Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated revenues grew by 18.1% year-on-year.
- EBITDA increased by 9.8% year-on-year, with margins improving to 20%.
- Digital services revenues surged by 51.5% year-on-year.
- Significant order book growth driven by large deal wins.
- Media business revenues grew by 9.2% quarter-on-quarter.
Negative Points
- Free cash flow for the quarter was negative INR385 crores due to increased working capital.
- Net debt stood at INR9,611 crores, with a net debt to EBITDA ratio of 2.2x.
- PAT margins were at 5.9%, down 12.8% year-on-year.
- TCTS revenues declined by 17.9% year-on-year due to the termination of a large loss-making contract.
- Order book from OTT and SP segments continues to be lumpy, affecting revenue predictability.
Q & A Highlights
Q: Can you help us understand the margin improvement to 20% and its sustainability?
A: Kabir Shakir, CFO: The margin improvement was driven by one-off employee cost reversals, cost savings from terminating loss-making contracts, and operating leverage drivers. We are confident in maintaining 20% margins due to ongoing synergies and cost management.
Q: Despite a healthy order book, why is revenue growth not as expected?
A: Amur Lakshminarayanan, CEO: The order book saw a healthy jump this quarter, driven by large deals. However, revenue realization from these deals will take time. The funnel remains robust, and we are expanding our engagements with global customers.
Q: What is the outlook for the CPaaS business in the near term?
A: Amur Lakshminarayanan, CEO: We expect growth in the CPaaS business despite global headwinds. We are acquiring new customers, and the bulk of revenue will come from SMS channels, with other channels like voice and WhatsApp in early stages.
Q: How does the reclassification of SD-WAN to cloud and security impact the business?
A: Amur Lakshminarayanan, CEO: The reclassification aligns with our internal structure. Cloud and security now include global SD-WAN and SASE offerings, enhancing our international revenue mix.
Q: Can we expect further margin expansion beyond 20%?
A: Kabir Shakir, CFO: Yes, we aim to organically inch up margins towards our 23%-25% target through operating leverage, strategic reviews, and cost synergies.
Q: What is the total addressable market for SASE-based offerings?
A: Amur Lakshminarayanan, CEO: We offer both hybrid and unified SASE solutions. The market is significant, and we are actively targeting mid-tier and large enterprises globally with our unique propositions.
Q: How are you addressing challenges in replacing incumbents in the market?
A: Amur Lakshminarayanan, CEO: We compete with major global players like NTT, Orange, and Verizon. Our unique underlay and overlay solutions, combined with our B2B focus, position us well to win against incumbents.
Q: What are the key drivers for maintaining strong performance in India?
A: Amur Lakshminarayanan, CEO: India remains strong with a healthy funnel. Despite a one-off impact last year, we expect robust performance driven by our expanded portfolio and customer engagements.
Q: How is the integration of Kaleyra progressing, and what are the growth prospects?
A: Amur Lakshminarayanan, CEO: Integration efforts are progressing well, with synergies in platform engineering and go-to-market strategies. We are confident in growing the CPaaS business profitably.
Q: What are the financial highlights for the quarter?
A: Kabir Shakir, CFO: Consolidated revenues grew by 18.1% YoY. EBITDA margins improved to 20%. PAT stood at INR 333 crores, with PAT margins at 5.9%. Free cash flow was negative due to increased working capital, and net debt stood at INR 9,611 crores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
