Luxoft

Prospectus Summary

Overview

We are a leading provider of software development services and innovative IT solutions to a global client base consisting primarily of large multinational corporations. Our services consist of core and mission critical software development and support, product engineering and testing, and technology consulting. Our solutions are based on our proprietary products and platforms that directly impact our clients' business outcomes and efficiently deliver continuous innovation. Through our services and solutions, we enable our clients to improve their competitive position by increasing efficiency, shortening time-to-market, and enhancing their end user experience. We have developed a reputation and track record of delivering consistently high quality service that has enabled us to establish long-term strategic relationships with many of our clients, translating into significant revenue growth and recurring business.

We utilize our deep industry- and domain-specific expertise to develop innovative high quality software for our clients' core products, processes and applications. We focus on six industry verticals that have significant and growing demand for IT services and consider innovative technology to be a top priority in achieving their business goals: financial services; travel and aviation; technology; telecom; automotive and transport; and energy. Across these industry verticals, we utilize a wide variety of modern technologies and have developed expertise in a number of domain practices, the most important of which are supported by our Centers of Expertise ("COEs"): big data; open source; mobile; Agile; and user interface, user experience and human machine interface ("UI/UX/HMI"). Each COE focuses on the research and development of its respective domain practice and has a dedicated pool of resources, including its own budget, time and IT professionals. We believe the combination of our broad range of services and solutions, and our deep industry and domain expertise, allows us to work concurrently on multiple mission-critical engagements for a single client, leaving us well positioned to increase our share of our clients' core technology budgets.

We serve large multinational corporations primarily in Western Europe and North America that rely on our IT solutions and software development capabilities for many of their mission critical systems. The scope of our services ranges from handling standard outsourcing client-directed engagements to engaging in managed delivery and transformational engagements, in which we assume full control of the project team and manage all facets of the execution. For the year ended March 31, 2013, a significant portion of our sales was to Fortune Global 500 companies, including Deutsche Bank, UBS, Boeing, Harman, Avaya and AMD. During the same period, we derived 45.6% of our sales from clients located in Europe, 42.0% from clients in North America, and 12.4% from clients in other geographies. Seven out of our top ten clients have been with us for five or more years and, in the three fiscal years ended March 31, 2013, the majority of our new clients were referred to us.

We operate through a global dedicated delivery model. We provide our services and deliver our solutions from fourteen delivery centers located primarily in CEE, including in Russia, Ukraine, Romania and Poland, where we have access to a significant pool of highly educated IT professionals who possess technical expertise and business domain knowledge. We also have delivery centers in the UK, U.S. and Vietnam.

We believe that our strong brand, corporate culture, and our focus on efficient innovation and our client's business goals and outcomes, allow us to successfully recruit and retain highly qualified IT engineers and developers ("IT professionals"). As of March 31, 2013, we had 5,846 personnel of whom 4,927 were IT professionals. Approximately 80% of our IT professionals hold Master's degrees (or Master's degree equivalents in certain jurisdictions) or higher, and approximately 85% of our personnel have more than five years of industry experience.

Our work has earned us important client recognitions, including from our large multinational clients such as Deutsche Bank, which formally recognized us this year as their strategic vendor partner in Global Technology and awarded us its Relationship Excellence Award for our "sustained and structured approach in nurturing and building a new basis for doing business to deliver superior outcomes." Several leading technology industry research firms have recognized our work. In particular, in its January 2013 report "Mobile Feast Or Beggar's Banquet," Forrester Research, Inc. listed us with IBM, Infosys and uTest as a mobile testing tool outsourcing vendor. In its December 2012 report "Innovation Insight: The Connected Vehicle Will Dominate Automotive and Mobility Innovations," Gartner, Inc. named us one of the four key operating system, software and application developers, with such developers as Google and Microsoft. We were also awarded the "IT Outsourcing Project of the Year" in 2012 by the European Outsourcing Association ("EOA") for our work with Hotwire Inc. For additional information about the awards described in this summary, please see "Business—Sales and marketing".

We have experienced significant growth over the last three years. Our sales have grown from $198.4 million in the year ended March 31, 2011 to $314.6 million in the year ended March 31, 2013, representing a compound annual growth rate ("CAGR") of 25.9%. Our net income has grown from $25.9 million in the year ended March 31, 2011 to $37.5 million in the year ended March 31, 2013, representing a CAGR of 20.4%. During the fiscal year ended March 31, 2013 we added 52 new clients including Delphi and Brookfield.

Competitive strengths

We believe the following strengths differentiate us from our competitors:

Deep vertical expertise with focus on innovative service offerings and solutions. We currently focus on six industry verticals that are technology- and data-intensive, that, we believe, present a large and growing market opportunity. To enhance our expertise, we recruit highly skilled IT professionals with significant technical expertise and understanding of industry-specific business operations and issues. We have also built substantive practice areas within our verticals to address our clients' most pressing problems, such as risk management, reference data, and fixed income, currencies and commodities ("FICC"). We invest in research and development to create cross-functional and vertical-specific proprietary products and platforms that help us deliver our services rapidly and cost-effectively. Examples of our solutions include an open-source car connectivity technology, called SmartPhoneLink, which we have developed with Ford; mobile financial information dashboards for risk management; smart-grid demand management systems; and open source-based test automation frameworks for network equipment.

Strong domain practices anchored by COEs. Over the past several years, we have developed expertise in several domain practices, including five key domain practices that we believe to be critical to the ongoing success of our clients: big data, open source, mobile, Agile, and UI/UX/HMI. We have established COEs specifically dedicated to the research and development of each of these key domain practices. We believe that our domain practice knowledge, applied within the industry vertical context of our clients' business needs, provides us with a strong competitive advantage.

Long-term relationships with multinational clients. We experience very low client turnover. Our largest clients consist primarily of Fortune Global 500 companies such as Deutsche Bank, UBS, Boeing, Harman and Avaya. Seven out of our top ten clients have been with us for five or more years. The dedicated teams of IT professionals we assign to each client, combined with a personnel attrition rate that we believe to be lower than many other industry players, results in the continuity of personnel and, importantly, the retention of know-how and strengthening of client relationships.

Highly educated, experienced and loyal workforce. We are committed to recruiting, developing and maintaining a work force of high quality IT professionals. We have invested significant resources to grow from 1,669 IT professionals as of March 31, 2008 to 4,927 technically sophisticated IT professionals as of March 31, 2013. Approximately 80% of our IT professionals hold Master's degrees or higher (or Master's degree equivalents in certain jurisdictions) with a focus on science and engineering, and 85% of our personnel have more than five years of IT industry experience. Furthermore, we utilize the strong ties we have built with the leading local colleges and universities in CEE and Vietnam, as well as our existing reputation as an employer of choice, to continue attracting and retaining highly educated IT professionals.

Global delivery platform. Our secure delivery centers in Russia, Ukraine, Romania, Poland, the UK, U.S. and Vietnam allow us to provide managed delivery and value added services for software development and innovative IT solutions. We distribute our high complexity work to client-facing industry specialists in tier-one locations, such as Kiev, Ukraine; Moscow, Russia; and Bucharest, Romania, and our lower complexity work to lower-cost, industry generalists in tier-two locations, such as Omsk, Russia; Dnipropetrovsk, Ukraine; and Ho Chi Minh City, Vietnam. This allows us to effectively allocate work based on resource and talent requirements, which leads to increased utilization, achieves scalability, and mitigates certain economic risks that might affect any single geography. We believe that our global delivery model allows us to better serve our clients, providing us with agility, logistical and time zone convenience and the cost advantage of having fewer dedicated on-site personnel. In our opinion, serving our clients by means of this model, combined with the mission-critical nature of our engagements and the similarities in engineering cultures between CEE and our primary revenue-generating geographies, reduces the risk that our clients will switch vendors and drives recurring revenue.

Strong and experienced management team. We benefit from the effective leadership of an international management team with diverse backgrounds and extensive experience in IT services. Each member of our senior management team has on average more than 15 years of industry experience, and has extensive experience in working both inside and outside of CEE for large and multinational corporations. During the recessionary period between March 31, 2009 and March 31, 2010, we increased our sales by 16.4%, which we believe substantially exceeded the revenue growth of most of our publicly listed peers during the same period.

Strategies

Our goal is to become the provider of choice for core systems and mission critical software that enhance business outcomes and help enterprises within our industry verticals remain competitive. We intend to expand our offerings to existing clients and to win business from new clients by pursuing the following:

Develop new capabilities and service offerings within our verticals. We intend to use our global dedicated delivery model, vertically aligned client-facing teams and innovative industry-specific products and platforms to increase our share of high value engagements and diversify across our existing clients' divisions and departments. For example, in financial services, we seek to expand beyond services for investment banking and sales and trading, and increasingly target new sources of revenues. We also seek to expand our service offerings by taking over our clients' captive IT operations, which also benefits clients by reducing the total cost of ownership. We will continue to proactively invest in and develop our innovative proprietary solutions around emerging technologies, supporting trends and critical client needs in our industry verticals.

Leverage domain practice expertise to win new business. We intend to win new business by leveraging the domain practice expertise we have developed in each of our five COEs, and to developing new technical expertise. We plan to use the products and platforms we have developed within our domain practices to benefit existing clients, and as pre-sale tools to demonstrate our capabilities to new clients.

Continue to expand our managed delivery model. In an effort to better serve our clients' needs, we are transitioning a significant portion of our engagements to managed delivery. We believe managed delivery provides meaningful advantages for both our clients and our operations. Our aim is to increase our ownership of client projects to the point of providing transformational engagements and those within which we substantially or fully replace a portion of our clients' IT departments.

Continue to develop our proprietary products and platforms. We will continue to develop our existing proprietary products and platforms to further enhance their capabilities and to create new products and platforms. For example, our platform iviLink can be amplified to accommodate a rich application environment for branded software developed by or for specific original equipment manufacturers ("OEMs"), and our product Horizon can be further developed by adding calculation, reference data and analytics tools. These proprietary assets also will help us target aspects of our clients' software budgets that were not previously accessible to us, and will position us well for growth.

Recent Developments

Joint Venture

We have recently commenced preliminary discussions with one of our major clients, who is a tier-one supplier for the automotive industry, to explore increased cooperation in the field of application development and technology services in the automotive and transport vertical. While these discussions are in the early stages and the parties have not entered into any agreement, letter of intent or similar understanding, one of the possible structures being considered involves the formation of a joint venture ("JV") into which each party will contribute all of its applicable aftermarket, application and technology services-related contracts with OEMs and all applicable technology solutions. In addition, our client would contribute its globally recognized brand and we would contribute our engineering services, including personnel. The proposed JV would serve automotive OEMs, dealers, and direct consumers. It would combine the service expertise and innovative technologies of both companies in such areas as head unit servicing, navigation systems and services, cloud solutions, big data and engineering services that would be executed through the resources contributed to the JV by us. Our sales generated by this client account for a substantial majority of the total sales generated by our automotive and transport vertical, with the remainder represented by one OEM and several tier-one suppliers, which together comprised less than 1.0% of our total sales in the year ending March 31, 2013. While increased cooperation between the client and us may hamper our ability to pursue contracts with other competing tier-one suppliers, our ultimate goal is to capitalize on and monetize the synergies between our company and the client and generate greater revenues and profitability than each party generates separately. At present, the client and we are assessing the commercial viability of this JV and considering other possible forms of joint cooperation; however, we can provide no assurance that the JV will be established or that the client and we will enter into any other form of joint cooperation.

Dividend Declaration

On April 30, 2013, we declared a $30.5 million dividend representing $28.00 per share to our shareholders. See "Dividend Policy."

Risk factors

Investing in our Class A ordinary shares involves risks. You should carefully consider the risks described in "Risk Factors" before making a decision to invest in our Class A ordinary shares. If any of these risks actually occurs, our business, financial condition or results of operations will likely be materially adversely affected. In such case, the trading price of our Class A ordinary shares would likely decline, and you may lose all or part of your investment. The following is a summary of some of the principal risks we face:

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We generate a significant portion of our sales of services, and anticipate deriving a large portion of our sales of products, from clients primarily located in the U.S. and Europe. Worsening economic conditions or factors that negatively affect the economic health of the U.S. or Europe could reduce our sales of services and thus adversely affect our results of operations.


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Rapid growth may strain our limited resources, and a failure to manage this growth could have a material adverse effect on the quality of our services and client support.


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We generate a significant portion of our sales of services, and anticipate deriving a large portion of our sales of products, from a limited number of clients and any significant loss of business from these clients or failure by such clients to pay for our services could materially adversely affect our results of operations.


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We derive a large portion of our sales of services, and expect that we will derive a large portion of our sales of products, from clients who operate in a limited number of industries.


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We operate in a highly competitive environment and may not be able to compete successfully.


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The significant share ownership position of IBS Group will limit your ability to influence corporate matters.

Our principal shareholder

Our principal shareholder is IBS Group Holding Ltd. ("IBS Group"), a leading software development and information technology services provider in Eastern Europe founded in 1992. IBS Group's global depositary receipts are listed on the Frankfurt Stock Exchange. Following the completion of this offering, IBS Group will beneficially own % of our outstanding Class B ordinary shares and will have control over % of our voting power.

Potential separation from IBS Group

IBS Group has advised us that it may consider divesting all or a portion of its ownership interest in us through an exchange offer or other form of distribution. IBS Group has advised us that it has not made an affirmative decision to pursue any such transactions and the timing of any such transactions is undetermined, however, no such transaction will be consummated during the 365-day period following the date of this prospectus. There are many factors that could affect IBS Group's decision to pursue such a transaction, and it may never pursue such a transaction at all.

Our status as a controlled company

We are a "controlled company" within the meaning of the corporate governance rules of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements. See "Risk Factors—The significant share ownership position of IBS Group will limit your ability to influence corporate matters."

Implications of being an emerging growth company

As a company with less than $1.0 billion in annual gross revenues during our last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include an exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting. The JOBS Act also provides that an emerging growth company need not comply with any new or revised financial accounting standard until such date that a non-reporting company is required to comply with such new or revised accounting standard. Furthermore, we are not required to present selected financial information or any management's discussion herein for any period prior to the earliest audited period presented in connection with this prospectus. We have irrevocably elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. As a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-"emerging growth companies." See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical accounting policies." We will remain an emerging growth company until the earliest of (1) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion; (2) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (4) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, or the Exchange Act. When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. If we choose to take advantage of any of these reduced reporting burdens, the information that we provide shareholders may be different than you might get from other public companies.

Corporate information

Including our predecessors, we have been in business since March 2000. Luxoft Holding, Inc was incorporated as a company limited by shares under the laws of the British Virgin Islands on March 7, 2006.