Sify Technologies Ltd (SIFY) 2006 Q4 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Sify Ltd. fourth-quarter and fiscal year 2006 earnings results conference call and webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Serry, Investor Relations with Sify Ltd.

Thank you, operator. I would like to extend a warm welcome to all participants today on behalf of Sify Ltd. I am joined on the call by Raju Vegesna, Chairman and CEO of Sify Ltd., Suri Venkat, Chief Operating Officer, and Pijush Das, Chief Financial Officer of Sify Ltd.. 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 call the Global Consulting Group at 646-284-9418 and we will have one sent to you. Alternatively, you may obtain a copy of the release at the investor information section on the Company's corporate Web site, www.Sifycorp.com. A replay of today's call may be accessed by dialing in on the numbers provided in the press release or by accessing the webcast in the investor information section of the Sify website.

Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. A presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP, and a reconciliation of such non-GAAP measures of the differences between such non-GAAP measures, and the most comparable financial measures calculated and presented in accordance with GAAP are also available on Sify's website. Before we continue, I would like to point out that certain statements contained in the earnings release and on this conference call are forward-looking statements rather than historical facts. They are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the Company seeks protection afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the Company's SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statements, but are not intended to represent a complete list of all risks and uncertainties inherent to the Company's business. I would like to now introduce Mr. Raju Vegesna, Chairman of Sify.

Thank you, David. I would like to welcome everyone on the call, once again. Thank you for joining us. I will now commence with opening remarks on our performance in the last quarter. I'm extremely pleased that we have been able to report a net profit year for the first time. Our profit for the full year was $2.2 million on revenue of $128 million, close to 18% higher than the revenues for the previous financial year. We have continued to grow, despite restructuring our businesses for the last six months. These changes are now falling in place for the future growth and profitability. I am also satisfied that we are now have a strong management team in place to build the business going forward.

We have also able to start building momentum in the consumer businesses with a number of new initiatives launching during the last quarter for Sify Broadband, I-Ways, and portals. I believe most of what we want to put in place by end of this fiscal year has been achieved and now we can turn our focus and collective energies to building the profitable growth going forward. The results of these efforts should be evident in the year ahead. I will now request Pijush to take you through our financial performance for the year and for the last quarter.

Thank you, Raju, and hello, everyone. I shall now go into the details of our financial performance for the year. Our revenues for the full year were $128 million, 17.9% higher than the previous year. Our net profit for the full year was $2.2 million, compared to a net loss of $3.6 million for the previous fiscal. However, our net profit was impacted due to the provision for doubtful debts on overdue amounts carried on the books for a period of time, amounting to $5.6 million. As I have shared with you last quarter, we prefer to take a conservative approach in providing for them rather than carrying the amounts on our books. These are not likely to be realized, although they are within industry norms. These have not been provided for in the past and our outstanding amounts in excess of 180 days and above.

We have stated our intention of being clear of all such provisions while being profitable by the end of this financial year, so that we could start a new financial year clear of the burdens of the past. That is what we are doing. We are also re-working our billing and collection systems to ensure that these are minimized in future.

Our cash profit in adjusted EBITDA terms, grew from $6.6 million in the last financial year to $11.6 million for the current fiscal, a 76% increase over the previous year, while our gross margins for the year improved from 45.9% in the previous fiscal to 47.3% for the current year. Our revenues for the quarter were $33 million, 10.7% higher than the quarter ended 31 March, 2006. The sequential growth in revenues over the previous quarter was at 2.1%.

Our net loss for the quarter was $1.7 million, compared to a net profit of $0.6 million in the same quarter of the previous fiscal year. Our net profit for the quarter was impacted due to the provisions for doubtful debts amounting to $2.39 million during the quarter. There was also an exchange loss of $0.4 million incurred on account of the stronger rupee against the dollar. Cash profit for the quarter in adjusted EBITDA terms was $0.5 million, compared to $2.8 million in the same quarter of the previous fiscal year. We ended the quarter with a cash balance of $52.67 million after capital expenditures of $3.19 million during the quarter.

I believe that the business decisions that we have taken will benefit us going forward not only with growth, but also financial health and profitability. The Company's increasing focus on synergies across businesses should also contribute towards this objective by leveraging scale and improving margins. Further details are available to you in our press release. I will now hand over to Suri, who will take you through some of the key initiatives during the quarter.

Thanks, Pijush. Good morning, everyone. During the last quarter I have shared with you how we restructured the teams for greater efficiencies and synergies across business. The focus now is on building momentum across businesses with some key initiatives.

In the enterprise segment, we continued to maintain our leadership, especially in the key VPN connectivity market. We have won the some very large engagements from existing customers, which are a testimony to the trust they repose in us and our capabilities. Our efforts going forwards will be supremely strengthened with the addition of industry veteran P J Nath as Executive President of this business.

We also continue to accelerate our growth in our international business across both Remote Infrastructure Management and corporate eLearning services. Both lines of business are seeing excellent customer traction and several important wins in the last quarter. We have also expanded our global footprint with sales offices in London and Dubai, in addition to our existing offices in California and New Jersey. Details of some of the key wins across both these businesses are available to you in the press release.

We have had a number of new initiatives in the consumer business aimed at increasing our competitiveness and our ability to grow revenues by providing more value to customers. First, Sify Broadband. A major initiative accomplished in the beginning of the quarter was the introduction of a Direct Renewal Facility, with the renewal button on the log on the client for broadband subscribers. So the subscriber now has the freedom to recharge according to need, convenience, and time of day without having to depend on anyone, which was the case earlier.

Another major initiative launched during the quarter was the Sify Phone voice over Internet protocol initiative. With the Sify Phone, a Sify Broadband customer can now call anyone in India who also has a Sify Broadband connection and Sify Phone with unlimited calls for a subscription of just INR 250 per month. This is a value-added service with the potential to add to revenues, as well as brickwall our customers.

The third initiative launched during the quarter was online learning courses. Online learning offers a huge opportunity in India, where education is seen by the middle class as a key to upward mobility and is highly valued. As a result, schools and college-going students are under enormous pressure to excel, often doing a slew of value-added courses they aren't going to cover in school and college to give them the edge.

The benefits of online learning with Sify go beyond convenience of time and place, with collective learning, with exposure to peers adding to the students' ability to understand concepts. Sify's courses are designed to shrink the country into a classroom where students can interact with peers across the country and also have their doubts addressed by a panel of experts online. The first such initiative is Sify Mathguru, an innovative math help program. The second is Sify Class Teacher, an online science program for children from grades one to ten designed to encourage independent learning, with 300 hours of interactive multimedia learning and over 20,000 assessments. With the launch of these two online learning services, Sify aims to usher in an era of anytime, anywhere learning at an extremely affordable price. These programs are available for the children of Sify Broadband subscribers for a subscription of just INR 100 per month.

A number of initiatives were launched in our cyber cafe business during the quarter to draw in more footfalls and increase revenue opportunities. The first is the INR 10 subscriber pack introduced for both trial and for those stopping by for occasional use. This pack also serves to correct the perception that I-Ways are more expensive than the average cyber cafe. This initiative resulted in the number of active registered users increasing by 45,000 during the quarter.

The second was the Internet learning program launched across 38 smaller towns during the quarter. Launch of this program was widely reported in local newspapers and city editions of national papers and featured on cable television, too, in a few of the towns. Underprivileged students in every town were given free packages during the launch period. This is a paid-for program, with some 5000 registrations during the launch period, which is quite encouraging. In addition to the 500 I-Ways cyber cafes, the sign-up for railway ticket bookings in the previous quarter, an additional 695 cafe signed up during this quarter.

Marketing activity was initiated during the quarter to increase awareness of the train ticket booking facility at I-Ways. Another new initiative in the key services area was the electronic bill payment system introduced in seven cities at over 300 our cyber cafes. With this system, consumers can now pay their utility bills online with cash at the I-Ways closer to their homes. During the quarter, an agreement was signed with Western Union for I-Ways across 24 states to become money transfer points. This is being rolled out across I-Ways in these states in a phased manner. These e-services initiatives launched during this quarter are expected to increase footfalls and revenue in the I-Ways in the future. The strategy is to further penetrate the market by adding value to customers beyond browsing.

Our portals business had a number of industry-leading initiatives, details of which are available in the press release. We also continue to lead in the broadband content space, with a special focus on film and entertainment content. Delhi Live, a broadband content portal for the citizens of Delhi, went live during the quarter. This is the third such Sify portal in addition to Bangalore Live and Mumbai Live. We intend to cover other major cities in the very near future. This brings us to the end of this section and I handover to Raju for his closing remarks.

Thank you, Suri. In conclusion, I would like to reiterate my belief in the size of the market opportunity going forwards and Sify's capability to take a large share of this growth market. All our efforts have been on setting the stage for more efficient operations and growth going forward, as well as in ensuring financial systems that are robust and reliable.

I believe that most of what we want to accomplish by end of this fiscal year has been achieved and we can now focus on building profitable growth in the future. Our goal remains the same, to ensure smart growth in every business so that we unlock synergies across businesses and grow them fast and grow them profitably. I will now handover to the operator for questions.

(OPERATOR INSTRUCTIONS) Sameet Sinha, Kaufman Brothers.

Just a couple of questions. First, in terms of the PDDs, do you think this is the last quarter or we could see at least one or two more quarters where you will need to take some bad debt expenses, or incremental bad debt expenses?

This is Raju and we are tightening up our financial systems and the processes. We see maybe one or two quarters still. Some of the schedule will affect some of things what we see. Still, I think there is some there and we are in the process of cleaning up.

Okay, thank you. The second one is how many cafes did you open during the quarter? If you could also talk to end of the quarter broadband sums.

Yes, we're now -- it's about 3638, Sameet. Another thing is also in these quarters what we are doing is there is some of the cleanup of the in our current cyber cafes is happening and that is also we're doing. And basically we're trying to bring cyber cafe's business also profitable. Instead of building more, we're looking at statistically what makes sense and more of cleaning up process also is being done.

Sure, can we expect that to go back to like 200 cafes for quarter (multiple speakers)?

One of the strategies we're looking at it, Sameet, is we're looking at a different kind of model of cafes, also. It is basically a smaller size and also looking at strategically, because one of the things we can claim to them, but then also we want to make this business profitable and growing cyber cafes is interest. Also, we want to make it profitable, bringing enough value-added services in each cyber cafe.

Sure. On the topic, you have launched a number of initiatives, the railway ticket booking, the Western Union, eLearning, all of these other cyber cafes. When do you expect these services to start gaining traction and contributing material revenues to that segment?

This is Suri here. We expect these numbers -- we're still in the process of rolling out, enabling some of our other cyber cafes also to provide these services. So that is going to happen during this quarter, so by the end of this quarter, we would see the number of people using these services going up. I expect full traction to come and lead the second quarter.

But to add to that, Sameet, is we started right away and we're doing, building all these initiatives. We have some of those things also in pipeline and we're not going behind with the thing. Ultimately our idea is to make the cyber cafes to a huge store and stop just a browsing centers, so there is nothing, you see, we have done. That is the way we're going to come out, with cyber cafes in these stores with these kind of value-added systems.

Sure, and if you could give me the number of broadband subscribers at the end of the quarter?

(inaudible) That is 215,000.

Okay, thank you very much.

(OPERATOR INSTRUCTIONS) there are no further questions in queue. I would like to turn the floor back over to management for any closing comments.

Thank you, everyone, for joining us on the call. We look forward to interacting with you on through the quarters and around this time thereafter. Thank you. Goodbye.

This concludes today's conference. Thank you for your participation.