Sify Technologies Limited (SIFY) Q2 2018 Earnings Report, Transcript and Summary

Greetings and welcome to the Sify Technologies Financial Results for Second Quarter of Fiscal Year 2017-2018. 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 Shiwei Yin, Investor Relations for Sify Technologies. Thank you. 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 joined on the call today by Raju Vegesna, Chairman; Kamal Nath, CEO; and M.P. Vijay Kumar, CFO 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 or e-mail me, I will send to you. Alternatively, you may obtain a copy of the release at 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 today’s call and in the earnings release may include non-GAAP measures. Sify’s results for the quarter are according to the International Financial Reporting Standards or IFRS and it will differ somewhat from the GAAP announcements made in previous years. A presentation of the most and 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 earnings release and on today’s 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 everyone. Thank you for joining on the call. We have done well in this quarter despite the challenges faced by the most Indian businesses due to the transition to the new tax regime called GST. This reinforces our belief that Indian IT market is on the upswing and the digital transformation is happening. And we remain determined to exploit the resulting opportunities. Our products and services are being validated on multiple fronts. Our engagements with the Indian enterprises validate the resilience of our product and services, while those with the government validate our capability to implement on a large scale. Let me now bring Kamal, our CEO to expand some of the business validates for the past quarter. Kamal?

Yes. Thank you, Raju. At the beginning of the financial year, we had announced our vertical go-to-market strategy across all the business segments. I am happy to share that a mix of our vertical strategy and our unique positioning as an ICT services provider and integration partner for our clients, has resulted in sustained growth in order book, revenue and profitability. Our business outcome oriented usage models for key verticals, over and above our services capabilities, will be a significant differentiator in our growth journey going forward. As announced in the last quarter, we will be presenting our business results under the following categories. A, telecom-centric services, which will comprise off managed data services on our domestic and international network. Termination of voice calls over IP in our domestic and international partner networks. B, data center-centric IT services, which will comprise off managed colocation services at Sify’s six Tier 3 data centers, cloud services, application-led services and technology integration-led services. Allow me to elaborate on the highlights of the two services for the same quarter. I will start with telecom-centric services. Revenue for the data network and managed services business grew 10% over the same quarter last year. Investment in expanding the network infrastructure continues as Sify’s domestic network now reaches more than 1550 cities. The 7th Global PoP at Marseilles went live this quarter. Hyperscale network now connects 45 data centers and network nodes and six public and private cloud nodes. The global capacity on the Sify network doubled over the last quarter. Key wins during the quarter were from a power distribution company, a public sector insurance company, a public sector bank and a leading hyper local ecommerce player. Other wins during the quarter include those from a large MSO, a leading private trust and a smaller banking player. There were two key wins in the network transformation and outsourcing category. A leading IT/ITES company entrusted Sify with its network and security consolidation led network transformation. A large single format European retailer awarded Sify a contract to manage the entire Wide area network, security and wireless local area network across their domestic retail footprint. Sify won its first commercial contract for IoT asset tracking during the quarter. As far as our data center-centric IT services concerned the revenue from this business services grew 24% over same quarter last year. Sify signed up 18 new data center customers during the quarter, including India Post, a power conglomerate, an Indian MNC, a housing finance company and a mobile engagement company. Other key wins were from a pioneering online trading platform, an infrastructure finance company, a GCC based remittance company, an upcoming health insurance provider, two payment gateway players, a co-operative bank and a Fintech startup. A large financial services company in India has contracted with Sify for complete strategic outsourcing and managed services, comprising of data center and disaster recovery infrastructure services, infrastructure integration services for data center network, IT infra compute and storage, virtualization and security services. Sify signed five new national level talent management accounts for applications services. Sify signed two existing customers for Sify’s cloud and mobile solutions, and won a large order from Safescrypt which is our digital certification services. Sify signed its first SAP S/4HANA implementation along with cloud infrastructure hosting. Sify made two more customer acquisitions for S/4HANA. Sify signed three large customers for SAP digital compliance solutions. Sify also added 35 new clients for technology-led integration services across data center IT, network integration, security and collaboration services. An umbrella organization for operating retail payments and settlement systems in India has contracted with Sify to expand and build network and security infrastructure with technology from a leading global partner. A central government department responsible for providing data center services to key government ministries has contracted with Sify for a complete technology refresh of one of their large data centers and for managed services. Another government of India department contracted to have their data center built by Sify. During this multi-year contract period, Sify will partner with global technology players to design, build and set up the data center, as well as offer managed services. This quarter Sify has been conferred gold level of partnership for acceleration and security services from Akamai. This was about our business. Let me bring in Vijay, our CFO to elaborate on the financial highlights for the past quarter. Vijay?

Thank you, Kamal. Good morning everyone. I’m please to present a financial performance for the second quarter of financial year 2017-2018. Revenue for the quarter was INR 4840 million, an increase of 10% over the same quarter last year. EBITDA for the quarter was INR 716 million, an increase of 13% over the same quarter last year. Net profit for the quarter was INR 203 million, an increase of 29% over the same quarter last year. Capital expenditure during the quarter was INR 452 million. Cash balance at the end of the quarter was INR 2389 million. As in the past, we continue to stay focused on cost efficiencies, while at the same time investing in people and relevant skill sets to offer value added managed services around our infrastructure stack. I will now hand you over to our Chairman for his closing remarks. Chairman?

Thank you, Vijay. We have begun an active outreach program to meet within the financial community and relate our successful project deliveries. Our compliance track record and our financial performance over the years, initial feedback has been very good and that we have a good story backed by strong numbers to tell. We intend to strengthen the story in the coming quarters. Thank you for joining on this call. Now I will hand over to the operator for any questions. Operator?

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]

There are no questions at this time. I would like to turn the call back over to management for any closing or final remarks.

This is Raju. Thank you everyone for joining us on the call. And we look forward to interacting with you through the coming year. Have a good day. Thank you. Bye.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation. And have a wonderful day.