Tata Communications Ltd

NSE:TATACOMM

Earnings Call Analysis

Strong Q1 Growth with Focus on Data Services

In Q1 FY '25, Tata Communications saw an 18.1% increase in consolidated revenues and a 140-basis point improvement in EBITDA margins, reaching 20%. Data revenues grew by 20% year-on-year and Digital Services surged 51.5%. Despite a challenging macro environment, the company is optimistic about maintaining EBITDA margins at 20% for the rest of the year, with ambitions to reach 23-25%. Notably, the order book showed significant growth driven by large deal wins. Net debt stood at INR 9,611 crores with a net debt to EBITDA ratio of 2.2x.

Introduction

Tata Communications had a strong first quarter in FY '25, showcasing significant growth and improvements across various metrics. This earnings call transcript highlighted the company's consistent performance and strategic efforts to ensure sustained profitability and relevance in the market.

Revenue and Margin Growth

The company reported an 18.1% year-on-year increase in consolidated revenues, reaching INR 5,633 crores. EBITDA was up by 9.8% year-on-year, with a margin improvement of 20%, an increase of 140 basis points quarter-on-quarter. Specifically, data revenues grew 20% year-on-year. The core connectivity sector, however, faced some challenges due to external factors such as cable cuts in the Red Sea .

Digital Services Performance

Digital Services saw notable growth, with revenues increasing by 51.5% year-on-year and 2.9% sequentially, reaching INR 2,144 crores. The MOVE platform, in particular, experienced a fourfold growth over the past year, driven by its integration in segments such as MVNO, MNO, and auto OEMs. Despite some seasonal declines in CIS and global CPaaS market, the overall performance of the digital portfolio was robust .

Strategic Initiatives and Acquisitions

Tata Communications has reclassified its SASE business to align with internal structures and market trends. This move aims to capitalize on the convergence of SD-WAN and security services under a unified SASE umbrella. The integration of acquisitions like Kaleyra has contributed positive synergies, particularly in improving EBITDA margins and order book growth .

Profit and Cash Flow

Profit After Tax (PAT) for the quarter stood at INR 333 crores, with margins at 5.9%. Despite a 12.8% drop year-on-year, this quarter saw a 3.6% increase quarter-on-quarter, bolstered by an exceptional gain of INR 84 crores. However, free cash flow was negative at INR 385 crores due to increased working capital needs, primarily driven by the new entity, Novamesh .

Debt and Capital Expenditure

Net debt for the quarter was INR 9,611 crores, with a net debt to EBITDA ratio of 2.2x. Capital expenditure for the quarter was INR 541 crores, although the approved CapEx stands at INR 706 crores. The Return on Capital Employed (ROCE) was 17.5%, a decline of 130 basis points quarter-on-quarter. This decline is attributed to the capital impact of recent acquisitions, which are expected to yield better returns in the future .

Focus on Future Growth

Despite macroeconomic challenges, Tata Communications remains confident in its future prospects. The company aims to sustain EBITDA margins at 20% for the rest of the year, with potential growth to the 23-25% range. Strategic reviews and optimization efforts are being implemented to capture multiyear growth opportunities, including areas like AI cloud and enhanced collaboration experiences .

Conclusion

The quarter wrapped up on a positive note, with the management expressing confidence in the company’s products, market strategies, and future profitability. The earnings call underlined the company’s commitment to leveraging its digital fabric to meet evolving market needs and deliver consistent value to shareholders .

Earnings Call Transcript 2025-Q1

[Operator]

Good afternoon, everyone, and a very warm welcome to you all. Thank you for participating in the Q1 FY '25 Earnings Call for Tata Communications. We are joined today by our MD and CEO, Mr. Amur Lakshminarayanan; our CFO, Mr. Kabir Ahmed Shakir; and our Head of Investor Relations, Mr. Rajiv Sharma.

The results for the quarter ended 30th June 2024 have been announced yesterday, and the quarterly data pack is available on our website for your reference. We will begin today's call with opening remarks from Lakshmi on the business performance and outlook, followed by remarks from Kabir on the company's financial performance.

[Operator Instructions] Before we begin, I would like to remind everyone that some of the statements made in today's call may be forward-looking in nature and are subject to risks and uncertainties. A detailed statement of these uncertainties are included in our annual filings on our company website. The company does not undertake to update these forward-looking statements publicly.

With that, I would like to invite Lakshmi to share his views. Thank you, and over to you, Lakshmi, for your opening remarks.

[Amur Lakshminarayanan, executive]

Thanks, Sudeshna. Good afternoon all, and welcome you to the Q1 FY '25 earnings call. I'm happy to share that our consolidated revenues grew by 18.1% year-on-year and our EBITDA is up 9.8% year-on-year. Our PAT is higher by 3.6% Q-on-Q. This quarter, Switch completed 12 months of acquisition. And with DIGO and Kaleyra operating as a single unit, we are discontinuing providing financials as underlying and reported and moving back to only reported numbers.

Our EBITDA margins came in at 20%, an improvement of 140 basis points quarter-on-quarter. Consolidated EBITDA is up 6.4% Q-on-Q and 9.8% year-on-year. Consolidated EBITDA margins improved by 140 basis points Q-on-Q, largely driven by improvement in data EBITDA margins, which improved by 90 basis points to 19.3%.

The improvement of NR margins and early gains from strategic review of subsidiaries have helped us achieve margin improvements. Our core margins, excluding subsidiaries and Kaleyra, were at 23.3%, well within our ambition range of 23% to 25%.

Our efforts will be to keep the EBITDA margins at 20% for rest of the year and improved from thereon. Overall, data revenues grew at 20% year-on-year and 0.8% Q-on-Q. Core Connectivity accounts for 54% of data revenues and Digital Services account for rest of 46% and are very much in line with our stated ambition.

Core Connectivity revenues this quarter were affected by cable cuts in Red Sea. Before I deep dive into Digital Services, let me talk about order book and funnel. Our funnel continues to be robust. Our funnel comprises of 59% of digital platforms and services and 41% of core connectivity services. This quarter, our win rates have been -- have seen a healthy jump for India operations and improved marginally for International segment. Our order book, which has been flattish for the past few quarters has seen a very good growth this quarter, largely driven by a couple of large deal wins.

That said, macro challenges continue to exist. While opportunities exist in the market, decision-making at enterprise level is slower, resulting in longer lead times. Order book from OTT and SP segments continue to be lumpy in the last couple of quarters.

Separately, let me remind you that with the CIS becoming a large part of our digital portfolio, a good part of the revenues is usage revenues, and they aren't reflected in the order book. To sum up, we are very encouraged by our step-up in the order book, win rates and our funnel looking good.

Coming to the digital portfolio performance. This quarter, our revenues came in at INR 2,144 crores, up by 51.5% year-on-year. Sequential revenue growth improved from a negative 0.8% in the previous quarter to 2.9% this quarter. Overall, the DPS portfolio growth has been broad based. There is a marginal decline in CIS, primarily driven by seasonality and muted growth in the global CPaaS market. We are pleased to report that our incubation business revenues were up 20.4% Q-on-Q.

One specific highlight has been our MOVE platform, which has grown 4x over the last years, driven by good traction in the MVNO, MNO and auto OEM segments. Embedded connectivity segment is in its early days. We are constantly adapting and realigning to market changes and trends in line with the same.

We have done a reclassification of our SASE business. Earlier, SD-WAN was part of Next Gen and Secured Service Edge, SSE was part of the cloud and security in our reporting. With SD-WAN and SSE converging under SASE and SASE being an overlay security product, we are now including SASE under cloud and security.

This aligns with our internal structure and review processes as well. We have provided a recasted numbers for the last 8 quarters. Cloud hosting and security revenues increased by 4.2% Q-on-Q and Next Gen revenues are flat due to the aforesaid reclassification and also some customer-specific issues and delays. I expect this to pick up from the next quarter. A significant win in this quarter that I want to highlight is in the BFSI space. This deal is the largest ever enterprise deal that we have won. To add some more color on this deal size, the ACV is nearly 4x of our earlier largest enterprise deal.

We are working with the customer for SOC modernization. The SOC will be built on the pillars of maximum automation and minimum disruption. What helped us stand out in this deal was our deep understanding of the customer, a demonstrated skill set of automation capabilities using our in-house IPs, the threat intelligence and other use cases, our operating model that brought agility to meet the bank's business needs.

This win reflects how being a B2B specialist is a deep moat for us and helps us differentiate ourselves from competition. Media business revenues grew 9.2% Q-on-Q. The ICC T20 World Cup in Americas and Caribbean was a coming together of Tata Comm and Switch capabilities. Our global delivery integrated with Switch local operations support was a valid proposition that resonated well with the team at Star and ICC, and they could appreciate the combined strength that we could offer in comparison to other providers.

We remain confident about our data growth ambitions as it continues to be driven by our expanded portfolio of capabilities as well as our increasing customer relevance. Our strategy and focused execution towards increasing customer relevance and expanding to multiple buying centers within the organization is boding well.

Our acquisitions and organic capabilities have made our digital fabric more relevant to the enterprises today as we help them to solve challenges with their cloud strategies, helping them to deliver better customer experience and simplifying their network transformations. We believe that our global digital fabric is a powerful concept which our enterprises, particularly in the international markets are beginning to realize.

With our digital fabric, we are addressing numerous issues that businesses are facing. We are confident about the larger opportunity. And with this strong conviction, we will continue to improve and derive value from investments and continuously augment our capabilities.

With that, I'll request Kabir to share the financial highlights.

[Kabir Shakir, executive]

Lakshmi, thank you. Good afternoon, everyone. I will discuss the highlights of our financial performance for the quarter. The first quarter of FY '25 directionally offers a positive start to the new fiscal year with 2 aspects proving to be formidable.

First is the sequential improvement in EBITDA margins and second is the improvement in data growth, particularly digital services. Getting both together, which is data growth and margins on the upward trajectory is exactly what we need to deliver on a consistent basis.

With our investments in growth, we are well poised to grow despite a challenging macro and remain confident about doubling data revenues by FY '27. I would like to bring to your attention that TCL stand-alone financials are not comparable with earlier quarters due to the creation of the new entity, Novamesh. Our consolidated revenues for the quarter stood at INR 5,633 crores, improving by 18.1% year-on-year and declining by 1% on a sequential basis.

Data revenues for the quarter stood at INR 4,694 crores, improving by 20% year-on-year and by 0.8% on a quarterly basis. Digital Services revenues improved 2.9% sequentially and were up 51.5% year-on-year. Almost each fabric has contributed to the growth of the digital services.

Net revenue margins have been steady, given our focus on operating leverage drivers. Our EBITDA margins for the quarter were at 20%. And as Lakshmi said, our efforts will be to stay in that range of 20% for the rest of the year, delivering a consistent improvement over prior year.

We benefited from an improvement in NR margins, cost savings from termination of loss-making contracts in TCTS and one-off reversal in employee cost this quarter. Going forward, as we benefit from synergies from acquisitions and begin realizing operating leverage from our organic investments, we see us meeting our EBITDA margin aspiration of 23% to 25%.

Our focus continues to be on creating elbow room and capacity for multiyear growth as we're ready to participate in new opportunities, including AI cloud. PAT for the quarter stood at INR 333 crores, and PAT margins were at 5.9%.

Our PAT was up marginally by 3.6% quarter-on-quarter and lower by 12.8% year-on-year. PAT benefited positively from an exceptional gain worth of INR 84 crores this year. Based on recent developments, there is a gain of INR 186 crores from the reversal of provision we took in third quarter of FY '24 towards interest on tax of variable license fee based on the Honorable Supreme Court of India's judgment.

This is negated to the extent of INR 103 crores up by a provision taken for impairment pertaining to an investment in assets held for sale. Free cash flow for the quarter was negative INR 385 crores, primarily driven by an increase in working capital. This increase in working capital is driven by our new entity, Novamesh, as it stabilized itself and an advanced payment pertaining to a strategic deal in digital services.

Net debt for the quarter stood at INR 9,611 crores, and net debt to EBITDA is now at 2.2x. Cash CapEx for the quarter stood at INR 541 crores, though our approved CapEx is close to INR 706 crores. ROCE came in at 17.5%, a decline of 130 basis points quarter-on-quarter as capital employed has increased due to 9 months of Kaleyra acquisitions.

The ROCE numbers will witness a further dilution in the next quarter as the full impact of Kaleyra gets baked in before it starts to improve. Moving to subsidiaries. TCTS revenues declined by 17.9% year-on-year due to the termination of a large loss-making contract, which we had called out earlier. The profitability of the business improved because of this termination. From a base of FY '24, the current full year impact of termination on consolidated financials would be 250 basis points of negative impact on growth, but a 70 basis points of positive impact on EBITDA.

Our payment business is now completely on a franchisee model, and we have been PBT-positive for the last 7 consecutive months, and the business has reported a healthy double-digit EBITDA margin of 10.4% this quarter. Driving capital allocation across the organization with an eye on return for every penny invested continues to be our focus area.

With a robust capital governance framework, we are investing in the right opportunities to help us stay ahead of a disruptive technology curve. Our investments today are helping us participate in megatrends such as the AI cloud and enhanced collaboration experiences. At the same time, we are also optimizing resources through our ongoing review, a strategic review of our businesses and subsidiaries. We are confident that these levers will enhance our moats and help us continue to improve profitability and provide the best value to our shareholders. I will now ask Sudeshna to open the forum for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Sanjesh Jain from ICICI Securities.

[Sanjesh Jain, analyst]

And it's good to see a margin improvement to 20%. So first question on the margin. Can you help us with the bridge because operating leverage clearly was not there in this quarter. So it should have come from the synergy benefit from the Kaleyra, which some one-off costs we booked related to acquisition in previous quarter, product mix and one-off in the employee cost.

Can you help us understand what all contribution did each of these elements had? And when you said 20% is sustainable for the rest of the year despite ongoing investment, so what is that makes you confident that these margins are sustainable? It's more operating leverage? Or you think there is more synergy benefit, which is yet to come?

[Kabir Shakir, executive]

Yes, I'll start off with that, Sanjesh. Firstly, I mean, as I explained in my commentary as well, there are a little bit of a one-off cost on -- on employee costs, which contributed in. But let me take the easy ones out first. The impact on TCTS, the loss-making contract, which I called out for the full year [Technical Difficulty] basis points. For this quarter, it's only 10 basis points. So the benefit we had was only small of 10 basis points. When I mentioned operating leverage drivers, I had also spoken about this in the previous quarters that we have a glide path for every tower as to what the destination portfolio is and what are the drivers that will take them to the destination margin for each of them.

I'm confident that a lot of those drivers are kicking in, and this is getting reviewed by the business, and we are very, very diligent about that.

So looking at the progress of that is what I had actually called out that the operating leverage drivers are kicking in, and that gives us the confidence that we will be able to [Technical Difficulty] for the rest of the year, deliver a consistent improvement over last year.

If we need to get to [Technical Difficulty] in the medium term, very clearly, it's not going to all come in, in the final year. There is going to be an organic move towards this. So there were certain costs that were spent in the prior year. Hopefully, from where I sit today, I don't see those costs coming back in.

I don't know a new acquisition spend on DD that may change. But as of now, I don't see any of them. So I'm confident that we will be able to maintain that at 20%. Likewise, all other growth that we are expecting and therefore, as a result of that, the operating leverage kicking in is also something which is actually factored in, which gives us the confidence that we will able to get to 20% for the rest of the year.

[Sanjesh Jain, analyst]

It appears, Kabir, that we can actually do more than 20%. Will that be a fair assumption if revenue growth kicks in as we are anticipating?

[Kabir Shakir, executive]

Well, if that happens, that's good, but let's be cautious with what we see on one forecast as of now, it is -- that's our endeavor as of now.

[Sanjesh Jain, analyst]

Great. Great. Now switching to the revenue where I think we are yet to see the kind of positive surprise. Lakshmi, you said in last quarter that there was a very healthy order book in the enterprise business, while this quarter had a decline of 5.6% quarter-on-quarter. And again, on a year-on-year basis, if we adjust to the acquisition, the growth appears not so exciting.

The same again, goes for India Y-o-Y growth of only 2.5%. While we were very confident on these 2 segments, while these 2 segments still doesn't look like a firing like what we thought.

[Amur Lakshminarayanan, executive]

So Sanjesh, I'm not sure if I said anything about the order book in the last quarter. I've been saying that in the last few quarters, it has been flattish. And in fact, on the Investors Day, I said we only had a marginal growth of 2% or something is what i said.

[Sanjesh Jain, analyst]

Correct, correct.

[Amur Lakshminarayanan, executive]

This quarter, I called out that we had a healthy jump in our order book. This quarter did not see a decline. This quarter saw a very healthy jump on the order book. Even though it's on the back of a couple of large orders. One of the orders they can start to realize revenues, some parts of it this year.

But the other order, I think we actually published that, it is World Athletics and World Athletics the first event is in Tokyo next year. So it's an order booked this year. There might be some revenues coming in, but the larger part is from next year onwards.

So the order book, we are very pleased about the order booking that we have this quarter. I wouldn't call it momentum because, again, as I said, is back on -- on back of 2 or 3 deals, but the funnel is looking good. Our engagements are good. So we just have to continue to execute regardless of what the macro conditions are.

[Sanjesh Jain, analyst]

Again, Lakshmi, touching upon even last year when in an analyst meet you said that order book sales funnel growth was upwards of 100%, while order book was just 3% growth. You did try to explain in the call. But still, that conversion is looking very painful for us or much slower than probably what we have thought. Any discussion there, which highlights that things can improve materially?

[Amur Lakshminarayanan, executive]

Sanjesh, I'm not sure, if I ever said, our funnel was 100%.

[Sanjesh Jain, analyst]

No, you had a slide in that analyst meet.

[Amur Lakshminarayanan, executive]

100%?

[Sanjesh Jain, analyst]

Yes, I think it's for digital services, if I'm right.

[Amur Lakshminarayanan, executive]

Anyway, I think Rajiv and team will clarify the data point. I continue to maintain that the order -- the funnel is looking good. So I'm not sure what the conversion has been slow, Sanjesh, there's no doubt about it.

This quarter, again, I repeat what I said has been very good and very healthy. I think one of the other characteristics of the orders, particularly when it comes to the network is the fact that largely enterprises have a cycle of 3, 4 years before they catch it.

It's not like applications and other things, if they have 100 applications, they can outsource 50 at any time and keep the rest or decide. So this comes in various cycles. That is one. Second is in infrastructure, it is -- I said in the Investors meeting, it's like touching live wire. And if it isn't broken, don't fix it, is another attitude when it comes to these.

So there are multitudes of factors that go into why there are delays besides the macro conditions. But all I would say is that the funnel is healthy. We are increasing our engagement with our customers, particularly the G50 customers, which largely used to be India-centric. Now we are expanding our relationships with them across the globe. So these are all good indicators of our engagement with the enterprise segment.

[Sanjesh Jain, analyst]

Are there any comment on India Lakshmi that would be my last question.

[Amur Lakshminarayanan, executive]

No. Again, India is healthy. I mean, this quarter is a blip due to the one-off we had in Q1 of last year. But I wouldn't read anything to it. India is still quite strong funnel, and we will end up strong.

[Kabir Shakir, executive]

Also, I'll just remind Sanjesh and to all others as well, our TCL stand-alone numbers are not comparable because of this split we have done with some businesses into Novamesh. So we need to be a bit careful reading those numbers.

[Sanjesh Jain, analyst]

No, no, I am reading from our data pack sheet, where we resegregate between India and international.

[Operator]

The next question is from the line of Vibhor Singhal from Nuvama.

[Vibhor Singhal, analyst]

Am I audible?

[Amur Lakshminarayanan, executive]

Yes, yes, Vibhor. Please go ahead.

[Vibhor Singhal, analyst]

So a couple of questions from my side. One is on the growth part. So Lakshmi, any -- again, any color on the CPaaS business, which you know it mentioned that there were global engines and seasonality in the business in this quarter. But what is the outlook for this sector in the near future? I know the medium to long term, I think we are excited about the space. But what would this be, let's say, in the near term in the next 2 to 3 quarters given the global focus on profitability, the global platforms [indiscernible] profitability? And how do we see this going, let's say, in FY '25?

[Amur Lakshminarayanan, executive]

Short answer is we will grow, Vibhor. I think there are customers that we are acquiring. And since it's a usage business, it depends on the how the usage picks up. But we are winning deals in Kaleyra, which will help us to grow despite the overall CPaaS market being muted globally. So we will end up growing.

[Vibhor Singhal, analyst]

Right. Any specific domains where we are kind of targeting a market share gain or anything that you could probably throw light on?

[Amur Lakshminarayanan, executive]

Any specific regions? Or what did you -- what is your question?

[Vibhor Singhal, analyst]

Let's say, I mean, in terms of WhatsApp or let's say, any other domains what I meant is that we are looking...

[Amur Lakshminarayanan, executive]

So yes, so we -- the Kaleyra platform, bulk of the revenues is in SMS. So that is what is in Stage 30 as we call it, and that is where we are actively going to market. The other channels of voice, WhatsApp, RCS and e-mail, we have reached what we call a Stage 1. So the products are built out. The MVPs are used by now some anchor customers, and it will take some time to move to Stage 3 and 30. So the large part of the revenues will come from the SMS channel even though we are acquiring customers on the other one, but the scale will happen through the SMS.

[Vibhor Singhal, analyst]

Got it. Got it. And just a small, I mean, clarification. Now that we moved the SD-WAN part from Next Gen connectivity to the cloud and security bucket. If I remember correctly, the cloud and security bucket used to be predominantly India business. Would the same hold true also or a good amount of mix in SD-WAN business was outside India and hence, cloud and security would now be kind of more -- I mean, would include more of global revenue than just being purely Indian?

[Amur Lakshminarayanan, executive]

Yes. In cloud and security, all of the SD-WAN, SASE and largely the other aspects of security is all global. Our IZO Private Cloud is India focused. In security portfolio, we have a SOC and a cloud SOC offering that is largely for India. Even though in cloud SOC, we have acquired now some international customers, which again, I would say, is in Stage 1 and not rolled out to all the geographies yet.

[Vibhor Singhal, analyst]

Got it. Sure, that's helpful. Just one question for Kabir. Kabir, you mentioned that, I mean, a solid performance on the margins this quarter. So you mentioned that we are looking to remain at that 20% level margins for the remaining part of the year. Does that mean, I mean, the margins would stabilize at these levels or you meant that probably there would still be some margin expansion through the remaining quarters?

[Kabir Shakir, executive]

Well, I mean we are expecting to grow our margins towards our 23% to 25%. So you should see an organic inch up in that, but it will be in that range. I'm hoping in that this will not go below 20%. So we were at 18.6%, if you remember, last quarter. We increased it to -- it up because our ambition, as we said, is to get back there and the sooner we get is what is important.

So there are multiple levers that we're going to do organically, driving all the operating leverage drivers that I mentioned before. Strategic review of subsidies that we are talking about. We have done one of them already, and we will continue to do the rest, plus the cost synergies that we need to get. So there are a lot of levers and a lot of balls in the air, Vibhor, if I may, which gives me the confidence that we should not go below 20%.

[Vibhor Singhal, analyst]

Right. But if I were to just maybe probe a bit further. I don't want a number, but directionally, should we be able to improve margins from the 20% levels in the remaining 3 quarters of the year?

[Kabir Shakir, executive]

I would say, yes.

[Amur Lakshminarayanan, executive]

Just to elaborate on the CPaaS even though I said that SMS is where we anticipate bulk of the growth this year. That is based on some of the -- and I did mention that we are acquiring customers and they focused on some of the larger deals there.

But also, we are equally focused on margins. So it doesn't mean that some as growth means it will come at a margin dilutive. So in the Kaleyra, we're very happy about the integration efforts on platform engineering and the product road maps.

Our focus will be to derive all the benefits of the synergies on cost and so on. But already, the synergies on go-to-market is playing out. We have acquired some large deals, and that is what gives us the confidence that we can grow and grow profitably.

[Operator]

[Operator Instructions] The next question is from the line of [ Prateek Dugar]. Prateek I will request you to please identify your firm name.

[Unknown Analyst]

Okay. So I'm from IntelSense. And first of all, I'd like to congratulate the management for the good set of numbers. And I had two questions. First question is a bit contextual. I just wanted to understand our total addressable market for the SASE-based offerings because with some large companies in the U.S. like Palo Alto had signed 8-figure deals in the past. And we also had a partnership with Fortinet wherein Fortinet has in its PPT, given projections about the entire security networking and the unified SASE market, they are expecting it to be a $208 billion kind of a market by 2027. Are we actually working anything in this domain? I mean do we have any offerings in this domain?

[Amur Lakshminarayanan, executive]

Yes. Prateek, we have two offerings in this domain. One is what we call as a hybrid SASE. Even today, very large enterprises are looking to see how to bring together a best-of-breed solution, which means that they might take an SD-WAN from others or a Cisco and bring the SSE and other security solutions from players like Palo Alto or Zscalers and so on.

That is what we call as a best-of-breed solution. And that is an offering that we have already reached Stage 30. We have implemented fairly large-scale solutions globally for customers. The new offering that we have launched is what we call as a unified SASE, which is a single vendor and a single pass SASE as they call. And that we have launched in partnership with Versa. And that's a global launch that we did, and we've already got a couple of customers signed up.

And that, in our opinion, would be large towards the mid-tier customers in the international markets, but can -- so that is where these two will fit. We have created a special team that has a GTM responsibility for this. So we are very actively focused on this market.

[Unknown Analyst]

Okay, sir. And the other question was like in our last con call, we had mentioned about replacing incumbents and some certain challenges that you were facing in regards to the awareness levels about our solutions. So if you could just give any progress on that front and share some of the name of the incumbents or giving more flavor about the total addressable market in that area?

[Amur Lakshminarayanan, executive]

Yes. Let's -- I have to give you a very detailed answer for that. I think the incumbents are dependent on the geographies that we compete in. But largely, the global players when it comes to the network modernization of underlay as well as the overlay implementing either hybrid or unified SASEs, we see the major players of being NTT, Orange, Verizon, and the usual suspects in that space. So those are the big competitors globally.

We have -- as I said, we have a challenging position in the international markets and relatively a small presence compared to them. But we are very confident because we have something very unique in our underlay called our IZO WAN proposition where we are able to offer a very high-performing network with SLAs on Internet and so on.

And similarly, on the overlay part of SD-WAN and SASE, we have a great experience and being a very B2B-focused company, we bring the best of both the network, we bring the best of tooling and technologies and some of the IPs we have created there and bring some of the service capabilities that these large organizations require. And that is what we think will be a winning mix in the market.

[Operator]

Thank you, ladies and gentlemen. This brings us to the end of the Q&A session. I would request Lakshmi to please share his closing remarks.

[Amur Lakshminarayanan, executive]

Thank you, Sudeshna. I think I would sum up the quarter as a very robust execution. We have seen an uptick in EBITDA from the 18.6% to 20%. We have seen from a decelerating Q4 in digital and data revenues to an uptick again.

Year-on-year, it's been an excellent acceleration. Across the digital portfolios, most portfolios have kicked in, be it MOVE or in the cloud and security portfolio. And of course, with CIS aided through the inorganic good. The other portfolio of Next Gen connectivity, as I said, was a blip and will pick up in the coming quarters.

So overall, we feel very confident about the products in the portfolio and our engagement in the market, and we'll continue to execute on the strategy. Thank you.

[Operator]

Thank you, Lakshmi. This brings us to the end of the call. In case of any queries, please write to [e-mail]. Thank you for joining the call, and you may now disconnect your lines. Have a good day.