Sify Technologies Limited (SIFY) Q3 2017 Earnings Report, Transcript and Summary

Greetings and welcome to the Sify financial results call for the third quarter of fiscal year 2016-2017. At this time, all participants are in a listen-only mode. A brief 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, Mr. Shiwei Yin, Investor Relations for Sify. Thank you, sir. You may begin.

Thank you, Michelle. I would like to extend a warm welcome to all of our participants on behalf of Sify Technologies Limited. I'm joining 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. If you do not have a copy of our press release, please call me at 646-824-2857 and we can have one sent to you. Alternatively, you may obtain a copy of the release at the Investor Information section on the Company's corporate Web-site 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 Web-site. 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 representation 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 Web-site. Before we continue, I would 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 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 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. Raju?

Thank you, Shiwei. Good morning. Thank you, everyone. Wish you all a very happy new year. Now I thank you for joining on this call. With the Government taking the lead on automation, several projects are now being fast-tracked. As Sify being among the earliest evangelists of digital transformation, we are being called upon either in for their operational or consulting roles. This is also marking our movement up in the value chain for the knowledge-based services. To reflect on our quarter performance, I will now ask Kamal, our CEO, to expand on some of the business highlights. Kamal?

Thank you, Raju. In quarter three, we have been able to continue the positive momentum from previous quarters, with healthy order book, revenue and profitability. Our experience over the years and track record in successful delivery of integrated ICT projects leading to foundation of digital transformation are being referenced by our new clients who are in similar decision zones. Our partnership portfolio is also being augmented with new-age technology partners to strengthen our vertical solutions and offerings. I'll now hand over to you, Vijay, to cover the financial highlights.

Thank you, Kamal. A very good morning to all and wish you all a very happy new year. I will now provide detailed financial results for the third quarter of financial year 2016-2017. Revenue for the quarter was INR 4,635 million, an increase of 20% over the same quarter last year. EBITDA for the quarter was INR 701 million, an increase of 15% over the same quarter last year. Net profit for the quarter was INR 176 million, an increase of over 54% over the same quarter last year. CapEx during the quarter was INR 510.87 million. The operating performance continues to improve quarter on quarter, enabling us to make significant investments in capacity building for the future, while still improving our bottom-line. We have tightened our investment criteria, with the majority of our new infrastructure investments clearly focused on the convergent opportunities in data center and cloud enablement, which we believe will be at the center of IT growth in India in the coming years. In the light of the recent communication from NASDAQ, the Company is evaluating options and is confident that in due course the market price will reflect both the present intrinsic value and the growth potential of the Company. Cash balance at the end of the quarter was INR 2,055.40 million. I will now hand over to our Chairman for his closing remarks, but before I hand over, Kamal, would you like to read out the business highlights too?

Yes, thank you, Vijay. So I will start with the Telecom Services business. The data and network managed services revenue grew by 11% over the same quarter last year. Revenue for the quarter was negatively impacted by a one-off adjustment pertaining to the impact of the cyclone in Chennai. The business added 265 new customers in the quarter. During the quarter, Sify expanded operations to the neighbourhood SAARC countries and recorded its first win in the region. Key wins include a large South based public sector bank and a retail fashion chain. During the quarter, Sify launched a managed Wi-Fi offering that enables large distributed enterprises to deploy a secure, scalable wireless LAN solution across their network. Key wins in this segment include a deployment for a large offshore center for a U.S. multinational and a manufacturing company. Data Center Services business unit; the DC Services business continued its growth trend with 40% revenue growth over the same quarter last year. The business added 12 new customers in this quarter. Among those who signed up were an online search major, a private insurance major, one of India's largest private banks and a heavy engineering group. Sify continued to invest in DC capacity expansion across all strategic regions, Mumbai, Delhi and Bangalore. As far as Cloud and Managed Services is concerned, the business recorded negative 6% revenue growth over same quarter last year. Sify added 14 new customers in this quarter. Sify won some marque projects and customers, including a health insurance major, a leading infrastructure finance company, one of India's leading broking houses, a state government's research and training division and another state government's development body. Sify launched new enterprise-centric services around the AWS stack with direct connect capabilities providing near zero latency for Sify-hosted customers. For the Web Acceleration and Security portfolio, Sify added four clients, one large global fast food delivery chain for accelerating and securing their online Web order management system as well as one of India's largest mobile-wallet companies. The business also concluded two large contracts from Government of India to accelerate their online engagement media. As far as Application Integration Services business unit is concerned, the revenue grew by 64% over the same quarter last year. Sify has signed up 12 new customers for the quarter. A pan-India consumer healthcare company has signed up for dealer management services. Four reputed customers including a large PSU bank have signed up for the Microsoft Azure business. The business has also signed up three new customers for talent management. In all, the business has enabled over 0.5 million online examinations just this quarter. Seven prestigious brands have signed up with Sify for Managed SAP Infrastructure services and Sify eLearning won the prestigious Brandon Hall Silver Award for excellence in eLearning. This is Sify's 12th Brandon Hall Award. Lastly, the Technology Integration Services; the revenue for this business has grown 45% over same quarter last year. Sify added 22 new clients across data centre IT, network integration, security and collaboration services. A large public sector insurance company has contracted with Sify for data centre infrastructure refresh to deploy and provide infra integration services for DC network, IT infra compute and storage, and security services. Another large public sector insurance company has contracted with Sify to refresh Wide Area Network infrastructure across India. During the quarter, Sify successfully handed over projects for data center transformation to two private insurance companies, deployed IT infrastructure and network security and collaboration services for a state government department, a Wide Area Network rollout across public sector insurance company, and security rollout for a public sector [oil] [ph] company. The handover of these projects is a reflection of Sify's commitment to deliver large complex transformational projects on time. I'll now hand over to you, Raju, for the closing remarks.

Thank you, Kamal. A lot of our projects now are becoming the proof of our capability for effecting digital transformation. It is this level that I would like to see Sify mature to. Also, towards the end of the last quarter, we transitioned an [indiscernible] annual government project to an online platform under the Digital India forum, thus demonstrating the productivity enablement of IT. With the Smart City projects picking up pace, we should be able to position this future to more markets. You will be hearing some more from us on this. Thank you for joining on this call. Now I will hand over to the operator for any questions. Operator?

Thank you for your time, and again, wish you have a great year ahead. Have a great day. Thank you. Bye.