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Krishnan Thiagarajan

AIDED by a sharp drop in selling, general and administrative expenses, i-flex solutions recorded a 32 per cent growth in post-tax earnings (prior to accounting changes) for the quarter ended March 31, 2004 vis-à-vis the third quarter. Over the same period, the revenues of the company have remained flat, compared to a 11 per cent growth in the immediately preceding quarter.

The key highlights of the performance on a sequential basis are:

Products segment: This core segment accounted for nearly 60 per cent of the operating revenues of i-flex. The gross margin (Product revenues- Direct Cost of revenues) declined by 4.6 percentage points to 64.8 per cent. But in contrast, the operating profit margin improved by nearly 7 percentage points to 45.5 per cent. This improvement was attributable largely to a drop in the selling, general and administrative expense (as a percentage of product revenues) to nearly 20 per cent in the latest quarter, from 30 per cent in the third quarter.

Order backlog: The order book for unbilled licence fee has increased to $40.5 million, up from $35.3 million in the previous quarter. In the latest quarter, i-flex has added nearly 30 customers, which include 17 customers added through the acquisition of Super Solutions Corporation during the course of this year. This customer addition has helped in a robust addition to order book, which includes the order pipeline at the beginning and end of the quarter. At $14.7 million, this addition to order book in the latest quarter was higher than $10.7 million and $9.6 million in the two previous quarters.

Services segment: The performance of this segment which had shown improvement in the third quarter of 2003-04, has slipped in the latest quarter. Both the gross and operating profit margins have declined on a sequential basis. Second, the dependence on Citigroup and its entities at 70 per cent of service revenues continues to be high and offshore billing rates have also dropped during this period.

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