Black Box Q1 FY27 earnings call

Black Box Limited delivered its highest-ever quarterly revenue of INR1,719 crores in Q1 FY27, marking a 24% year-on-year growth. This performance was bolstered by strong execution of the order backlog and a INR60 crores contribution from the recently acquired Brazilian entity, 2S. Profitability also saw significant uplift, with EBITDA increasing 38% YoY to INR160 crores and profit after tax growing 18% YoY to INR56 crores. The EBITDA margin expanded by 90 basis points to 9.3%, driven by operating leverage and a favorable business mix.

The company secured new order bookings totaling US$339 million during the quarter, contributing to a record-high order backlog of approximately US$950 million. This represents an impressive 83% year-on-year increase, providing substantial revenue visibility for future periods. Management noted that large data center engagements typically have a tenure of 24 to 36 months, and a significant portion of the current backlog is expected to convert into revenue in Q3, Q4 FY27, and spill over into FY28, with FY28 growth projected to exceed 25%.

Black Box is strategically positioned to capitalize on the massive digital infrastructure investment cycle, particularly in AI infrastructure. The company successfully secured a US$131 million (INR1,240 crores) service-only order from a new global hyperscaler in the United States, underscoring its capabilities in this high-growth segment. While the non-hyperscale enterprise business is expected to grow at a modest double-digit 10%, the overall growth trajectory is projected at 25%, primarily driven by the hyperscale momentum.

For FY27, Black Box provided strong guidance, targeting revenue between INR7,800-8,000 crores (23-27% growth) and EBITDA of INR725-750 crores (27-32% growth). EBITDA margins are expected to range from 9.3-9.4%, an increase of 30-40 basis points. Profit after tax is projected to grow 38-50% to INR300-325 crores, with order bookings reaching US$1.3-1.4 billion. The company also reiterated its long-term aspiration to achieve INR18,000 crores (US$2 billion) in revenue by FY30, with INR12,000 crores from organic growth and INR6,000 crores from inorganic growth.

The company's capital allocation strategy prioritizes strengthening talent and technology capabilities, supporting working capital, and pursuing selective acquisitions that enhance capabilities and geographic reach. The recent acquisition of 2S in Brazil, which contributes approximately US$50 million in annual revenue, exemplifies this approach. This acquisition expands Black Box's capabilities in networking, cybersecurity, and managed services, and establishes a strategic platform for further growth in the Latin American market.

Management emphasized that Black Box's competitive advantage lies in its ability to execute large-scale projects, expand talent, and provide comprehensive training. They highlighted that the market for gigawatt-scale digital infrastructure is not solely price-driven but demands consistent execution and proven capability. The company's established relationships and track record in delivering complex projects at scale serve as a significant moat, differentiating it from smaller players and even larger IT companies that may lack the specialized execution capabilities.

The company's current low tax rate is attributed to carryforward operating losses across various geographies. For FY27 and FY28, the tax rate is projected to be between 10-15%, eventually normalizing to around 20% in the long term. Black Box maintains a medium-term objective to consistently achieve an EBITDA margin of 10% or more, with expectations for Q4 FY27 to reach or exceed this range, despite ongoing investments in talent and training to support its growth trajectory.