Black Box Limited
Q1 FY26
Call date · August 14, 2025
1 · Management Commentary
Key Positives
- Order bookings remained robust at $176 million, with nearly two-thirds being high-value deals.
- Significant wins included a large US financial services project, a workplace solution for a major OTT player in Latin America, two major US data center orders, and other notable US public sector and university contracts.
- Backlog increased to $518 million (from $504 million at FY25-end); management confident of reaching $700 million by FY26-end.
- EBITDA grew 1% YoY to INR116 crores; EBITDA margin improved 30 bps YoY to 8.4%.
- PAT rose 28% YoY to INR47 crores; PAT margin up 80 bps YoY to 3.4%.
- Strategic focus on high-value customers and reduction of long-tail accounts to <1,000.
Key Negatives
- Revenue for the quarter declined 3% YoY to INR1,387 crores due to client-driven delays in equipment procurement amid tariff uncertainties.
- Lower fixed cost absorption in Q1 led to sequentially lower EBITDA margin compared to Q4 FY25.
- Average lead time from order receipt to revenue recognition has extended to 4–6 months.
Forward Guidance
- Capex: Not disclosed.
- New products/segments: Continued focus on data centers, networking, workplace, and technology products; targeting larger, multi-year annuity contracts.
- Expected client wins/losses: Targeting $1 billion in order bookings for FY26; aiming for $700 million backlog by year-end; data center orders expected to be 20–25% of total.
- Revenue/margin outlook: Revenue growth of 15–20% expected from Q2 onwards; EBITDA margin guidance of 9–9.2% for FY26 remains intact.
- Other strategic initiatives: GTM transformation with experienced leadership; focus on large deals and Fortune 500 clients; ongoing reduction of long-tail accounts; continued operational efficiency and margin resilience; exploring inorganic growth opportunities, with funding via internal accruals and potential debt for acquisitions.
2 · Q&A Highlights
Q 1 (Composite): What gives management confidence in maintaining FY26 revenue and margin guidance despite Q1 revenue decline and ongoing tariff-related delays?
A (Management):
• Strong order backlog and robust pipeline; expect revenue momentum to pick up from Q2 as delayed orders convert.
• Guidance factors in known risks; expect 15–20% sequential revenue growth from Q2 onwards.
• Tariff situation largely resolved outside India; customer delays are temporary and baked into forecasts.
Q 2 (Composite): How should FOREX gains/losses be treated in margin guidance, and how predictable are these impacts?
A (Management):
• FOREX impacts are operational and included in EBITDA; management actively plans inventory/receivables to optimize currency effects.
• Margin guidance (9–9.2%) includes expected FOREX impacts.
Q 3 (Composite): What is the outlook for order bookings, especially in data centers, and what are the typical deal sizes and execution timelines?
A (Management):
• Targeting $1 billion in FY26 order bookings; Q1 at $176 million, with strong pipeline for larger deals ($10–50 million+).
• Data center orders expected to be 20–25% of total; average project execution timeline is 6–9 months.
Q 4 (Composite): Why is the company reducing long-tail clients, and what is the revenue/margin impact?
A (Management):
• Focus on large, high-value clients improves efficiency and margins; long-tail reduction reduces SG&A burden.
• Revenue impact from long-tail reduction was $16–17 million last year, expected to be $6–7 million in FY26 (already factored into guidance).
Q 5 (Composite): How is the company evolving its engagement model with hyperscalers and large enterprises, and are there plans for strategic partnerships or annuity revenue streams?
A (Management):
• Transitioning from transactional to strategic, long-term partnerships with hyperscalers and co-location providers.
• Focus on multi-year annuity contracts, co-innovation, and deeper wallet share; expanding presence in US and Europe.
Q 6 (Composite): What is the impact of the new GTM team and leadership on deal engagement and win rates?
A (Management):
• Enhanced quality and depth of client engagements; multi-vertical, multi-solution approach increasing share of wallet.
• Improved pipeline and customer advisory initiatives; expecting stronger order wins and revenue growth in coming quarters.
Q 7 (Composite): What is the outlook for exceptional items and restructuring costs?
A (Management):
• Expecting INR40–50 crores in exceptional items for FY26; this should be the last year for major restructuring unless macro conditions change.
Q 8 (Composite): How will future inorganic growth be funded?
A (Management):
• Organic growth to be funded via internal accruals and working capital; inorganic (acquisitions) may involve debt if required, depending on opportunity size and structure.
3 · Other Key Numbers
- Q1 FY26 order bookings: $176 million
- Q1 FY26 backlog: $518 million (vs $504 million at FY25-end)
- FY26 order booking target: $1 billion
- FY26 year-end backlog target: $700 million
- Q1 FY26 revenue: INR1,387 crores (down 3% YoY)
- Q1 FY26 EBITDA: INR116 crores (up 1% YoY)
- Q1 FY26 EBITDA margin: 8.4% (up 30 bps YoY)
- Q1 FY26 PAT: INR47 crores (up 28% YoY)
- Q1 FY26 PAT margin: 3.4% (up 80 bps YoY)
- Fixed costs: INR310–320 crores per quarter
- Average lead time from order to revenue: 4–6 months
- Long-tail accounts reduced to <1,000
- Data center orders expected: 20–25% of total order bookings (approx. $200 million of $1 billion target)
- Impact from long-tail reduction: $6–7 million revenue in FY26
- Exceptional items expected in FY26: INR40–50 crores
- Number of currencies operated in: 19
- India-based global capability center: 500 people, expected to grow
- No capex figure disclosed in the call