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spk02: Good day, ladies and gentlemen, and welcome to your CIFI Technologies financial results for fourth quarter and fiscal year 2019 to 2020 conference call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Xue Yin. Sir, the floor is yours.
spk03: I would like to extend a warm welcome to all our participants on behalf of SIFI Technologies. I'm joined on a call today Chairman, Chief Executive Officer, and MP Vijay Kumar, Chief Financial Officer of SIFI 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 let us know and we will have it sent to you. Alternatively, you may obtain investor information website at www.safetycorp.com. A replay of today's call may be accessed by telling the name of the members provided in the press release or by accessing the webcast investor information section of the Safety Corp website. Some of the financial measures referred to during the call and in the earnings release may include measures. Safety's results for the year are according to the International Financial Reporting Standard, or IFRS, and will differ somewhat from the GAAP analysis The presentation of the most directly comparable financial measures calculated and presented in a reconciliation of 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 available. I'd like to point out that certain statements contained in the earnings release and on today's forward-looking statements rather than historical facts, and are subject to risks and uncertainties that could cause actual results to differ materially from the described. With respect to such forward-looking statements, the company seeks protection by the Private Securities Litigation Reform Act of 1995. These risks include graduate factors, including competitive developments and risk factors listed from time to time in the company's SEC reports and public releases. intended to identify certain noticeable factors that could cause action results to differ maturely from those described in the forward-looking statements, but are not intended to present a complete list of all risks and uncertainties inherent to the company's business. Now, I would like to introduce Mr. Rajiv Agisna, Chairman of SIFI Technologies. Sir?
spk06: Thank you, Sway. Good morning, and thank you for joining us on this call. Plus, you're all staying safe. Every adversity presents an opportunity to rethink the way we do the business. For some time now, SIFI has been increasing the level of automation across our entire suite of service. And during the ongoing lockdown period, we have been able to perform remote commissioning and maintain high service levels without any major impact. I am sincerely proud of my team who are continuing to raise up the challenges faced by our clients every day. The biggest lesson from this market, from this lockdown, is that there is no escaping the digital economy for tomorrow. SIFI's future is in enabling that for our clients. Let me now bring in Kamal, our CEO, to expand on our business performance for the past year. Kamal?
spk05: Thank you, Raju. The current scenario and the lockdown has created challenges in the short term and opportunities in the medium and long term for us. As a service provider, we are currently addressing the upgrade and downgrade requirements of customers based on their demand. We're remotely managing mission-critical infrastructure of customers who are serving the core industries and consumers. The current situation has also stimulated conversation with customers on the need for scalable, flexible IT infrastructures which can be consumed on demand. We are seeing the cloud skeptical customers showing enthusiasm on cloud adoption to ease their capex cost and cash flow. Organizations are reviewing how to provide secured and productive work-from-home deployment. As a digital ICT service provider, we see these as an opportunity to further boost utilization of our investments and enhancement of our services revenue. In line with the continuing precedent, I would like to expand on the business highlights and our growth drivers. Revenue from data center-centric IT services grew by 3% over last year. Segment-wise, revenue from data center services grew by 21%. Cloud and managed services grew by 9%, while technology integration services and applications integration services fell by 13% and 2% respectively over last year. Revenue from network-centric services grew by 9% over last year. Segment-wise, revenue from data and managed services grew by 12%, and voice business grew by 4% over last year. The current situation resulting from the nationwide lockdown has curtailed industry growth, and we expect customers to spend mostly on must-have services and not on nice-to-have services as we emerge from the lockdown. Customers will look for technology and contracts which are flexible and agile. Overall, service providers whose business models are consumption-based will get more attention from customers. Service providers who can deliver cost benefits will have an advantage in customer engagements more than ever. Cloud services, network access services, security services, and e-learning would be the prime growth area for CIFI post-lockdown. Let me summarize the categories of customers who signed up with CIFI during the quarter. Customers choosing CIFI for migration of their on-premise data center to multi-cloud platforms like CloudInfinite, AWS, and Azure. They also entrusted CIFI with management and security. Customers choosing SIFI as their data center hosting partner as they embrace hybrid cloud strategy. Customers choosing SIFI as their digital services partner, and customers choosing SIFI as their network transformation management partner as they migrate to cloud-ready network. A detailed list of our key wins is recorded in our press release, now live on our website. Let me bring in Vijay, our CFO, to elaborate on the financial highlights of the past year. Vijay.
spk04: Thank you, Kamal. Good morning, everyone. Allow me to present the financial performance for the full financial year 2019-20. Revenue for the year was INR 22952 million, an increase of 7% over last year. EBITDA for the year was INR 4076 million, an increase of 31% over the last year. Considering IFRS 16 leases adoption from April 1, 2019, the increase in EBITDA is 17% on comparable basis. Net profit for the year was INR 706 million, a decrease of 34% over last year. Capital expenditure spent during the year was INR 4405 million. We had a reasonably good year 2019-20. The EBITDA growth of 17% has been healthy while we continue to spend for the future both in people and tools to increase our digital transformation services capabilities. The net profit is lower as the company is now subject to full taxes as past tax benefits have expired. As global trade shrinks substantially and overall demand and supply chain recovery is expected to take time, we are preparing the organization for new contracts to be slow to conclude as some of our clients are likely to take time to regain their momentum in the market. We continue to carefully manage our costs while ensuring that services to customers and their experience remains the best. We stay committed to our data center, cloud, and network-centric expansion projects and will exercise due caution in terms of both timing and cost structure of these projects. Considering the economic conditions, and uncertainty on timing of the economy normalizing, the board did not recommend the payment of dividend this year and instead advised the capital to be conserved and used for financing expansion projects. Cash balance at the end of the year was INR 2651 million. I will now hand you over to our chairman for his closing remarks. Chairman, Thank you Vijay.
spk06: The post-COVID economy is going to be a completely new world. While the truth is that nobody can forecast how it will turn out to be, the advantage for CP is that the entire breadth of our service portfolio will be in demand. The priority right now is safeguard our assets, people, tools, and customers' business. I will now hand over to operator for questions. Questions? Operator?
spk02: Thank you. The floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. If you're using a speakerphone, we ask that while posing your question, you pick up your handset to provide the best sound quality. Again, ladies and gentlemen, If you do have a question or comment, please press star one on your telephone keypad at this time. We'll take our first question from Greg Burns with Sidoti & Company. Please go ahead, sir.
spk01: Morning. Just first, what was the debt balance at the end of the year?
spk04: Pardon, pardon, I couldn't hear you.
spk00: The debt balance at the end of the year?
spk04: Okay, the debt balance, both the term debt is about $60 million, and working capital debt, net of cash, working capital debt, net of cash is about $25 million.
spk01: Okay. And the CapEx balance? number that you mentioned the 4405 was that for the full year or is that just for the fourth quarter it was for the full year okay and when we um when we think about this year obviously um you're conserving some capital not paying deciding to not pay the dividend um What are your projections for CapEx for this year? Is it going to be higher or lower or about the same level?
spk04: We have, as a policy, not made forward-looking statements. But as far as our commitment for expansion on our data center and network services, We will continue with our plans, which are on the drawing board. Maybe there could be some timing delay of a quarter or two. But otherwise, we are committed on our plans, similar to what we have done in the recent past.
spk01: And then as we look at the impact that the virus and the lockdown is having on the business, could you just talk about maybe what parts of the business are being most impacted? Is it the more project-based areas of the business? Can you maybe just go through your different segments, talk about, you know, what you're seeing, what the impact has been, and, you know, maybe highlight those that are maybe more or less impacted by the virus?
spk06: Yeah, come on. I think this is a good question for you, Kamal. Yeah, yeah, yeah. Thank you.
spk05: So what we have done is we have analyzed the vertical view as well as our product line view of this particular issue. So from a vertical perspective, we see banking and securities, which is a little negative on an immediate term, but over a long time we see that, you know, it should be neutralized. The communication sector, and particularly the sector where we belong to, you know, as a company, that is expected to show positive growth. Sectors like education, healthcare, that will grow as far as the digitalization, you know, initiatives are concerned. Insurance will take, insurance and manufacturing will take a little hit in the short term, but long term we expect again because of digitalization effort which is happening to be neutral, I mean which will basically cover up the current issue of the current shortcomings. Retail will be a challenge as well as transformation and hospitalization sector. So this is how what we find now. But the good news is for us that the segment which constitutes most part of our revenue both and the new business which is banking, finance, and security, that industry, including insurance, and communications, as well as certain sectors of health care and insurance. Those are going to recover from here, or those will continue to grow, you know, because of the digitalization initiative with the customers have to take. I think we are better off than many other industries as far as the verticals are concerned. From a horizontal or from a services portfolio perspective, we see growth of our cloud and data center services, which we are bullish, and the whole industry is bullish about that. We are no exception. Network services will see a shift in pattern where more bandwidth will get consumed because of work from home, you know, the culture which will be more and more, you know, prevalent in the coming days. It is already on. It is only going to be stronger and only going to be, you know, going to be deployed in a very structured way. So there we see, although there may be a dip initially you know, companies like us who are mostly in the B2B space, little negative to start with, but it will get neutralized because more bandwidth will get consumed among data centers and to the data centers and cloud. Application and digital services, we also see neutral growth for us, although digital as an offering for those companies which are much bigger, you know, than us, you know, in the digital space, they are talking about positive growth. But our big business, which is the TIS business, We are expecting a deep impact because customers will be wary of not investing in CapEx and to also hold back the cash and rather go for consumption-based models rather than buying hardware and infrastructure and making upfront investments. That's the biggest lesson with the customers have probably had experience. There is no point in investing up front and creating large infrastructure themselves. Otherwise, it's better to consume infrastructure as a service or platform as a service from people like us. So whatever it is, it means bad, but we see little, you know, it is tilted towards the neutral and positive side. I hope I've been able to answer to your question.
spk01: Yeah, no, that was great. So just, I guess, if we just... I know you don't give guidance, but maybe... You can help us out a little bit, just given the level of uncertainty out there. But as we take everything you just said about your different business segments and we look into next year, do you still expect to grow next year? Or what's your view for this fiscal year in terms of the ability to still grow in this environment?
spk05: So it is a very tough question to answer very honestly at this point of time. Last part of our revenue is out of contracted and carry forward which is more of an assured revenue. I would say you know very near to our current revenue we are maybe you know 25% less than what we have achieved this year, or maybe 20%, not 20%, I'm sorry, maybe 15% less than what we have achieved this year is expected to be our assured revenue next year. But, of course, you know, if we have a growth aspiration, then even under this condition, we need to do new business. So it depends on how much of new business we'll be able to acquire and convert that into revenue. So the dependency is more on that.
spk06: See, Greg, to answer your question, Greg, in overall, right, so India is locked down, and we don't know when this whole thing will be unlocked, right? Second, you know, how the spending is going to be across the businesses, right? So post-COVID, we have to analyze probably once we get to the back to the normal life, right? And third, you know, everybody projecting India has a lot more potential, a lot of manufacturing is going to move to India, a lot of the things, blah, blah, blah, and all those things we need to analyze, right? those situations to give understanding how the India, you know, if India grows, we will grow, right? So that is the way we look like, you know. So the overall global, you know, India economy, you know, we are depending on how this post-COVID is going to be turned out, you know. That is going to play a big role in our expansion, you know.
spk01: Okay. And maybe just lastly, just to help me fully understand this, when we look at the... the complexion of your business, how much is tied to contracts that should be more recurring? How much is consumption-based, which may decline, and maybe how much is a CapEx project-based? Can you just maybe help us understand the mix of your revenue and how much of that is maybe more stable and recurring than project-based?
spk04: Yeah. Vijay, you have an idea? Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Kamal Shelly? Go ahead, Vijay. Yeah. Yeah.
spk06: Yeah.
spk04: Yeah. Yeah. So as far as our revenues are concerned, I would draw your attention to our 20F and the half-yearly 6K filing. where we have those segment numbers, the network and the data center business is almost in full annuity revenues, which are contracted. And they increase with the consumption. As far as the other IT services business is concerned, a little over one-third, a little over one-third is annuity revenues there.
spk01: Thank you.
spk02: As a reminder, ladies and gentlemen, if you do have a question or comment, please press star 1 on your telephone keypad at this time. Again, that's star 1 on your telephone keypad at this time to ask a question or comment. And, sir, at this time we have no one further in the telephone queue.
spk06: Thank you for joining us on this call. And again, once again, please stay home, stay safe. Thank you.
spk05: Thank you. Thank you everyone. Thank you.
spk02: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.
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