Release Date: February 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Allied Digital Services Ltd (BOM:532875, Financial) reported consolidated revenues of INR171 crore in Q3 FY24, showing marginal growth on a quarter-on-quarter basis.
- The company has secured several significant contract renewals, including a $2.7 million renewal with a prominent American home appliance brand and a $1.8 million renewal with a distinguished restaurant chain.
- Allied Digital Services Ltd (BOM:532875) has been recognized by the Great Place to Work Institute, highlighting its commitment to exemplary talent management practices.
- The company is making strategic progress on its SaaS platform ADiTaaS, which is witnessing upgrades and enhancements.
- Allied Digital Services Ltd (BOM:532875) has won new orders, including a prestigious award for the Ayodhya Smart City project and a contract with a bank based on the East Coast of the US for end-user transformation services.
Negative Points
- The company faced delays and deferrals in closing contracts in the US, impacting its financial performance.
- EBITDA for Q3 FY24 was INR21 crore, lower than INR30 crore in Q3 FY23, with the EBITDA margin decreasing from 17% to 12%.
- Profit after tax for Q3 FY24 was INR12 crore, compared to INR11 crore in Q2 FY24, indicating only a slight improvement.
- The focus on cost-cutting in the US market has led to delayed decision-making by potential customers, affecting IT spending.
- The traction in government projects in India has led to continued stress on cash flows, although the overall cash position has shown an improving trend.
Q & A Highlights
Q: Sir, you talked about larger deals in your pipeline facing decision delays. From which set of clients are you facing these delays?
A: The delays are primarily from general enterprise customers, such as large banks and FMCG companies, not from our IT company partners. The decision-making process in the US market has been slow, but we have received verbal confirmations and expect formal contracts soon. (Paresh Shah, CEO)
Q: Can you give us a three-year or four-year perspective on where you want to take the company?
A: We are still on track to achieve a revenue run rate of INR1,000 crore within the next two to three years. We aim to improve our margins to mid-teens over the next four to six quarters. (Nehal Shah, Executive Director)
Q: What is the update on the company's discussions with midsize banks for SaaS solutions?
A: We have partnered with a US-based firm to target the BFSI segment with our SaaS platform. We are also enhancing our ADiTaaS platform to include enterprise automation. (Paresh Shah, CEO)
Q: How many smart city projects is the company currently executing?
A: We are working on several projects, including Lucknow, Solapur, Amritsar, Jalandhar, Sultanpur, Ayodhya, Bidkin, Aurangabad, Pune, Pimpri-Chinchwad, and Kalyan-Dombivali. Many of these projects are nearing completion or are in the O&M phase. (Paresh Shah, CEO)
Q: With the US market looking weak, are you focusing more on domestic projects?
A: Yes, we are aggressive in the domestic market, which looks promising. However, we expect the US market to pick up soon, especially with cost-cutting measures and the upcoming election year. (Paresh Shah, CEO)
Q: What are the KRAs set for Mr. Ramanathan, and what targets have been set for him?
A: Mr. Ramanathan's role is to strengthen our sales and marketing engine. His compensation will be linked to revenue and top-line growth. A formal document outlining his targets is under process and will be announced soon. (Nehal Shah, Executive Director)
Q: What are the key learnings from the company's past challenges, and how are you applying them now?
A: Key learnings include better governance, a more structured approach to growth, and deciding what not to do. We have also become very robust in compliance, which is reflected in our steady growth. (Nehal Shah, Executive Director)
Q: What is the company's strategy regarding data centers?
A: We do not intend to build our own data centers due to the hyper-competitive market. Instead, we will leverage existing data centers and add our services on top of them. (Nitin Shah, Chairman & Managing Director)
Q: What is the guidance for this year, and how do you see the next year shaping up?
A: We expect sequential growth this year, but the next year looks far more promising. Deals closed in early 2024 will start reflecting in our books from April onwards, making the first and second quarters of the next fiscal year better. (Nehal Shah, Executive Director)
Q: Are you seeing any traction in the data privacy and cybersecurity sectors?
A: Yes, data privacy and cybersecurity are becoming increasingly important, especially with new data privacy laws. We are seeing opportunities in these areas and are positioning ourselves to capitalize on them. (Paresh Shah, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
