Chairman's Remarks

Chairman's Remarks

Dear Analyst,

It is my pleasure to highlight the business performance of the Sasken Group for the fourth quarter ended 31st March 2016.

We must point out that certain statements made here or those we make subsequently in response to your queries concerning our future growth prospects are forward-looking statements. Please read the Safe Harbor clause in the second slide of our presentation for full details.

Let me begin by walking you through our financials for the Fourth Quarter Fiscal 2016. In the Fourth Quarter of Fiscal ‘16 the consolidated revenues for the Sasken Group declined by 5.1% over the previous quarter to Rs. 119.82 crores. Consolidated Earnings before Interest, Depreciation, Taxes and Amortization cost for the fourth quarter fiscal ‘16 were Rs. 9.53 crores, a decline of 36.4% sequential. Consolidated PAT for Q4 fiscal ‘16 was at Rs. 174.63 crores, up by 1,451.5% over the previous quarter. PAT margins for the quarter were 145.7%. Software Services revenue for the quarter were at Rs. 115.79 crores, a decline of 3.7% over the previous quarter. Software product revenues for the quarter were Rs. 3.18 crores, a decrease of 39.8% over the previous quarter. Services EBITDA margin for the quarter was at 10.8%. Product EBITDA margin was at -86.7%. For the financial year 2016, the consolidated revenues were at Rs. 483.17 crores, up by 12.9% over the fiscal 2015. Earnings before interest, taxes, depreciation, and amortization charges were Rs. 47.17 crores, up by 46.3% over the previous financial year. The consolidated profits after taxes for the fiscal ‘16 were Rs. 206.29 crores, up by 72.5% over the previous financial year. PAT margin for the full year were at 42.7%. For the full year, software services revenues were Rs. 460.06 crores, up by 11.1% over the previous year and products revenues were Rs. 200.7 crores, up by 69.1% over the previous financial year. EBITDA margins for the services business was at 10.8% and for products business was at -12.5% for the full financial year for fiscal 2016. Consolidated earnings per share for the 4th quarter were approximately Rs. 98.55 and for the full year, EPS works out to be Rs. 107.14. Cash and cash equivalents were approximately Rs. 372.84 crores as of March 31st, 2016.

Litigation

Your Company has reached a settlement with a Non-Indian Licensee in connection with the unauthorized use of Sasken’s Protocol Stack IP by them. This settlement brought to an end, the ongoing arbitration and terminated all ongoing obligations of the parties under the relevant agreements. Towards this end, your Company has received a sum of USD 45 million in March, 2016.

People

On the people front, the headcount for the Sasken Group stood at 2,118 as of March 31, 2016. We continue to attract and retain talent comprising both freshmen and laterals. Our effort in increasing employee engagement is expected to stem attrition, which currently stands at 20.3 % for trailing twelve months. We will continue to invest in our people and maintain their technology edge to ensure our talent is the best in the market.

Utilization for the quarter averaged 79.2% and is expected to marginally improve in the coming quarters.

Customers

We have successfully added 12 new customers during the quarter taking the total number of active customers to 134.

I will now provide key highlights related to our services business.

We continue to consolidate and build on our reputation as a leader in providing engineering research and development services to a wide spectrum of global corporations. Our deep roots in the semiconductor industry combined with an unparalleled knowledge of ‘connectivity’, ‘multimedia’, ‘modems’ and ‘device software’ puts us in a unique position to engage with several segments, downstream from the inception of silicon platforms. We have made progress in entrenching our position in the Devices segment, while building a strong customer base in the Auto
and IoT segments. A stellar example of such a project is the auto grade Linux based IVI system we are developing for one of the largest semiconductor vendors. In Auto electronics, we continue to engage with multiple Tier 1 auto OEMs and support the development and enhancement of several auto infotainment and telematics platforms.

On the devices side, our portfolio of offering covers all device categories from smart to rugged devices. We are working with one of the largest rugged device OEMs to build next generation products on new silicon platforms. Additionally, we are enabling upgradation of their existing products to the latest release of the Android Operating System for another OEM. In the wireless network space we continue to develop, enhance and maintain radio networks for railways based on the GSM-R technology. In the satellite segment we continue to be entrusted with turnkey product development of the next generation satellite terminals.

In Fiscal 2017 the rejuvenation of our portfolio of offerings based on the outcome of strategy consulting engagement with a globally leading consultant will gain momentum and open new vistas for growth.

Testing plays a pivotal role in shortening product commercialization timeframes and enhancing reliability both of which are of fundamental importance in the hypercompetitive markets. Our ability to offer a bouquet of Independent Testing Services that are supported by our test automation platform is highly valued by our customers. We are providing testing and product quality assurance services for a leading multilingual messaging services provider across all mobile platforms. OEMs spanning from smart to rugged devices and semiconductor vendors continue to rely on our services for comprehensive product quality, inter-operability and field testing of devices. In the Digital IT arena, we are engaged with a large Greenfield telco to test and ensure the reliability of their application and messaging platforms. We have begun to address the test requirements emerging from next-gen Industrial Automation and IoT platforms and expect customer traction to increase in these areas.
In the Digital IT space, we continue to chip away and make inroads in Application Development and Data Analytics. We have been entrusted with the development of Fleet Management mobile application by a large and diversified conglomerate servicing global auto OEMs. We have made forays in the point of sales market and work with a diversified Japanese corporation to build mobile Point of Sale (mPOS) tablet applications. Our insights platform based offerings continues to help a leading European MVNO achieve a significant reduction in operational cost. We have entered into partnerships with a leader in cross-platform development software and another who is a front-runner in data visualization products. As we continue to widen our ecosystem, we will be better positioned to scale and grow our business especially as bridging the physical and digital world becomes a business imperative in the era of platforms.

We thank you for your interest in Sasken and your continued support. My team and I are committed to always hold all our stakeholders in trust.

Rajiv C Mody
Chairman, Managing Director and CEO
Sasken Communication Technologies Limited