Subex reports 148% Net Income growth in 2018 while 14.4 pp EBITDA Margin decline from 24.9% to 10.6%

04-05-2018 • About Subex ($SUBEX) • By InTwits

Subex reported FY2018 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 1.3%. At the same time it's in pair with industry average of 12.3%
CAPEX is quite volatile: ₹29m in FY2018, ₹60m in FY2017, ₹30m in FY2016, ₹63m in FY2015, ₹37m in FY2014
The company has potentially unprofitable business model: ROIC is 3.6%
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 decreased on 9.2%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 14.4 pp from 24.9% to 10.6% in FY2018.

Net Income margin jumped on 18.5 pp from -12.1% to 6.4% in FY2018.

Investments (CAPEX, working capital and M&A)

In FY2018 the company had CAPEX/Revenue of 0.88%. The company showed small CAPEX/Revenue decline of 0.88 pp from 1.8% in FY2015 to 0.88% in FY2018. It's average CAPEX/Revenue for the last three years was 1.2%.

Return on investment

The company operates at low ROIC (3.6%) and ROE (2.8%). ROIC decreased on 6.4 pp from 10.0% to 3.6% in FY2018. ROE increased on 8.9 pp from -6.1% to 2.8% in FY2018.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.1x and Debt / EBITDA is 0.9x. Net Debt / EBITDA decreased on 0.1x from 0.1x to 0.1x in FY2018. Debt dropped on 62.6% while cash dropped on 59.2%. Net Debt/EBITDA declined at -2.5x per annum in FY2014-FY2018.

Subex has short term refinancing risk: cash is only 93.5% of short term debt.

Financial and operational results

FY ended 31-03-2018

Subex ($SUBEX) key annual financial indicators

mln. INR	2014	2015	2016	2017	2018	2018/2017
P&L
Revenue	3,401	3,598	3,225	3,573	3,243	-9.2%
SG&A		33	29
EBITDA	846	849	671	891	343	-61.5%
Net Income	-116	102	-743	-432	207
Balance Sheet
Cash	430	484	851	737	301	-59.2%
Short Term Debt	1,602	1,469	1,040	859	322	-62.6%
Long Term Debt	6,024	5,777	406	0	0
Cash flow
Capex	37	63	30	60	29	-52.8%
Ratios
Revenue growth	10.6%	5.8%	-10.4%	10.8%	-9.2%
EBITDA growth	61.6%	0.3%	-21.0%	32.8%	-61.5%

EBITDA Margin	24.9%	23.6%	20.8%	24.9%	10.6%	-14.4%
SG&A, % of revenue		0.9%	0.9%
Net Income Margin	-3.4%	2.8%	-23.0%	-12.1%	6.4%	18.5%
CAPEX, % of revenue	1.1%	1.8%	0.9%	1.7%	0.9%	-0.8%

ROIC	8.7%	8.6%	6.9%	10.0%	3.6%	-6.4%
ROE	-5.8%	5.3%	-15.8%	-6.1%	2.8%	8.9%
Net Debt/EBITDA	8.5x	8.0x	0.9x	0.1x	0.1x	-0.1x

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.

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.