Q1 24/25

Aug 13, 2024

Summary

Revenue declined 9% YoY to INR 1,423 crore, while EBITDA rose 28% and PAT 55% as margins improved. Management reaffirmed FY25 guidance, expects a stronger H2 and is investing the INR 410 crore raise in growth areas.

Ladies and gentlemen, good day and welcome to the Q1 FY 2025 earnings conference call of Black Box Limited. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants line will be on listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjeev Verma, Whole Time Director and CEO of Black Box Limited. Thank you, and over to you, sir. Good morning, everyone. I hope you all are well and safe. On behalf of Black Box Limited, I would like to welcome you to our Q1 2025 earnings call. I am joined today by Deepak Bansal, Executive Director and Global CFO, and our Investor Relations Advisor, SGA. We have uploaded our results presentation to the exchanges and trust you have had a chance to review it. We are pleased to connect with you once again. Let me begin with an overview of our company, followed by a review of our business and financial performance for Q1 FY 2025. Black Box is a leading global digital infrastructure solutions integrator providing cutting-edge technology solutions and world-class consulting services. We specialize in connectivity and network solutions, data center solutions, modern workplace, and cyber security across 35 countries. Our broad global reach, coupled with continuous innovation and deep expertise, drives customer success by seamlessly integrating people, ideas, and technology to solve complex business challenges. With over 4,000 skilled professionals and four decades of industry experience, Black Box delivers secure, reliable connectivity, and impactful collaboration solutions. Our presence in major markets underscores our global strategy, thinking global while acting local, allowing us to deliver cost-effective solutions across diverse business environments, supported by our center of excellence in India. In the last quarter, our strategic exit from low-value, non-accretive customers caused a temporary dip in revenue. Nevertheless, our focus on productivity and margins enabled us to meet EBITDA targets and come close to achieving PAT target. Our core operations demonstrated strong performance with notable growth in key areas, affirming the resilience of our business model. Our backlog stands steady at $475 million as of June 30th, 2024, bolstered by a robust pipeline, particularly in data center solutions. We anticipate a continuous upward trend in our North American project backlog. Notable deal wins for the quarter include data center and in-building solutions over $11 million, digital workplace, connected buildings, CX, networking solutions, on-demand solutions, and managed services over $13 million. Our KVM solutions over $4 million. We are excited to report a significant funding boost of INR 410 crores to drive growth in key focus areas within the digital infrastructure sector. This capital will be invested strategically in data center expansion, enhancing our capabilities to capitalize on the exponential growth in data center demand driven by cloud and AI. We aim to become a leading provider for hyperscalers, multi-tenant data center operators, and large enterprise data customers. Network infrastructure advancement, expanding our solutions portfolio for enterprise customers and data center operations, including hyperscalers to support increasing data traffic and improve experience at edge. We will make investments in innovation and development in pioneering digital infrastructure solutions, including advancements in cloud computing, cybersecurity, AI, and IoT. Go-to-market expansion supporting our strategic growth into key industry verticals with enhanced technology solutions bolstering our sales and business development efforts in North America and emerging markets. We have also made significant strides in our go-to-market strategy and have brought on board seasoned sales and solution architects with industry-specific expertise. As we progress through FY 2025, we remain focused on leveraging our strong pipeline and order book. With our business segments gaining momentum, we are confident in our ability to deliver improved performance and achieve our revenue and profitability targets. That concludes my remarks. I now hand over the call to Deepak to review the financial highlights. Thank you, Sanjeev, for the detailed overview. Good morning, everybody. I will now discuss our financial performance for quarter one FY 2025. Revenues for the quarter were lower by 9% year-on-year and stood at INR 1,423 crores in quarter one of FY 2025. The top line is affected due to our strategic exit from low-value, non-accretive customers, coupled with some delay in decision-making leading to delayed project execution and with muted demand for our product business from some federal partners during the quarter. Our pipeline continues to swell and the order books increased to $475 million as at June 30th, 2024. If you look at EBITDA, we have reported a growth of 28% year-on-year to INR 115 crores in quarter one FY 2025, compared to INR 89 crores in quarter one of FY 2024. We have seen a consistent growth in our EBITDA margins for quarter one FY 2025. EBITDA margins increased to 8.1%, which is a growth of 240 basis points year-on-year, compared to EBITDA margins of 5.7% in quarter one of FY 2024. A strong emphasis on margin and enhanced productivity continued to generate positive outcomes, reflecting in our EBITDA margins. We are further marching towards FY 2025 exit at 9% EBITDA margin. Coming to profit after tax, we have reported a robust 55% growth year-on-year at INR 37 crores as compared to INR 24 crores for quarter one FY 2024. PAT margins stood at 2.6%, growth of 110 basis points year-on-year. We had the higher exceptional items at INR 15 crores due to high severance cost during the quarter. Operating performance has resulted in better profitability despite a continued high interest cost environment. We have seen a good increase in our earnings per share at INR. 2.21 per share in quarter one FY 2025 versus INR 1.43 per share in quarter one of FY 2024. In summary, we are optimistic that this growth trajectory will continue enhancing both margins and overall profitability. As Sanjeev mentioned, we have secured INR 410 crores equity raise earlier in this month in the form of issuance of preferential warrants to existing promoters, marquee investors and KMPs. We have seen wide participation and interest from various investors. We will continue to deploy the capital for growth and put the best use to enable us for better returns on capital employed. That is all from my side. I will now request Sanjeev to join me for Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Saurabh Sadhwani from Sahara Capital. Please go ahead. Good morning, sir. Deepak, one question about the severance cost. It has been much higher compared to last year, so should we expect it to stay at level for the rest of the year? We are obviously taking some actions in the current quarter, and that is why the cost was little higher. I am expecting that to be hovering at between, let us say, 10 to 12 crores, in quarter two also. Okay. In H2, are we expecting any more severance costs? In H2, yes, there will be some severance cost while we are improving and working on our productivity and all those things. It will be some severance cost depending on the geographies where we are taking some actions to improve productivity. It will be there in H2 also. Some will be there, but I think it will not be to the extent which is in H1. Okay. Sir, could you give us a little bit more detail about the funds that you're raising? Where would it be deployed exactly, and what kind of use cases are we expecting fund to be deployed at? I'll take that. I think I answered that in my- Right. Yeah. In my opening statements, I think we are going to use a large part of the fund for growth purposes. We are making significant investment in our global market expansion, both verticalizing and creating horizontal solutions, hiring high-end sales professionals with experience in industry verticals. We are seeing a massive change in environment for technology, both in the data center and the network infrastructure, including 5G. We will be investing money to make sure that we have the requisite capabilities and solutions crafted in those areas. We will also be making some investments in our delivery and innovation expansion to be able to serve the customers in our hyperscale data center markets. All in all, I think the large part of the funds will, of course, be utilized for seeing that we are able to grow. As Deepak said, we will be prudent about making sure that our return on capital is maintained at a very high level. I will leave it to Deepak to add some more color to it. I think, Pranjiv, you have covered it well. Idea is to prudently deploy the capital and to see that how we can generate more returns on the capital into go-to-market and into the network infrastructure enhancement, and also the expansion of the data center practice all across. Wherever we need to hire few people in terms of solutions and all those things, we will continue to do from the organic growth perspective. Okay. And sir, specific to the data center expansion, are we looking at some particular geography, or will it be for the overall business? I think we are looking at two specific geographies in that space, and both are hyper, India and North America. We do serve customers in the European market as well. Many of them are North American customers. But we see hyper-growth in the data center, specifically in India, where we are constructing our strategy and plan to be a significant player. And of course, North America, we are serving large customers like Meta and Amazon and Microsoft. We continue to serve them as well. These are the two largest markets, and of course, as I said, we are global, so we continue to look at other markets. But from a focused market, India and North America are the largest markets for the data center business. Okay. Okay, sir. Thank you so much, sir. That was all. Thank you. The next question is from the line of Tushar Vasoja from Yugya Capital. Please go ahead. Hello, sir. Thank you for the opportunity. I have a couple of questions. In this quarter, you had a decline of around 10%. Can you please quantify what part of that decline was business or orders that you willingly walked away because of low-value customers? As I said in opening statement, we have made a strategic decision to exit low-value, long-tail customers. Black Box was serving over a few thousand customers over the last very many years. We have instituted a strategic program to assess our customer base. 90% of our business comes from top 250-odd customers who are large multinationals. We see lot of scope in going deeper than going wider with our long tail. We have made specific programs to see that we are able to exit where we don't see long-term value from our smaller customers. I think it is across board. We started that sometime end of last quarter. We are continuing to make progress on that. We'll still make some progress on that with respect to assessing and exiting if we don't see value, and focusing on our top customers. To that extent, I think we are investing heavily in go-to-market, bringing in leaders where we can build scale with our existing customers. The opportunity with our top 250, top 300 customers is immense, and we cannot be everything to everybody. We are a global company, therefore, we are able to see that we are able to get value from our customers and focus on our Fortune 500 customers. That's the objective, and therefore, we are exiting from customers that we don't see long-term value or see growth in those customers we will be exiting. Is it fair to assume that the entire around 10% of decline can be attributed to this reason? It's a mix, right? We've added and we have exited, right? I think, clearly in this case, our additions has been lower than our exit. As we make progress, we expect to add more and exit less. We expect to continue to grow our revenues from here. The additions would exceed the depletions or exit of long-tail customers going forward. Okay, how long do you expect this exercise to last for? We expect that fiscal 2024, 2025, we will continue to exit and assess our long-tail customers. Okay. From FY 2026, you would only serve high-value customers. Is that correct? We will serve customers that we believe has long-term potential over the next 3, 4 years' time to become substantially accretive to us. We still are focusing on driving our organic growth and inorganic growth to be a $2 billion enterprise over the next 4 years' time. To that extent, customers who are accretive for us have long-term value. We are investing in those customers, investing in sales motion, investing in leadership and talent, and that's the way we want to go. Okay. Fair enough. When you talk about delays in decision-making, is that on your end or on your client's end? Also, how long will this last? I think, specifically for our product business, there have been some delay with respect to our critical customers, which is about 15% of our business. That is our Technology Product Solutions business. We do long-term projects with large customers. Sometimes it is linked to their site being ready. It is not if, it is when. Those sometimes take a little bit more time than planned, and that is what happened in quarter 1. We did have some delay in some of our large project execution. In our project business, it is important for us that the site is ready for our engineers to run the projects. If there is a delay, there could be a mismatch of revenues in a certain quarter. It is not a standard trend, but it does happen once in a while. We saw some dip of our revenues getting backlogged because we could not complete certain projects from a customer perspective. Sometimes we do have delay in some product supply from third-party vendors if we are doing a project. A mix of customer side, a mix of customer vendor readiness does cause a little bit delay, causing a mismatch in order. Also just to add, the project delays are also triggered by a little bit of the economic situation right now, where there is a little bit of confusion on the hard landing, soft landing, and then the Fed interest rates and all. We are expecting that as soon as Fed starts reducing the interest rates, this environment will improve because the customers are also prudently going on with respect to spending because if they go slow on the work, obviously their spending little bit gets slowed. They are timing it basically with the Fed taking some actions, which we are expecting that Fed should take the action by September, to reduce the rate. As soon as that cycle starts, the overall sentiment at the customers' level will also change in terms of faster project execution. Okay, sir. Sir, I have a bit of a qualitative question for you. Approximately 75% of the revenue comes from the North American region, and you also talked about the hypergrowth phase for Indian data centers. So I want to know how different is India's data center ecosystem and potential for growth when you compare it to a more matured market like U.S.? From a maturity perspective, clearly America's maturity curve is higher and the demands are little different. India is also hypergrowth market. I think over the last couple of months, I think the total number of projects in India on the ground for data centers specifically was about 1,300 megawatts, and is now forecasted to more than double to 3,000 megawatts. And should AI catch momentum, it's going to grow several times more than that, right? A larger part of the environment is largely based on the cost and pricing. The per megawatt build-out of data center in India is much lower, largely at the back of lower labor costs. But I think most of the players coming to India are global players. Of course, some are local players as well. Therefore, from maturity perspective or the quality perspective, I think it will be consistent to what North America would have, except for the fact that the total cost outlay for data center in India is significantly lower, nearly half, and that's largely at the back of lower labor cost in India. Okay. Sir, can I just one last question. Do you have any sort of seasonality in your business? Like how much do H1 and H2 usually contribute to a full year's revenue? So I think from our perspective, we expect our H2 to be higher than H1. There is an element of seasonality to an extent that there is a budget and a fiscal year norm. In India, largely the fiscal year ends in March. Therefore, if you are an India-specific business, people want to utilize their budget in January, February, March period. So if they are doing a capital intensive work, and if you have capital left, you want to use it, your budget. Similarly, in the Americas, there is a calendar year, so the third quarter for some federal customers or some customers that have budgets to consume will do that. So we expect our H2 to be better than H1 from that perspective, considering a certain element of seasonality or use of budgets to be used for projects. Okay, sir. Thank you. I do have more questions. Thank you. The next question is from the line of Vivek Choraria, who is an individual investor. Please go ahead. Hi, Sanjeev Verma. Thank you for the chance. Sanjeev, what gives us the confidence of meeting our guidance been constantly missing on our top line and our commentary hasn't changed. I mean, even to meet the lower end of our top-line guidance, our revenue run rate for the next three quarters has to be close to INR 1,700 crores and we are at a INR 1,450 crores run rate. So can you just explain the math to me because it seems a bit daunting to meet the revenue guidance and then consequently the EBITDA and the PAT guidance as well. Yeah, Vivek. Thank you for the questions. As I said before, I think we have made a strategic call after assessing as where we want to go and how we want to get there to make sure that we are getting profitable growth. We suited our assessment of our go-to-market sometime in last quarter of the last fiscal year and made a decision to transform the business, especially in North America, with go-to-market being vertical, going deeper in vertical, industry vertical and horizontals. Taking an assessment of our large base of customers over a few thousand and assessing what is the value that they create for us in terms of operating margins. We made a call saying we will focus on our top customers to go deeper because their ability to spend is very high. To that extent we have been gradually increasing prices to our low-end customers or exiting if we don't see value. We are going to continue doing that. But we expect as we move forward that we now have the pipeline and the team in place, over the last six months and we are completely making that investments, which will start to catch momentum, whereas growth additions from our focus accounts will exceed or far exceed a depletion or some small cuts that we will take into our long-tail accounts. So we expect our quarter 2 moving forward to be better than quarter 3 and quarter 4. We expect our second half of the year to be significantly better than the first half. We are still guiding within our revenue guidance range for the year. We are confident of meeting our EBITDA and PAT norm for the year that we have guided before. Having said that, I think I know our quarter 1 has been low, as I called out because of our exit of some low-value customers. We are turning around. We expect our momentum to catch up going forward. We expect our second half to be significantly better. We expect some of our investments in our large accounts and the team that is in place will become accretive going forward in quarter 3 and quarter 4. We expect we should be able to meet our guidance range for revenue, securely for EBITDA as well, going forward. Okay. Thank you for that, sir. Slightly a longer-term question. You have now spoken at the end of a $2 billion target in the next four years. Right now we are close to $700 million, $800 million. So that's quite a huge jump, 2.5 to 3 times. Do you have the team in place? Are the building blocks being set? Because that will, of course, be a mix of organic and some acquisitions. How confident are we as a company to be a $4 billion company, say, by FY 2028 or FY 2029? I am guessing by FY 2028 or 2029 is the target. Then consequently, I am guessing the margin profile obviously will be very different. Just assessing longer-term outlook would be great. Thanks, Vik. I think, one, of course, it's important for us to put a goal in front. We have put ourselves into an aspirational goal of getting to a $2 billion business in the next four years' time. We are currently at a range of $800 million. We are expecting organically to take this business to $1.2 billion-$1.3 billion with a double-digit growth going forward for the next several years. Yes, we will be looking at, to be able to go to $2 billion, we will have to look at inorganic growth. That is part of our strategy. We will be looking at accretive growth. We will not be emotional about economics. Should we get into some assets that we believe are valuable, we'll do that. But first things first, we are focused on going into organic growth. Coming back to your question of investments, yes, we are making significant investments, already made. We have divided our North American business, which is our largest business, into five verticals and worldwide into five horizontals. All the vertical leaders are in place. All the horizontal leaders are in place at this time. We're making also investments in high-value business developers who have the relationships to get into accounts that we want to serve. With the investment and momentum catching up now, we expect to build a significant momentum in fiscal 2025. We expect going forward from fiscal 2025 to become highly accretive and to be able to meet our double-digit organic growth aspirations. As we move forward, we'll continue to explore assets that will be accretive for us, that will allow us to bring in additional revenue inorganically to guide us towards our $2 billion goal. We will continue to guide ourselves towards that. We are currently focused on reorganizing, revitalizing, and reinvesting in our sales go-to-market motion. I've called that out earlier in our press release, in our conversations, that that's our focus now, is growth. Growth and growth. Of course, we have to grow in a disciplined and profitable manner, and investments to that extent have been made and is being made, and expect as we start to get to the second half of the year and start to become accretive, and we start to get into the next fiscal year, we start to get speed on that and take it from there. Thank you so much, sir. That's all from my side. Thank you. The next follow-up question is from the line of Tushar Vasoja from Yugya Capital. Please go ahead. Thank you for the follow-up opportunity, sir. I have some questions on your order book. What is the execution period for current order book? Can you repeat the question? Your line is cracked. What is the execution period for your current order book? Okay. I think on average, the execution period is of various size. We have annual maintenance contracts that last for a year. Our average project size are nine months. Some of them are six months, some of them are 18 months, some of them could be longer. The average size of our projects is about nine months. We do have annuity contracts that last for a year. We do also serve a lot of customers on demand that are practically with revenue at the point of sale. Our product business is revenue at the point of sale. We have a mixed bag from our revenue streams, right? Some are projects longer term, some are annuity contracts, some are product sales, where we sell products from a Technology Product Solutions perspective. A significant part of our business is services, which is on T&M basis, which is at the point of sale, right? It's a mixed bag from an order book perspective. Okay, sir. Sir, how much of your order book will be executed in FY 2025? I think order book is a point in time, right? I think we continue to grow an order book, we continue to add order books. Our focus is to see that our order books exceed our revenues for the year. In general, we focus on order books to be 25% more than our revenue plan for the year, right? If you look at our current order book, possibly we'll consume 60%-70% of that in the remaining part of the year, but we'll be adding an order book over the next five, seven months. Some of them will be consumed in the current part of the year, and some of them will become a backlog, adding to the backlog of the remaining full 2025. It's a flux. Our goal is to close the year bigger than last year from a revenue perspective and open the order book bigger than the last year's opening order book. Okay, sir. Sir, you mentioned that for an average tenure of your orders is around 9 months. So what will be the average monetary value of an order? Average monetary value of an order, I think it will be difficult to predict an average monetary value of an order considering we have products, projects, large projects. If you divide it by our customers, about 90% of the revenue come from 250 customers. You can take 90% and divide by 250, you get an average value from a customer. Okay, sir. Fair enough. I have some questions on your Technology Product Solutions division. So margin performance of this segment has been very inconsistent for some quarters. So can you please add some color on it? And when will that segment be able to consistently be profitable? You are talking about the gross margins or operating margins? Operating margins, EBITDA margins. Okay. So from a gross margin perspective, we do about northward of 40%. Our technology products basically made about $20 million. So every dollar outside of that is highly accretive. As we move forward, we plan to grow the business in this current year over 20% odd. So if you look at the current fiscal year, it will be equally accretive or more from our 9% guidance perspective that we have called out that will end the current year's time. So I think we expect the year for TPS to be accretive equally or more than the 9% that we are guiding for the year. Okay, sir. Sir, I have one question regarding this. Do you manufacture products or is it outsourced or privately labeled? We have both. We have our own control room products sold under Black Box Enville brand, for which we have an R&D center in Ireland and Bangalore. We do also have contract manufactured product sold under Black Box brand. The focus is, as we move forward over the next few years' time, to focus more on our IP-led product that has higher margin. To that extent, we are again investing in those areas. We just expanded the R&D in Bangalore. We expect the percentage of our own IP products to increase significantly quarter after quarter going forward, and therefore being accretive for us as we grow that business as well. Okay. Sir, one last question. How much of the revenue comes from data center-related solutions? Our revenue from data center solutions last year, correct me if I'm wrong, was close to $150 million. $150 million. It is around $175 million. For the financial. Yeah. Yeah. Okay. In this quarter? This is annual number. Yes, sir. Can you provide us with a number for this quarter? This quarter it should be around $40 million or $45 million. We do not have the exact numbers. It should be around $40 million, $45 million. Fair enough, sir. Thank you. That has answered all of my questions. Thank you. The next question is from the line of Harish Jain, who is an individual investor. Please go ahead. Hello. Yes, sir. You are audible. Yes. Good morning, sir. Sir, I wanted to understand our strategy on the interest part. As we can see that our debt for FY 2024 was around INR 400 crores, but our interest cost was around INR 140 crores. That is 35% of our debt. Even if we include lease liabilities and there are some costs related to lease liabilities in this, still the interest cost is pretty significant compared to the debt we have. What is our strategy to it? I have a second part to this question as well. The interest, like you rightly told, that we have the debt of close to around, let us say, INR 350 crores. Sorry, not INR 350, INR 400 crores. On a INR 400 crores, we have the interest, which is basically in the range of SOFR plus 250 basis points. Then, we have $100 million of the AR securitization facility, which is an off-balance sheet non-recourse facility. That is an off-balance sheet facility. The cost of the securitization of that $100 million also gets accounted for in the interest line. That is why we are not able to correlate the total interest cost with the overall borrowing on the balance sheet of INR 400 crores. So this is where my second question comes in. Our PAT is almost equivalent to our interest cost. Why, as a management, are we bearing such high interest costs when we are so sound in our balance sheet and we have the ability to raise large sums of money? Why do not we, as a management, try to reduce this cost, which will significantly increase our PAT, as we can see that FY 2024 PAT is equivalent to the annual interest cost? No, no. Our interest cost is SOFR plus 250 basis points, and SOFR right now is at around 6% because of the high interest rate environment in U.S., which is not in our control. When the 6% SOFR cost comes down to probably 3%, 4% in next one year time, our interest rate will automatically reduce. Can we reduce the margin of 250 basis points which banks charge? Probably by 25 basis points. There is no scope more than that because that is a reasonable margin of the size of the company we are. Basically, our interest cost is on the AR securitization facility of $100 million, which is off balance sheet, and on the INR 400 crores of the debt which is on balance sheet. How much of this INR 140 crores would be the off-balance sheet cost? I mean cost related to the $100 million facility. Yeah. The $100 million facility will be around 8.5, around INR 70 crores. Okay. We use this facility to convert our receivables, right? Correct. Because basically, our business is we need a working capital to run the business, and for that working capital, it is funded through AR securitization. So the AR securitization facility cost goes into the interest rate. Understood. But sir, do we have any plans to reduce the INR 400 crore debt given that we have INR 200 odd crore in cash as of FY 2024, and then we have raised significant equity? Do we have plan to reduce the debt or we are comfortable with the debt levels? We are as such comfortable at the debt level. But yeah, we will not leave any opportunity where we can reduce our debt. But the idea is to deploy the capital on the growth, because the cost of the debt is only 8%. If we deploy the 8% capital into a better growth in terms of the revenue, which we can churn the cycle on the inventory, on the working capital cycle, we can generate a better return as compared to reduction in the debt. So it is like a trade-off between the business opportunity versus reduction of the debt. So we will continue to look at that. If we have the business opportunity, obviously, we will not reduce the debt. Otherwise, we will park the cash into reduction of the debt. Understood, sir. That's a fair call. I have just one more question. I was reading Facebook's result of last quarter, and they seem to have again restarted the capital cycle. We continue to say that there is a headwind in terms of delay in decision-making. Do we see that changing on ground as of today, given what has happened in what is announced by Facebook? I'll take that. I think, yeah, Facebook did announce increasing capital outlay for this fiscal year by $5 billion. Facebook happens to be a large customer. When we say about the market dynamics, it's not specifically a customer. If we continue to serve Facebook, we expect large orders from them over the next couple of months. That will continue. From an overall perspective of the mix of financial sector, we have exposure to the data center, which is accretive for us. There are manufacturing companies. In totality, including some federal business that we have to our product business, we do see scope of hypergrowth in certain areas. It's a mixed bag, right. We're not expecting anything to fall off from specifically AI-led customers, and therefore we are investing heavily. If you see on our data center solutions network refresh, which is now becoming wired, wireless, and more software-defined, we're adding capabilities. Adding go-to-market to specifically industry vertical solutions is largely at the back of that, because some industries will do well while some will not in a certain environment. We are agnostic to industry. We are, of course, lucky from that perspective that this is a digital infrastructure decade. There's a lot of data centers getting built, and therefore we have taken a call to make strategic investments. Some investments take time. These are large customers. The selling cycles sometimes are six, nine months. But once you are in, you're in for a long haul. We'll continue to look at those opportunities, those sectors that have seen hypergrowth, be it semiconductor, be it AI-led data centers, be it large infrastructure build-outs. Black Box is very well suited with experience to serve those. While some of the other sectors might have some headwinds, be it the banking sector, be it the federal or other industries. We believe that we have a good potential for us to grow with the portfolio we have, with the customer set that we have. We need to bring in high-quality talent, which we are doing at this time. We wanted to get deeper with our customers, which we are doing. As I said before, we expect as we move forward in this fiscal year, the second half, of course, we will catch momentum. Going forward in the next year, of course, we'll catch more momentum because our investment would have started to mature and become more accretive. Understood, sir. That is all from my end. Thank you. Thank you. Ladies and gentlemen, you may press star and 1 to ask a question. The next question is from the line of Payal Shah from Billion Securities. Please go ahead. Good morning, sir. Thank you so much for the opportunity. I have two questions. First, I just wanted to understand, apart from data centers, which of our business has a good headroom for growth and what has been the trend in that particular business? I think from a solutions perspective, our data center business has growth. Our networking business, both on the wireless side and both on the wired side, private entity, large infrastructure rollouts are accretive. Our hi-tech business, we serve customers like Intel. They are expanding their fab plants, their semiconductor plants. These are high accretive areas for us. More importantly, most of our solutions are actually supporting mission-critical operations, be it networking. If you look at the next generation applications will require high-speed connectivity, high-speed network. We all know that we want to have very fast internet. We want our application on our devices to run faster. Black Box is in the business of creating that digital highway on which this runs. Now some industries are making bigger investments, some are making late investments. But in general, we believe the next five, seven, 10 years' time would be the era for creating next-generation infrastructure. Be it in India, airports getting built which will be connected. We have face recognition. We have video cameras on the streets. Now these are Require heavy investments in infrastructure so that we are able to have those connectivity and the network to transport a massive amount of data to ingress and analyze. I think we are in the forefront of building those infrastructures across industry verticals. Some putting larger capital outlays, some putting smaller, but nevertheless, there is going to be a change sooner or later over the next five, seven, 10 years' time to rehaul this infrastructure. Therefore, we believe we are at a very good spot to capitalize on this over the next several years. That's quite helpful, sir. My next question is, in our consolidated revenues, how much contribution would be from the inorganic acquisitions we have done in the past, and how much would be organic? No, we haven't done any inorganic in the past year or so, right? Barring a small $4 million or so that we did, this is largely organic. Going forward, as I said, in two parts, we expect our current focus is on organic growth, double digits taking us to from a current $800 million kind of a run rate going to $1.1 billion-$1.3 billion. Inorganic is opportunity-based, based on being accretive. Our goal of getting to $2 billion does have an inorganic element to it, but our current focus is to put our heads down, get into our organic growth, maintain our profitability benchmarks, get to our 9%-10% goal that we have. As and when we feel that we are ready, we got something which is accretive for us from inorganic perspective, we will do that. But that's not our everyday focus at this time. Our current focus is to grow organically. That is quite helpful, sir. That is it from my side. Thank you. Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Sanjeev Verma for closing comments. I would like to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with us or our Strategic Growth Advisors, our investor relation advisors. On behalf of Black Box Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.