Subex reports 32.8% EBITDA growth in 2017 and 10.8% Revenue growth

26-05-2017 • About Subex ($SUBEX) • By InTwits

Subex reported FY2017 financial results today. Here are the key drivers of the company's long term financial model:

Subex has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.2%. At the same time it's in pair with industry average of 12.1%
CAPEX is quite volatile: ₹60m in FY2017, ₹30m in FY2016, ₹63m in FY2015, ₹37m in FY2014, ₹13m in FY2013
The company has business model with average profitability: ROIC is 10.0%
It operates with medium-size leverage: Net Debt/EBITDA is 0.1x while industry average is -0.5x

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

Revenue and profitability

Subex's Revenue surged on 10.8%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 4.1 pp from 20.8% to 24.9% in FY2017.

Net Income margin surged on 10.9 pp from -23.0% to -12.1% in FY2017.

Investments (CAPEX, working capital and M&A)

Subex's CAPEX/Revenue was 1.7% in FY2017. CAPEX/Revenue increased slightly on 0.60 pp from 1.1% in FY2014 to 1.7% in FY2017. It's average level of CAPEX/Revenue for the last three years was 1.5%.

Return on investment

The company operates at low but positive ROIC (10.0%) and negative ROE (-6.1%). ROIC increased on 3.1 pp from 6.9% to 10.0% in FY2017. ROE increased on 9.7 pp from -15.8% to -6.1% in FY2017.

Leverage (Debt)

Debt level is 0.1x Net Debt / EBITDA and 1.0x Debt / EBITDA. Net Debt / EBITDA dropped on 0.7x from 0.9x to 0.1x in FY2017. Debt dropped on 40.6% while cash dropped on 13.4%. Net Debt/EBITDA followed a declining trend at -3.4x per annum in the last 5 years.

Subex has short term refinancing risk: cash is only 85.7% of short term debt.

Financial and operational results

FY ended 31-03-2017

Subex ($SUBEX) key annual financial indicators

mln. INR	2013	2014	2015	2016	2017	2017/2016
P&L
Revenue	3,073	3,401	3,598	3,225	3,573	10.8%
SG&A			33	29
EBITDA	524	846	849	671	891	32.8%
Net Income	-599	-116	102	-743	-432
Balance Sheet
Cash	444	430	484	851	737	-13.4%
Short Term Debt	1,939	1,602	1,469	1,040	859	-17.4%
Long Term Debt	5,377	6,024	5,777	406	0	-100.0%
Cash flow
Capex	13	37	63	30	60	98.4%
Ratios
Revenue growth	-35.7%	10.6%	5.8%	-10.4%	10.8%
EBITDA growth	-59.8%	61.6%	0.3%	-21.0%	32.8%

EBITDA Margin	17.0%	24.9%	23.6%	20.8%	24.9%	4.1%
SG&A, % of revenue			0.9%	0.9%
Net Income Margin	-19.5%	-3.4%	2.8%	-23.0%	-12.1%	10.9%
CAPEX, % of revenue	0.4%	1.1%	1.8%	0.9%	1.7%	0.7%

ROIC	5.6%	8.7%	8.6%	6.9%	10.0%	3.1%
ROE	-32.8%	-5.8%	5.3%	-15.8%	-6.1%	9.7%
Net Debt/EBITDA	13.1x	8.5x	8.0x	0.9x	0.1x	-0.7x

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	FY2013	FY2014	FY2015	FY2016	FY2017
Trigyn Technologies ($TRIGYN)	27.1%	29.8%	9.1%	26.9%	-
Tata Elxsi ($TATAELXSI)	15.4%	24.6%	9.6%	26.6%	-
Polaris Financial Technology ($POLARIS)	10.2%	7.3%	-21.9%	7.6%	-
Cranes Software International ($CRANESSOFT)	14.8%	9.4%	8.4%	5.6%	-
Saksoft ($SAKSOFT)	29.5%	41.1%	3.1%	5.3%	-
Median (15 companies)	17.7%	21.8%	9.7%	-2.2%	-
Subex ($SUBEX)	-	10.6%	5.8%	-10.4%	10.8%

Top companies by EBITDA margin, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Tata Elxsi ($TATAELXSI)	11.9%	17.6%	20.9%	23.0%	-
Atishay Infotech ($ATISHAY)	28.1%	25.8%	24.5%	21.9%	-
Saksoft ($SAKSOFT)	10.9%	10.5%	10.0%	14.8%	-
Aurionpro Solutions ($AURIONPRO)	14.5%	12.0%	16.9%	13.0%	-
Polaris Financial Technology ($POLARIS)	11.9%	10.2%	11.9%	12.4%	-
Median (12 companies)	8.5%	9.9%	9.2%	9.6%	-
Subex ($SUBEX)	17.0%	24.9%	23.6%	20.8%	24.9%

Top companies by CAPEX/Revenue, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Dion Global Solutions ($DION)	11.9%	29.6%	4.0%	18.4%	-
Aurionpro Solutions ($AURIONPRO)	12.3%	12.6%	13.4%	6.1%	-
Tata Elxsi ($TATAELXSI)	5.4%	3.1%	3.9%	3.6%	-
Datamatics Global Services ($DATAMATICS)	3.1%	12.9%	2.2%	3.5%	-
Mastek ($MASTKBBPH)	-	0.0%	4.9%	2.4%	-
Median (7 companies)	6.9%	2.7%	3.9%	3.5%	-
Subex ($SUBEX)	0.4%	1.1%	1.8%	0.9%	1.7%

Top companies by ROIC, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Tata Elxsi ($TATAELXSI)	19.1%	38.3%	55.4%	65.9%	-
Polaris Financial Technology ($POLARIS)	15.1%	12.6%	16.2%	24.8%	-
Saksoft ($SAKSOFT)	13.5%	-	-	22.3%	-
Aurionpro Solutions ($AURIONPRO)	8.6%	5.9%	12.1%	11.0%	-
Mindteck (India) ($MINDTECK)	1.2%	20.0%	17.5%	10.6%	-
Median (29 companies)	4.8%	16.3%	14.2%	10.8%	-
Subex ($SUBEX)	5.6%	8.7%	8.6%	6.9%	10.0%

Top companies by Net Debt / EBITDA


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Aurionpro Solutions ($AURIONPRO)	1.7x	1.9x	1.2x	1.3x	-
Datamatics Global Services ($DATAMATICS)	0.3x	0.5x	0.3x	0.4x	-
Saksoft ($SAKSOFT)	2.3x	0.0x	1.2x	0.3x	-
Melstar Information Technologies ($MELSTAR)	-	-	-	0.0x	-
Danlaw Technologies India ($DANLAW)	-0.2x	0.0x	0.0x	0.0x	-
Median (16 companies)	0.0x	0.0x	0.0x	0.0x	-
Subex ($SUBEX)	13.1x	8.5x	8.0x	0.9x	0.1x

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.