Subex revenue increased on 5.8% in 2015 while EBITDA Margin decreased slightly on 1.3 pp from 24.9% to 23.6%

14-05-2015 • About Subex ($SUBEX) • By InTwits

Subex reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Subex has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.0%.
The company has business model with low profitability: ROIC is at 8.6%
It operates with high leverage: Net Debt/EBITDA is 8.0x while industry average is 0.3x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Subex ($SUBEX) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	4,828	4,778	3,073	3,401	3,598	5.8%
SG&A					33
EBITDA	1,295	1,303	524	846	849	0.3%
Net Income	788	318	-599	-116	102
Balance Sheet
Cash	24	5	444	430	484	12.8%
Short Term Debt	5,453	6,018	1,939	1,602	1,469	-8.3%
Long Term Debt	4	0	5,377	6,024	5,777	-4.1%
Cash flow
Capex	40	34	13	37	63	71.0%
Ratios
Revenue growth	4.2%	-1.0%	-35.7%	10.6%	5.8%
EBITDA growth	34.0%	0.6%	-59.8%	61.6%	0.3%
EBITDA Margin	26.8%	27.3%	17.0%	24.9%	23.6%	-1.3%
Net Income Margin	16.3%	6.7%	-19.5%	-3.4%	2.8%	6.3%
SG&A, % of revenue					0.9%	0.9%
CAPEX, % of revenue	0.8%	0.7%	0.4%	1.1%	1.8%	0.7%
ROIC	14.1%	16.4%	5.6%	8.7%	8.6%	-0.0%
ROE	32.7%	18.2%	-32.8%	-5.8%	5.3%	11.2%
Net Debt/EBITDA	4.2x	4.6x	13.1x	8.5x	8.0x	-0.5x

Revenue and profitability

Subex's Revenue increased on 5.8% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.1 pp from 9.2% to 10.4% in FY2015.

Net Income marign increased on 6.3 pp from -3.4% to 2.8% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 the company had CAPEX/Revenue of 1.8%. CAPEX/Revenue increased slightly on 1.1 pp from 0.70% in FY2012 to 1.8% in FY2015. For the last three years the average CAPEX/Revenue was 1.1%.

Return on investment

The company operates at low ROIC (8.65%) and ROE (5.34%). ROIC showed almost no change in FY2015. ROE surged on 11.2 pp from -5.8% to 5.3% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 8.0x and Debt / EBITDA is 8.5x. Net Debt / EBITDA dropped on 0.5x from 8.5x to 8.0x in FY2015. Debt decreased on 5.0% in FY2015 while cash jumped on 12.8% in FY2015.

Appendix 1: Peers in IT Software Products

Below we provide Subex benchmarking against other companies in IT Software Products industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Blue Star Infotech ($BLUESTINFO)		5.1%	49.2%	43.3%	-2.0%
Saksoft ($SAKSOFT)	-60.3%	16.3%	29.5%	41.1%
Twinstar Industries ($TWINSTAR)	-90.5%	204.5%	59.8%	38.8%
Datamatics Global Services ($DATAMATICS)	-71.6%	60.5%	24.5%	33.4%
Trigyn Technologies ($TRIGYN)	-59.5%	16.8%	27.1%	29.8%
Median (15 companies)	-50.1%	16.5%	17.7%	21.8%	9.6%
Subex ($SUBEX)		-1.0%	-35.7%	10.6%	5.8%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Atishay Infotech ($ATISHAY)	19.6%	35.7%	28.1%	25.8%	24.5%
Tata Elxsi ($TATAELXSI)	11.4%	13.8%	11.9%	17.6%	20.9%
Datamatics Global Services ($DATAMATICS)	5.6%	9.2%	9.4%	12.4%
Aurionpro Solutions ($AURIONPRO)	21.4%	15.9%	14.5%	12.0%
Saksoft ($SAKSOFT)	10.1%	10.8%	10.9%	10.5%
Median (13 companies)	8.1%	7.5%	8.5%	9.9%	10.7%
Subex ($SUBEX)	26.8%	27.3%	17.0%	24.9%	23.6%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Dion Global Solutions ($DION)	10.7%	39.9%	11.9%	29.6%
Datamatics Global Services ($DATAMATICS)	5.7%	20.2%	3.1%	12.9%
Aurionpro Solutions ($AURIONPRO)	15.7%	17.5%	12.3%	12.6%
Atishay Infotech ($ATISHAY)	3.8%	41.7%	8.6%	10.0%
Tata Elxsi ($TATAELXSI)	7.0%	5.3%	5.4%	3.1%	3.9%
Median (10 companies)	5.2%	4.5%	6.9%	2.7%	3.9%
Subex ($SUBEX)	0.8%	0.7%	0.4%	1.1%	1.8%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Elxsi ($TATAELXSI)	13.2%	22.5%	19.1%	38.3%	55.4%
Trigyn Technologies ($TRIGYN)	15.7%	15.2%	21.1%	26.2%
Mindteck (India) ($MINDTECK)	6.7%	-2.6%	1.2%	20.0%
Atishay Infotech ($ATISHAY)	30.9%	27.2%	15.7%	19.2%
Datamatics Global Services ($DATAMATICS)	2.5%	9.8%	11.4%	16.4%
Median (31 companies)	3.9%	3.8%	4.8%	16.3%	16.8%
Subex ($SUBEX)	14.1%	16.4%	5.6%	8.7%	8.6%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Aurionpro Solutions ($AURIONPRO)	1.1x	1.7x	1.7x	1.9x
Datamatics Global Services ($DATAMATICS)	0.2x	0.5x	0.3x	0.5x
Atishay Infotech ($ATISHAY)	-1.0x	-0.2x	-0.0x	0.3x	0.0x
Ace Software Exports ($ACESOFT)				0.0x
Saksoft ($SAKSOFT)	3.8x	2.8x	2.3x	0.0x
Median (14 companies)	0.1x	0.5x	0.0x	0.0x	-0.7x
Subex ($SUBEX)	4.2x	4.6x	13.1x	8.5x	8.0x

Subex stock price chart

Subex financials

mln.	FY2010	FY2011	FY2012

Revenue	4,631	4,828	4,778
EBITDA	966.3	1,295	1,303
Net income	1,003	787.8	318.4
CAPEX	49.469	40.150	33.620
Debt	6,342	5,457	6,018
Cash	34.931	23.600	5.178

About Subex

Subex Limited provides business and operations support systems (B/OSS) solutions for communications service providers (CSPs) in the telecom sector worldwide. The company offers revenue operations center (ROC) services for CSPs through coordinated operational control. It provides ROC Revenue Assurance, a revenue assurance solution to tackle critical challenges in the revenue chain; ROC Fraud Management, a solution for the prevention of fraud by eliminating known frauds, reducing fraud run time, and augmenting internal controls; and ROC Credit Risk Management solution to assess and mitigate risk presented by subscribers. The company also offers ROC Partner Settlement, a solution to operators for the settlement of charges with their network and content partners; ROC Route Optimisation tool to operators to manage network cost information supplied by other operators; and ROC Cost Management, a solution to monitor and manage the cost of partner services. In addition, it provides ROC Asset Assurance solution to manage telecommunications assets; ROC Data Integrity Management solution to provide quality data for CSPs; and ROC Capacity Management, a solution to prevent an availability or performance impact on business critical applications due to capacity issues, as well as ROC Cloud, a software-as-a-service delivering ROC to small and medium telcos. Further, the company offers managed services to improve the operations of CSPs; and consulting and specialist services provide advices to clients through CSPs for managing and improving businesses, and return on investment managements. The company was formerly known as Subex Azure Limited and changed its name to Subex Limited in December 2007. Subex Limited was founded in 1992 and is headquartered in Bengaluru, India.