Subex

Subex achieved operational profitability for the first time since June 2022, reporting a normalized PAT of INR 3.9 crores for Q2 FY26, without any exceptional items^📎. Revenue for the quarter stood at INR 68.9 crores, marking a 3.76% increase from the previous quarter's INR 66.4 crores. Normalized EBITDA saw a significant QoQ increase of 69.76%, reaching INR 7.3 crores compared to INR 4.3 crores in the prior quarter, reflecting consistent and disciplined performance. The reported PAT for the quarter was INR 2.8 crores, down from INR 13 crores in the previous quarter which included an exceptional item^📎.

The company announced new deals worth approximately $15 million, which was clarified by an analyst as around INR 120 crores. These wins include renewed long-standing partnerships in APAC and Europe for five to six years, a new engagement with a leading Dutch telco for MVNO billing, and upgrades for fraud management systems in APAC and the Middle East. Management stated that the order funnel remains strong, with a target pipeline of INR 180 million to INR 200 million, and pipeline tracking at four to five times the annual order intake. The large orders typically have an execution timeline ranging from four to five years.

Following the AGM, the company is undergoing significant board-level changes, with the chairman and two independent directors stepping down due to not receiving requisite majority. Management's immediate focus is on reconstituting the board with leaders possessing the right expertise and vision, aiming to complete this process before the Q3 results. Additionally, a new head of sales has been appointed in Europe, and legal and HR leadership hires are in progress as part of a broader organizational reset to drive the next phase of growth.

Subex is making an 'AI pivot,' aiming for all its products to be GenAI native, focusing on lighter versions that require less heavy implementation. The company is exploring opportunities to horizontally scale its fraud management products into adjacencies like fintech and telco wallets, leveraging its 30 years of expertise in fighting fraud. Management emphasized a build-with-customer approach, involving POCs and iterative feedback to ensure product relevance and market fit, rather than building in isolation.

Management provided an update on Sectrio, clarifying that one contract had a provision taken in Q4 FY25, and the other was a wind-down with no recovery, aiming to finalize its closure this quarter. The company acknowledged the presence of 'legacy issues' and structural items on the balance sheet, including INR 196 crores in goodwill, which are addressed through annual impairment exercises. Management stated that most of the cleanup is behind them, but these legacy areas require ongoing review and procedural handling.

Subex maintains a strong liquidity position with INR 135 crores in the bank. However, regulatory hurdles, specifically negative retained earnings, currently prevent the company from undertaking buybacks or paying dividends. Management confirmed that the company is not actively pursuing M&A opportunities, instead focusing on stabilizing its capital table. The company is planning to conduct an investor day in the coming weeks to share detailed product roadmaps, adjacencies, and market opportunities, and is also developing a plan for broader investor engagement with shareholders.