Sify Technologies Limited
Q1 2018 Earnings Call Transcript

Published: 25 Jul 2018

[Operator:]

Welcome to the Sify Technologies Financial Results for First Quarter and Fiscal Year 2018 through 2019. [Operator Instructions]. It is now my pleasure to introduce your host Shiwei Yin, Investor Relations for Sify Technologies. Thank you Mr. Yin you may begin.

[Shiwei Yin:]

Thank you, Devin. I would like to extend a warm welcome to all of our participants on behalf of Sify Technologies Ltd. I'm joined on the call today by Raju Vegesna, Chairman; Kamal Nath, Chief Executive Officer; and M.P. Vijay Kumar, Chief Financial Officer of Sify Technologies. Following our comments on the results, there will be an opportunity for questions. A replay of today's call may be accessed by dialing on the numbers provided in the press release or by accessing the webcast in the Investor Information section of the Sify corporate website. Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. Sify's results for the year are according to the International Financial Reporting Standards or IFRS, and will differ somewhat from the GAAP announcements made in previous years. A presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and a reconciliation of such non-GAAP measures and of the differences between such non-GAAP measures and the most comparable financial measures calculated and presented in accordance with GAAP will be made available on Sify's website. Before we continue, I would like to point out that certain statements contained in the release and on this conference call are forward-looking statements rather than historical facts, and are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the company seeks protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time-to-time in the company's SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause the actual results to differ materially from those described in the forward-looking statements, but are not intended to represent a complete list of all risks and uncertainties inherent to the company's business. I would now like to introduce Mr. Raju Vegesna, Chairman of Sify Technologies Limited. Sir?

[Raju Vegesna:]

Thank you, Shiwei. Good morning and thank you for joining us on the call. We are at the point where domestic enterprise in our Indian market are utilizing multiple services from our portfolio to navigate the Indian IT landscape. Global MNCs are viewing us as a reliable partner to commission their India projects. The profile of our client engagement is also shifting through border implementations across multiple services, translating into more strategic relationships. Let me bring in Kamal our CEO to expand on some of the business highlights for the past quarter. Thank you. Kamal?

[Kamal Nath:]

Yes. Thank you, Raju. Our sustained focus on our cloud at the core service lines along with investments being made around the model is adding a distinct character to our revenue, profitability and new order book. Clients are seeing the merits in our vertical based business strategy and the flexibility to opt for either a subscription or a build model. Our positioning as a digital transformation partner, our comprehensive set of services and demonstrated speed to market are key differentiators that will propel our growth. You will see evidence of the same in our detailed press release now live on our website. Let me now expand on the key business highlights and the growth drivers for Sify. Revenue from telecom centric services group by 18% over the same quarter last year. Segment wise revenue from data and managed services grew 27% while revenue from the wholesale voice business grew by 2% over the same quarter last year. The telecom centric services unit added 170 new customers in the quarter. Revenue from data center centric IT services fell by 14% during the same quarter last year. Segment wise revenue from data center services and cloud and managed services grew by 28% while the revenue from technology integration services and application integration services fell by 41% due to customer specific projects under implementation. Data center centric IT services added 87 new customers in the quarter. Let me now touch upon the growth drivers and the new investments made and initiatives been driven by us in that direction. Digital transformation in India market continues to accelerate because of government programs as well as private initiatives aimed towards citizens of consumer experience. In-line with this trend our investments and initiatives are focused on creating infrastructure on services which has clouded the core as a central theme. These investments and initiatives cut across data center, cloud, network and applications. We have embarked on capital expansion on our DCs to cater to demands for a mix of customers from telecom and [indiscernible] segments including upcoming payment banks, ecommerce players and government and public sectors. We review to catering to the margin hyper converse cloud platform in private cloud environment, we have invested in hosting and managed services on [indiscernible] to be run from our data centers. The platform also provides direct connectivity to [indiscernible] cloud to express cloud to hybrid cloud environment. We have also launched Oracle's Exadata as a service hosted from our private cloud incorporating all the benefits of cloud with managed services. We have established steady partnership with Interxion [ph] one of the global leaders in hyper conversion infrastructure to enable customers to migrate from legacy platforms to hyper converse infrastructure either in a hosted on an on-premise environment. To support small and medium segment customers in need of content delivery we have augmented our CDN portfolio by expanding our support for the AWS cloud front. We are investing to upgrade our network to 400G ready network to cater to upcoming demand from multiple industry verticals for their data heavy network requirements. The software defined wide area network, a network securities services portfolio will also complement this upgrade. The software defined wide area network, a network security services portfolio will also complement this upgrade. That was about our business let me bring in Vijay, our CFO to elaborate on the financial highlights for the past quarter. Vijay?

[Vijay Kumar:]

Thank you, Kamal. Good morning everyone. I will now present the financial performance for the first quarter of financial year 2018-19. Revenue for the quarter was INR4683 million, an increase of 3% over the same quarter last year. EBITDA for the quarter was INR741 million, an increase of 6% over the same quarter last year. Net profit for the quarter was INR201 million, an increase of 16% over the same quarter last year. Capital expenditure during the quarter was INR1001 million and cash balance as of the end of the quarter was INR1710 million. Our business is supported with our continued investment in infrastructure, tools and people to augment our growing portfolio of services. While we continue to exert greater fiscal discipline, our mix of data center and network value added services help broaden our revenue streams. I will now hand you over to our Chairman for his closing remarks. Chairman?

[Raju Vegesna:]

Thank you, Vijay. The profile of our clients has changed over the years from subscribing for individual services now we are being called on to take them through the entire IT transformation. This is the evidence of the value we are creating for our customers. It is now time to enhance that value and thank you for joining us on this call. I will now hand over to the Operator for questions.

[Operator:]

[Operator Instructions]. Our first question comes from the line of Greg Burns with Sidoti. Please proceed with your question.

[Greg Burns:]

Can you please just give us a little more color on whether technology integration services and AIS versus were down so much in the quarter and do you expect those businesses to show growth for this year? Thank you.

[Raju Vegesna:]

These two businesses involved to a large extent customer specific projects and there were projects for which orders have been won in the past and they were under implementation. For customer specific reasons the implementation has got delayed beyond the quarter and they will get converted at revenue. Between the last year and the current year there isn't unlikely to be any degrowth.

[Greg Burns:]

Okay. And do you expect those like is this second quarter do you expect them to be rolled out in the second quarter, third quarter like what's the timing on?

[Raju Vegesna:]

It should be between the second and third quarter.

[Greg Burns:]

Okay. What are your -- how much CapEx are you expecting for the full year this year?

[Raju Vegesna:]

The capital expenditure for this year as far as the projects which are already underway is concerned, the committed CapEx is about $30 million but we continue to evaluate additional opportunities for expansion and we will keep you informed as we take those decisions.

[Greg Burns:]

Okay, and then lastly can you talk about the wireless aspect of your network, do you own any spectrum? Is there any risk that you lose access to the spectrum you're using and do you have enough access to spectrum to continue to grow the business?

[Raju Vegesna:]

We operate on a combination of both licensed and open spectrum and there is no change in this expected in the future.

[Greg Burns:]

Okay. So you feel like you have access to lot of spectrum?

[Raju Vegesna:]

Yes. And there is good amount of growth happening through fiber on the ground and we have our metro expansion plans which have been executed over the last couple of years. So that’s also contributing to the growth of our data and managed services.

[Operator:]

[Operator Instructions]. Our next question is a follow-up question from the line of Greg Burns. Please proceed with your question.

[Greg Burns:]

Can you talk about your data centers, how much of your existing footprint is currently concentrated for and what are your plans in terms of new data centers online this year? Thank you.

[Raju Vegesna:]

As far as the existing facilities are concerned 5 out of the 6 large facilities are fully sold. The sixth one is getting monetized as per the plan and there is additional capacity being created, the $30 million which I mentioned to you, a new capacity is getting created now for which we have a committed investment and there are good opportunities for growth in this business and we will invest as we go along.

[Greg Burns:]

Okay and looking at your application integration services, what percent of that business is iTest?

[Raju Vegesna:]

In the application integration services iTest constitutes about 60% of the total application and integration services business.

[Greg Burns:]

Okay. And thinking about I guess the growth drivers of iTest and basically what should we be looking for in terms of continued growth of iTest and what are the triggers domestically get more business?

[Raju Vegesna:]

Yes. On the application and integration services we have two streams, one is the home grown applications which includes this iTest and we have integration services on the industry standard applications. So the growth for the future will come from both of these streams particularly on the industry standard applications where there is significant action happening where people are moving those applications from on-premise to the cloud and given that we are in established infrastructure services player in the country and we have demonstrated experience of moving applications on to the cloud, good amount of growth in the future should come through that stream as well. While iTest will grow the other part of application [indiscernible] services should also start doing well in future without me sounding to be forward-looking since you asked this specific question for understanding I'm responding on it.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

[Raju Vegesna:]

Thank you everyone for joining us on the call and we are looking forward to interacting with you through the coming years. Have a good day. Thank you.

[Operator:]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.