Release Date: May 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Black Box Ltd (BOM:500463, Financial) reported a robust 59% year-on-year growth in EBITDA for FY24, reaching INR428 crores compared to INR269 crores in FY23.
- The company achieved a significant increase in EBITDA margins, which rose to 6.8% for FY24, a growth of 250 basis points year-on-year.
- Profit after tax for FY24 grew by 5.8 times, reaching INR138 crores compared to INR24 crores in FY23.
- Black Box Ltd (BOM:500463) has a strong order backlog of USD470 million as of March '24, indicating a steady pipeline of projects.
- The company is experiencing significant growth in its data center business, with revenue from this segment increasing from $15-20 million three years ago to approximately $110-115 million in FY24.
Negative Points
- Revenue for FY24 remained flat at INR6,282 crores, showing no significant growth compared to INR6,288 crores in FY23.
- There was a shrinkage in the order backlog from USD490 million in December '23 to USD470 million in March '24 due to slow decision-making on project orders.
- The company experienced delays in customer decision-making, which affected short-term revenue growth.
- Higher interest costs due to the interest rate environment in the US caused Black Box Ltd (BOM:500463) to slightly miss its profitability target for FY24.
- The company is gradually moving out of low-value long-tail customers, which led to a miss in achieving overall revenue guidance for the full fiscal year.
Q & A Highlights
Q: How are we looking at the inorganic opportunities in FY25? And how should we look at the North America data center market?
A: We continue to be prudent in our approach for inorganic opportunities, focusing on accretive plans that serve our market depth or portfolio expansion. Currently, we do not have an active pipeline but will continue to explore opportunities. Regarding the North America data center market, we see significant growth potential, with current capacity expected to double over the next five to seven years. This creates tremendous momentum, and we are bullish on our growth in this sector.
Q: How are you planning to increase margins, and what is the long-term sustainable margin level you are targeting?
A: We have several levers to focus on margins, including better contract renegotiation, improved productivity from our center of excellence in India, and better terms with vendor partners. Our goal is to reach about 10% operating margin over the next couple of years.
Q: Can you explain the delays in project execution and how it affects your order book?
A: We are pivoting away from serving small, long-tail customers and focusing on large deals with top customers. This shift has caused some delays in decision-making, but we are confident that our growing pipeline will mature over the next few quarters, leading to good momentum in order bookings and revenue.
Q: Can you provide more details on the revenue contribution from the data centers business and its growth?
A: Our data center revenue has grown significantly over the past three years, from about $15-20 million to approximately $110-115 million. We are seeing about 20% growth in this sector.
Q: What is the current order backlog, and how do you see it evolving?
A: Our total current backlog is about $470 million, with a strong pipeline, especially in networking and data center services, close to $2 billion. We expect this pipeline to mature over the next several quarters, providing growth momentum in order bookings and revenue.
Q: How are you looking at growth in the TPS business and its contribution to your overall portfolio?
A: The TPS business currently contributes about 12-13% of our revenue. We expect this contribution to remain in that range while seeing growth in the TPS business.
Q: How should we look at growth in the number of clients in the INR50 crores-plus revenue category?
A: We are focusing on increasing the number of clients in this category by going deeper with existing customers, adding new solutions, and serving new markets. This strategy aims to gain a larger share of the wallet from our top customers.
Q: What are the growth prospects in the cybersecurity space?
A: Cybersecurity remains a critical part of our business, with significant wins, including a top 10 US airport. We currently serve 50 customers worldwide and added 20 new customers last year. We expect to add more logos in fiscal '25, creating momentum in this sector.
Q: Can you provide more details on the competitive scenario in the US data center market?
A: We compete with many local players in the US, but our differentiator is our ability to serve at scale and in multiple markets. Our relationships with global customers allow us to support them not only in North America but also in Europe and APAC.
Q: How are you looking at growth in the Indian market, particularly in data centers?
A: India remains critical for us, both from a local business and a center of excellence perspective. We are exploring opportunities in data centers and large-scale infrastructure build-outs. We expect growth in this market, leveraging our experience with global customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
