Release Date: May 03, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Subex Ltd (BOM:532348, Financial) maintained profitability in its core telco business despite overall results being below expectations.
- The company achieved an 8% year-on-year margin expansion in its core business due to significant cost optimization efforts.
- Subex Ltd (BOM:532348) reported a positive normalized profit after tax (PAT) in Q4, reflecting operational improvements.
- The company has a healthy cash reserve, providing flexibility for decision-making in uncertain environments.
- Subex Ltd (BOM:532348) secured strong wins, including a new logo in Europe for its Hypersense fraud management product and extended managed services contracts with tier-one customers.
Negative Points
- Overall revenue declined by 8% year-on-year, primarily driven by the non-core business.
- The company faced challenges with delayed order intakes and longer sales cycles due to macroeconomic conditions.
- Subex Ltd (BOM:532348) recognized an impairment allowance of 16.89 crores on disputed trade receivables, impacting financial results.
- The non-core business, particularly the SE division, continues to be a drag on profitability.
- There is ongoing uncertainty regarding the closure of certain contracts, which may lead to additional cash burn.
Q & A Highlights
Q: What is the status of the pre-closure of the two big contracts in the Sudre Digital LLP, and what about the impairment allowance for trade receivables?
A: One of the contracts has been pre-closed, and the impairment allowance of 16.89 crores is related to this. The Myanmar contract is not part of this impairment. The second contract is still under negotiation, and while efforts are being made to pre-close it, it may not be possible to exit entirely. The cash burn for this contract is estimated to be around 300k, but this could vary depending on the negotiation outcomes. (Respondent: Unidentified_3)
Q: What are the products Subex is offering in the telecom market, and what are the plans for addressing adjacencies for growth?
A: Subex offers products in business assurance, fraud management, partner settlement, and AI solutions primarily for fraud management. The fraud management market is growing at 39% CAGR. Subex is also addressing telco adjacencies, particularly in telco fintech, by providing fraud management and business assurance for fintech products. The company aims to expand into OTT business as well. (Respondent: Unidentified_3)
Q: What is the company's approach to cost optimization, and how has it impacted financial performance?
A: The company has undertaken cost optimization through manpower optimization, facilities adjustments, and benchmarking costs against industry standards. This has resulted in a 31% improvement in employee productivity and an 8% gain in operating margin. The focus has been on aligning costs with industry benchmarks to improve financial resilience. (Respondent: Unidentified_3)
Q: How does Subex plan to communicate its developments, such as AI agents and LLM solutions, to investors?
A: Subex acknowledges the need for better communication with investors regarding its developments. The company plans to increase its outreach through investor days and more proactive communication, including updates on LinkedIn and potentially through stock exchanges. (Respondent: Unidentified_3)
Q: What are the challenges Subex has faced over the past 12 years, and what is the root cause of its performance issues?
A: The challenges include a significant tech lag due to past financial issues, commitments to non-core initiatives that were not successful, and execution challenges. The company is working on fixing these issues by focusing on core business, improving execution, and addressing tech lag through investments. (Respondent: Unidentified_3)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
