Key highlights from Black Box Ltd (BBOX) Q1 FY23 Earnings Concall
Q&A Highlights:
- [00:14:13] Aditi Sawant of ADM Advisors asked if the company plans to shift few of the employee base to the low cost countries like India. Sanjeev Verma MD said that some of company’s backend processes, specially shared services in Finance, the Support Center for the North operations and other shared services have gradually been moved to low cost geographies like Bangalore and Mumbai. So, BBOX will continue to focus on that.
- [00:16:00] Aditi Sawant of ADM Advisors enquired about BBOX being a market leader in TPS (Technology Product Solution) business and what’s driving the leadership position. Sanjeev Verma MD answered that BBOX is focused on specific areas of technology products, specifically around KVM, and audio-video products, that’s expected to grow rapidly.
- [00:19:11] Anjana Shah from Shah Investments asked about BBOX’s inorganic strategy and filtration criteria before making an acquisition. Sanjeev Verma MD replied that the strategy is based on propelling either expansion in geography or allowing to add the solutions portfolio, customer or a talent base.
- [00:21:05] Darshan Mehta asked about the guidance on revenue growth and margins for FY23. Sanjeev Verma MD said the company is looking at growing revenues between 15% and 20%. And from a margin perspective, GM in the range of 27% to 28% and operating margin in the range of 5% to 6%.
- [00:23:04] Anuj Shah with Shrinath Securities enquired about the scope of offering on the datacenter infrastructure side where Meta is the largest customer. Sanjeev Verma MD answered that for specific part of the data center, BBOX is responsible for providing network infrastructure, both passive and active, starting from the fiber. BBOX is the network provider, which is the backbone on which the Meta applications run.
- [00:24:48] Anuj Shah with Shrinath Securities asked about the measures BBOX is taking to navigate on supply challenges. Sanjeev Verma MD said supply side challenges continues to be an issue. BBOX is aggregating with supply chain vendors to get priority to source things in time to large customers.
- [00:26:50] Anuj Shah with Shrinath Securities asked about the initiatives taken to mitigate labor shortages. Sanjeev Verma MD said BBOX is looking at internship programs to rebalance cost, investing in training to get in more entry level people to reduce lateral hiring. Also, BBOX is repricing itself considering inflationary cost and labor cost.
- [00:32:21] Karthi Keyan from Suyash Advisors enquired how does BBOX get affected by the migration to Cloud. Sanjeev Verma MD replied that the company expects the adoption of Cloud as a credit and accretive to BBOX business. BBOX added that it’s well poised in creating the digital infrastructure on which people will consume Cloud.
- [00:36:50] Karthi Keyan from Suyash Advisors asked about the product business as a part of the FY’24 revenue mix, what percentage will be coming from products. Sanjeev Verma MD replied that it expects its product business to grow at the same pace of 15% to 20%. But overall revenue mix between products and services business will still remain 80:20.
- [00:38:35] Karthi Keyan from Suyash Advisors also enquired what part of the product revenue currently comes from the projects business. Sanjeev Verma MD clarified there is no direct overlap with respect to the go-to-market for the solutions business that is largely a direct to customer, a Fortune 500 customers business.
- [00:45:08] Esha Savla from Arya Securities asked about the leverage levels for the Black Box Corporation acquisition. Deepak Bansal CFO clarified that when Black Box was acquired, whatever leverage was taken at that time was all repaid within 1 year of the acquisition. And currently BBOX don’t have the leverage which was taken at that time.
- [00:47:32] Parth Goswami from KK Advisors asked about the margin profile of the Dragonfly acquisition. Sanjeev Verma MD answered that the margin profile of the business is close to 40%. BBOX said it’s looking at becoming a significant player in the cybersecurity space, and that is why the Dragonfly acquisition was done.