travel & Hospitality (+2.9% Q-o-Q) and Life Sciences & Healthcare (+2.5% Q-o-Q). On a year on year basis, all industry verticals - with the exception of BFSI and Retail - grew above 9.5%, with four verticals growing in double digits Y-o-Y.
Markets: Growth was led by Latin America (+5% Q-o-Q), Continental Europe (+2.6% Q-o-Q) and North America (+1.5% QoQ). On a Y-o-Y basis, Continental Europe (+22.3%), UK (+8.2%) and India (+4.1%) performed very well. North America grew 2.8% YoY.
Services: Continuing investments by clients in Digital initiatives resulted in over 150+ wins and strong growth across all service practices. Key highlights:
-- Cloud Services: Robust growth led by public cloud, private cloud and
application modernization services, accounting for 22 Digital wins
-- Cyber Security: Saw more than 15 major wins, growth was led by demand
for services around GDPR, Identity & Access Management, and
Vulnerability Management
-- IoT: The practice saw continued high growth, as IoT deployments go
mainstream. TCS won over 10 IoT deals including the one where Rolls
Royce chose the TCS Connected Universe Platform (TCUP) to underpin its
next generation products and services
-- Digital Interactive: Experience Intelligence & Humanizing the Machine
First World were two key themes behind marquee wins
-- Enterprise Intelligent Automation: Delivered top of the line growth,
with TCS Machine First Delivery Model (MFDM) gaining strong traction
-- Enterprise Application Services: Adoption of newer Digital offerings
such as SAP S/4 HANA, Oracle Cloud, Microsoft Dynamics 365, Salesforce,
and other cloud enterprise platforms drove steady growth
-- Consulting & Service Integration: A key pillar of TCS' full stakeholder
play, consulting-led transformations in the areas of M&A, Supply Chain,
Future of Finance, and Customer Experience resulted in several marquee
deal wins.
-- Cognitive Business Operations: Robust order book with 3 large deals in
Market Research, Oil & Gas and Telecom industries, as the value
proposition of leveraging digital to transform business operations and
deliver superior business outcomes gains traction.
Select Key Wins in Q3
-- Selected as a strategic partner by a large European bank to
operationally transform their mission critical core systems across
multiple geographies and lines of business.
-- Chosen as a strategic partner by a large Australian bank in a multi-year
deal, to provide application services across all lines of business in an
agile model.
-- Selected as the exclusive partner by Lexmark International Inc. in the
US to provide end-to-end IT management for the company's transformation
to a future-ready enterprise. The partnership includes private cloud
infrastructure, end user services and network management and
applications management. The engagement will leverage ignio(TM), TCS'
cognitive automation platform, to deploy a machine-first delivery model
(MFDM(TM)).
-- Partnered with a major US oil field services company to transform their
F&A business processes, utilizing a cognitive operations solution,
thereby unlocking exponential business value for the customer.
-- Selected as a strategic IT partner for a large global engineering
procurement construction company, managing multi-sourcing service
integration, cyber security, deploying ignio(TM) to drive cognitive
automation of the company's SAP landscape, and application services.
-- Selected for a multi-year deal to drive the business operations
management of a large US healthcare organization's six critical
healthcare functions, leveraging ignio's cognitive capabilities for
automation and insights.
-- Selected as the preferred digital partner for Rolls Royce in their
strategic initiative to develop an IoT platform and associated
applications, which will be the foundation of their IoT solution that
connects thousands of assets globally.
-- Extended a long-standing partnership until 2025 with Nielsen Holding
PLC, a leading global market research firm, leveraging TCS' Business 4.0
strategy to help transform their technology, operations, engineering,
and knowledge processes to deliver superior outcomes to their customers.
-- Selected as the principal technology partner by UK's heritage fashion
and foods retailer, Marks & Spencer, to transform customer experience
and drive growth of its business.
-- Selected as a strategic partner for Western Union, a large US financial
services and communications company to maintain and transform its
mission critical systems globally, spanning multiple lines of business
and evolving to an agile and DevOps operating model.
-- Selected by TDC, a Danish telecommunications company to provide IT
Infrastructure services and leverage ignio(TM) to build a 360 degree
view of the enterprise, automate incident and service request
resolution, and infrastructure health-checks to reduce costs and enhance
the customer experience.
Key Digital Wins
-- Selected by a large European retailer as a strategic partner for their
digital marketing transformation to provide customers with a proactive,
conversational and contextual experience across multiple global
channels, while taking the mass-personalization capability of the
retailer to the next level.
-- Chosen by a leading UK based insurance firm as the partner to chart the
roadmap to transform its procure-to-pay business process to be more
agile with the next generation cloud capabilities.
-- Selected by a German lens manufacturer to conceptualize and bring out a
first-of-its-kind offering with sophisticated centration, position of
wear and related capabilities built on an IoT framework of intelligent
devices to drive next generation automation and deliver a friction-free
customer experience.
-- Chosen by a leading Japanese hi-tech firm as their IoT partner to
engineer next generation safety, security monitoring features in their
Data Centers while minimizing their carbon footprint through a Remote
Energy Management solution.
-- Engaged by a European telecom company to improve visibility on
expenditures using machine learning and AI techniques, and leverage the
power of analytics to provide greater HR and talent insights.
-- Selected by a Canadian insurer to develop the blueprint for an enhanced
user experience - a key element of their competitive differentiation -
using TCS's Service Design methodologies.
-- Engaged by a leading UK based retailer as their cloud transformation
partner for their application modernization program leveraging the
Microsoft Azure Cloud.
-- Engaged by a leading American investment management company to deliver
out-of-the-box, disruptive methods of augmenting traditional channels
with automated self-service for superior customer experience.
-- Selected by a major Indian private bank for big data architecture and
design consulting for enabling next generation security analytics
capabilities.
-- Selected for 3 different Cyber Security engagements - an American
healthcare provider, a British stock exchange and an American insurance
firm - to provide comprehensive Infrastructure and Application
Vulnerability Management services.
-- Engaged by an Australian oil and gas company as the strategic partner
for their digital transformation journey to improve business stakeholder
value leveraging cloud technologies.
Research and Innovation:
-- TCS' Research and Innovation scientists received Second Prize at the
INFORMS RAS 2017 Problem Solving Competition at Houston, Texas. The
Institute for Operations Research and the Management Sciences (INFORMS)
is the largest society in the world for professionals in the field of
operations research, management science, and analytics.
-- The National Centre for Promotion of Employment for Disabled People
(NCPEDP) selected a TCS R&I Scientist for the 18th NCPEDP Mindtree Helen
Keller Awards 2017
-- TCS hosted the TCS SLUSH Experience 2017 as part of SLUSH - Europe's top
startup event in Helsinki. The event brought together a host of TCS
customers and startups in the areas of AI and Mixed Reality towards
driving collaborative innovation
As of December 31, 2017, the company has applied for 3617 patents, including 100 applied during the quarter. Till date the company has been granted 623 patents.
Human Resources:
Total employee strength at the end of Q3 stood at 390,880 on a consolidated basis, with gross addition of 12,534 employees and net addition of 1,667 employees during the quarter.
Localization initiatives continue to progress well, with 2,929 employees recruited outside India in Q3, bringing the total to 9,908 in FY 18, year to date.
Employee reskilling initiatives, focused on building digital competencies at scale using anywhere anytime access, are helping employees stay relevant at a time of technology change. The company continues to enjoy best in class employee retention rates. The IT Services attrition rate (LTM) fell by 0.2% in Q3 to 11.1%, while the total attrition rate (including BPS) fell to 11.9%.
The percentage of women in TCS rose further to 35.2% in Q3. The total number of nationalities represented in the workforce stood at 131.
"Our core philosophy of investing in our people and empowering them, and in creating employee-friendly workplaces, is resulting in an engaged, energized and empowered workforce that is central to our continued success," said Ajoy Mukherjee, Executive Vice President and Global Head, Human Resources.
Awards and Recognition:
Business Leadership: Partner:
- Recognized in the - CA Technologies 2017 Global
Forbes 2017 Global 2000 Marketing Innovation Partner of the
list as: Year
o One of the Top Regarded - Cloudera Global System
Companies Integrator of the Year
o One of the World's Best - Cisco IT Service Provider
Employers Partner of the Year for Cloud
Excellence
- Ranked No 1 in the
BT 500 - India's Most the Year
Valuable Companies -2017 - Perfecto 2017 Global Partner of
- Topped the BW 500
Real rankings in the
technology space -2017 Sustainability:
- Won the CII - Recognised as a Leader in
Industrial Intellectual Climate Change efforts by CDP (formerly
Property Award 2017 Carbon Disclosure Project)
- Won a Gold for the
TCS New York City Marathon
App in the Best in Biz
Awards 2017
o Recognised for Consumer
App of the Year for second
consecutive year
- Won two awards at
the Express IT Awards(R)
2017
o IT Innovation in large
enterprise category
o Mobility Solutions
category
- Ranked as Top
Employer in South Africa by
the Top Employers Institute
- Recognised as Top
2017 Recruiter in Canada by
the Canadian HR Reporter
- Won Canadian
National HR Award for 'Best
Recruitment Campaign'
- Named as one of the
'Best Companies to Work for
Women in India' by Working
Mother Media and Avtar
Group
- Won the 'WILL Best
Employers for Women' award
---------------------------
IFRS Financial Statements
Unaudited Condensed Consolidated Statements of Comprehensive Income
For the three-month periods ended December 31, 2016, September 30, 2017 and
December 31, 2017
(In millions of USD, except per share data)
Three-month Three-month Three-month
period ended period ended period ended
December 31, 2016 September 30, 2017 December 31, 2017
----------------- ------------------ -----------------
Revenue 4,387 4,739 4,787
------- ----- ----- -----
Cost of revenue 2,490 2,733 2,767
--------------- ----- ----- -----
Gross margin 1,897 2,006 2,020
------------ ----- ----- -----
SG & A expenses 756 818 815
--------------- --- --- ---
Operating
income 1,141 1,188 1,205
--------- ----- ----- -----
Other income
(expense), net 175 127 134
--------------- --- --- ---
Income before
income taxes 1,316 1,315 1,339
------------- ----- ----- -----
Income taxes 310 312 325
------------ --- --- ---
Income after
income taxes 1,006 1,003 1,014
------------- ----- ----- -----
Minority
interest 6 3 2
--------- --- --- ---
Net income 1,000 1,000 1,012
---------- ----- ----- -----
Earnings per
share in $0.51 0.52 0.53
------------ ----- ---- ----
Unaudited Condensed Consolidated Statements of Financial Position
As of March 31, 2017 and December 31, 2017
(In millions of USD)
As of March 31, 2017 As of December 31, 2017
-------------------- -----------------------
Assets
------
Property and equipment 1,811 1,828
---------------------- ----- -----
Intangible assets and
Goodwill 581 601
--------------------- --- ---
Accounts Receivable 3,498 3,819
------------------- ----- -----
Unbilled Revenues 825 991
----------------- --- ---
Investments 6,474 5,028
----------- ----- -----
Cash and Cash equivalents 555 761
------------------------- --- ---
Other current assets 1,119 1,016
-------------------- ----- -----
Other non-current assets 1,385 1,682
------------------------ ----- -----
Total Assets 16,248 15,726
------------ ------ ------
Shareholders' Funds 13,619 12,782
------------------- ------ ------
Long term borrowings 11 9
-------------------- --- ---
Short term borrowings 34 3
--------------------- --- ---
Other current liabilities 2,204 2,529
------------------------- ----- -----
Other non-current
liabilities 323 344
----------------- --- ---
Minority Interest 57 59
----------------- --- ---
Total Liabilities 16,248 15,726
----------------- ------ ------
About Tata Consultancy Services Ltd (TCS)
Tata Consultancy Services is an IT services, consulting and business solutions organization that partners with many of the world's largest businesses in their transformation journeys. TCS offers a consulting-led, Cognitive powered, integrated portfolio of IT, Business & Technology Services, and engineering. This is delivered through its unique Location Independent Agile delivery model, recognized as a benchmark of excellence in software development. A part of the Tata group, India's largest multinational business group, TCS has over 390,000 of the world's best-trained consultants in 46 countries. The company generated consolidated revenues of US $ 17.6 billion for year ended March 31, 2017 and is listed on the BSE (formerly Bombay Stock Exchange) and the NSE (National Stock Exchange) in India. For more information, visit us at www.tcs.com.
Follow TCS on Twitter at @TCS_News.
(1) Growth rates mentioned are in constant currency
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