Key highlights from Black Box Ltd (BBOX) Q3 FY23 Earnings Concall
Management Update:
- [00:05:10] BBOX said that by FY24, it expects the revenue to cross INR7,000 crore and achieve EBITDA margins in the range of 9-10%.
Q&A Highlights:
- [00:09:07] Ashay Jain of Jain Capital asked about the demand environment and if there’s any slowdown due to layoffs in the industry. Sanjeev Verma CEO replied that there were some headwinds. However, BBOX has not seen any impact of slowdown or any impact on the deal pipeline. Additionally, order book for 3Q23 is stronger vs. 2Q23.
- [00:11:22] Ashay Jain of Jain Capital also asked if BBOX has any near term plans to get into any new businesses. Sanjeev Verma CEO replied that BBOX remains open to continue to look for new areas to invest. BBOX has taken some investments organically over the last 12 months, mainly in cyber security, talent and data center.
- [00:13:45] Nidhi Agarwal from Bright Securities enquired since GM have begun to improve sequentially, if it’s fair to assume that the inflationary pressure and supply chain challenges are back to normal. Sanjeev Verma CEO answered that it’s not completely gone. BBOX took some measures of improving efficiency, reducing cost and some were accretive in 3Q23.
- [00:15:58] Amit Shah at AMT Securities enquired if BBOX has any plans to enter into newer geographies. Sanjeev Verma CEO said the company is looking at a strategy to scale in some markets and is focused in Europe and Asia-Pacific to increase scale. BBOX is not looking at getting into a new country currently.
- [00:16:59] Amit Shah at AMT Securities asked about the current GM for 3Q23 and the steady state margin outlook going ahead. Deepak Bansal CFO answered that the GM for 3Q23 is 25.5% vs. 23.4% in 2Q23. Going forward, BBOX expects to see increase in gross margin in coming quarters.
- [00:20:32] Nilesh Doshi enquired if the employee severance payment is going to continue that’s hitting the bottom line. Deepak Bansal CFO answered that the expense is coming as cost optimization and rationalization efforts are going on. Probably from FY24, BBOX doesn’t expect to see those severance expenses.
- [00:22:47] Ashay Jain of Jain Capital queried about the steps taken to achieve the margins and reach in the range of 9-10%. Sanjeev Verma CEO replied that BBOX expects to achieve an average of 15% odd revenue growth. And on the bridge of 9-10%, BBOX expects margins to be accretive by 200-300 bp over the next 12 months and SG&A by 100 bp.
- [00:24:02] Ashay Jain with Jain Capital asked about the estimated capex BBOX would incur. Deepak Bansal CFO answered that BBOX is a very capex light company and it doesn’t have the capex in the form of a real capex. BBOX added that the capex is expected to continue in the range of between INR8-10 crores per year.
- [00:27:38] Nishant Shah at Emkay Global enquired if the capex of INR8-10 crores will be debt funded or funded from internal accruals. Deepak Bansal CFO replied that the capex will be funded from internal accruals.
- [00:35:25] Vikas Jain from Financial Quotient asked if the government policy is favourable for data centers in India. Sanjeev Verma CEO replied that India is interested in participating in the growth of data centers, but BBOX will not jump in until it can ensure that the working capital requirements and payment terms are met.