Sify Technologies Limited (SIFY) Q1 2014 Earnings Report, Transcript and Summary

Greetings and welcome to the Sify Technologies' financial results for first quarter fiscal year 2013-2014. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christopher Chu with Grayling. Thank you. Mr. Chu, you may begin.

Thank you, operator. I would like to extend a warm welcome to all of our participants on behalf of Sify Technologies Limited. I am joined on the call today by Raju Vegesna, Chairman; Kamal Nath, Chief Executive Officer; and MP Vijay Kumar, Chief Financial Officer of Sify Technologies. Following our comments on the results, there will be an opportunity for questions. If you do not have a copy of our press release, please call us at 646-284-9400 and we will have one send to you. Alternatively, you may obtain a copy of the release at the Investor information section of the company’s corporate website at www.sifycorp.com. A replay of today’s call may be accessed by dialing in 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 earning release may include non-GAAP measures. Sifty’s results for the year are according to the International Financial Reporting Standard, or IFRS, and will differ somewhat materially from 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 on 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’d like to point out that certain statements contained in the earnings 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 protection 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 actual results to differ materially from those described in this forward-looking statement, 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 and Managing Director of Sify. Raju?

Good morning and thank you for joining us on the call. It has been an exceptional quarter for us and major endorsement of both our growth strategy and focus on the cost. We have always held the view that in a tightening market, clients would minimize their exposure to partner and vendor risks and the players who would benefit are the ones with the robust infrastructure, consistent performance and a sound delivery system. As we close the books on the last quarter, we are very happy that all our business verticals are gaining strength in their own right. In time and with the demand from the industry, we should see more cross-selling product opportunities driving further volume growth and stickiness with our clients. As a result of our reengineering interior solutions and service company we are now flexible and scalable enough to cater to both one-off event or long-term implementation, including those that require integrated solutions.

Ladies and gentlemen, thank you for your patience. Your teleconference will resume momentarily. (Operator Instructions) Mr. Vegesna you may resume.

Yes, so I want to, I think there is a, you know this is a direct indication of the confidence that the clients are placing in us and our solution basket. We are now increasingly being called in at the early stages of the project itself and being [asked] for economical and innovative solutions. This is a reflection and the flexibility of our solutions whether they are for small clients with a limited budgets or for long enterprises planning a complete or all of their existing infrastructure. To reflect on [technical difficulty] how we are doing currently, I would ask Kamal Naath, our CEO to expand on the business highlights of this quarter. Kamal?

Yeah. Thank you, Raju. And good morning to everyone. The last three quarters have been spent having the entire organization to Sify's (Inaudible) strategy and execution plan, with a very, clear focus on predictable performance of each business units and each revenue stream. We are happy that this quarter has reflected the outcome of the strategy as well as the execution plan. Revenue, new order book and profitability and all these three fronts we have exceeded our targets which is a very positive start to begin. Our integrated services approach has resulted in to significant growth in multi-tower engagement with existing and new customers, increase in average deal size, and increase in revenue from our existing customer base. This approach has also opened up new segments for us in the market. The highlight of the quarter is a winning of a multi-services multi-technology integration project across more than 2,500 locations from one of the India's largest non-banking financial company. We will now share with you all the individual business unit highlights for the quarter. We will start with telecom services. Domestic data services has grown by 29% over the same quarter last year. Wholesale voice services grew by 34% over the same quarter last year. Our international data services has also grown by more than 25% over the same quarter last year. As far as our data centric business is concerned, we have added additional capacity by over 10 Megawatts Tier III Data Center facility at Noida. This datacenter has received design certification with Uptime Institute and the first phase is now open for business. We have already signed now six new customers this quarter. One of them being a prominent public sector bank. One of the largest international telco players has expanded and consolidated their business with us in…

Thank you, Kamal and good morning, everyone. I will now provide detail financial results for this first quarter of financial '13, '14. Revenue for the quarter ended 30 June, 2013 was INR2628 million, as against of INR2316 million last quarter, up 13%. Compared to the same quarter last year, our revenue has increased by 33%. EBITDA for the year was INR465 million as compared to INR229 million in the previous quarter, a increase of 104%. Compared to the same quarter last year our EBITDA has increased by 151%. Net profit for the quarter was INR163 million as against a net loss of INR15 million for the previous quarter. Capital expenditure during the quarter was INR176 million. Cash balance at the end of the quarter was INR1085 million. While we were pleased with the excellent performance for the quarter, we recognized that the overall environment remains challenging. Therefore we will continue to focus on monetizing existing facilities and reach better dividends on our part infrastructure investments. We are already seeing some returns on our investments in under-sea cables and we look forward to new revenues from our new Data center assets. EBITDA continues to be in good shape and growing. Our operational cost are on strict diet and focus on operating margins will remain our high priority, so that we are able to benefit from the consolidation. The larger picture is that or consistent strategy from the leadership has allowed Sify to outperform many of its competitors, but we must remain cautious to maintain the highest possible asset utilization and lowest possible operating cost, to ensure that these gains can be translated into good bottom line results. I'll hand over to our chairman for its closing remarks, Chairman.

Thank you, Vijay. [Friends], as my colleague explained in detail, our focus is now on delivering services across the entire IT ecosystem, be it an infrastructure or a platform or a software layer, we are confident that in a challenging market, we hit such a high notes, we will be able to (Inaudible) better value as the market turns more prior ago. Thank you for joining on this call. I will now hand over to the operator for questions.

(Operator Instructions) Our first question comes from the line of [Mohan Raju with CP Technologies] please state your question.

Good morning, everybody. Yeah this is, Mohan, am I audible?

Yes, you are audible.

First of all, congratulations to Mr. Raju, Kamal and Vijay for a fantastic quarter. Good to see Sify Technologies doing exceptionally well in the first quarter with INR163 million net profit. This question is directed towards Mr. Kamal Nath who highlighted about various verticals and the company's alignment gearing up for the future growth. So what are the other fundamentals that the company will be focusing on to continue this exceptional growth in the challenging market conditions. We'd like to hear the other fundamentals that the company would be focusing on to keep the growth consistent and grow for the better.

Yes, yes and I'll be very happy to respond to you Mr. Raju. See fundamentally the biggest change, which we have been able to bring in the last nine months is the integrated approach so earlier as you know Sify always had the telecomm business, the Data Center business, the Applications business, the Managed Services and Cloud business. But we were mostly working on single track projects with our clients. So for example, if a client was spending say $10, we were only getting $1 or $2 out of that. But currently with an integrated approach, be it a technology integration track or a services led track, we are able to get, say $6 to $7 out of the same dollars, wherever we are the opportunity at the right time. So what I actually mean is our head room to grow is inbuilt. It is our ability to address more and more integrated projects and the IT services layer, rather than on a single track either, rather than a single track infrastructure layer, which will be our main mantra of success going forward and one of the many reasons where I had mentioned about few deals in my session was predominantly that approach.

Okay.

See, Mohan to add to that, see we are in a unique position having one of the biggest MPLS networks in the country and also having huge data centers that puts us not just in either a telecom player or just IT player itself, we are looking at [ITT] player for both. So on top of these two key infrastructures, and if you look at cloud, a cloud, a cloud means, it's to a either a data center or a telecom it should be combined. So that is the way it puts is -- Sify in a unique position compared to our competition in India.

Indeed, indeed. Fantastic, so I think congratulations to the entire team. Sify has been doing well in the selling [region] markets, where a few other players are in deep trouble. I would like to see Sify doing really well as Mr. Vijay mentioned, 13% quarter-on-quarter growth in the next turnover and also the profit after tax. So congratulations to the team. I would like to see the results and we would like to see Sify achieving new leaps and bounds in the quarters to come.

Thank you.

Thank you.

(Operator Instructions) We have no further questions at this time. I will now turn the floor back over to the management team for closing remarks.

Thank you everyone for joining us on the call. And we look forward to interacting with you all through the new financial year. Thank you and good bye.

Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time. And we thank you for your participation.