Release Date: October 29, 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 strong growth in both revenue and profitability despite geopolitical uncertainties.
- The company secured over INR675 Crores in new orders and contract renewals, including a significant INR430 Crores Pune smart city order.
- Cash balance increased significantly to INR170 crore from INR99 crore year-over-year, indicating improved liquidity.
- Days sales outstanding improved to 72 days from 87 days, reflecting better receivables management.
- The company is expanding its global presence with new offices and leadership teams to support future growth.
Negative Points
- Other expenses increased from INR14.2 crores to INR17.5 crores due to non-recurring expenses, impacting margins.
- There was a slight dip in margins this quarter, attributed to non-recurring expenses and provisions.
- Finance costs increased due to higher working capital requirements and changes in accounting practices.
- The company faces challenges in maintaining consistent margins due to initial costs associated with acquiring new customers.
- There is uncertainty regarding the timing of revenue realization from large projects, such as the Pune smart city project.
Q & A Highlights
Q: There has been a slight dip in the margin this quarter year on year. What is the management's commentary on that, especially regarding the expense rise in purchase and other direct expenses? Also, now that we have crossed the INR200 crore revenue mark this quarter, do you want to revise the guidance of INR1,000 crore revenue for FY26?
A: Nehal Shah, Executive Director: We maintain our guidance of INR1,000 crore for FY26 and believe we can achieve it in the next 6 to 7 quarters. As for the margin dip, Gopal Tiwari, CFO, explained that it was due to non-recurring expenses, including provisions and one-time celebration costs. Without these, the EBITDA margin would have been better.
Q: What is the business outlook for the cybersecurity space over the next few quarters, and what revenue can be expected from this segment?
A: Paresh Shah, CEO: We see exciting opportunities in cybersecurity, with continued demand and growth in customer logos. Cybersecurity is becoming integral to managed services, especially in safe city and smart city projects, which inherently include cybersecurity components.
Q: What levers do you see for improving margins to around 15%, and what factors contributed to the current quarter's 11% margin?
A: Nehal Shah, Executive Director: We are constantly working to improve margins, focusing on parameters like reducing debtor days and increasing cash flow. We are also engaging more in app support and AI, which could lead to better margins. The current quarter's margin was affected by non-recurring expenses.
Q: Can you provide some insights into the data center business and its traction during the quarter?
A: Nehal Shah, Executive Director: The data center business is crucial for us, with ongoing projects in safe cities and enterprise customers. We are helping clients migrate from on-premises to cloud solutions, and the government of India's data center projects present significant opportunities.
Q: Can we expect more quarters with order wins of INR500 crores or more?
A: Nehal Shah, Executive Director: While I can't provide specific numbers, the traction is strong, and we aim to maintain this trend to achieve our INR1,000 crore topline target. The Pune project will start contributing from the third quarter, with full implementation expected by the first quarter of next year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
