Subex

Subex reported Q4 FY25 revenue of INR 70.6 crores, a slight decrease from INR 72.7 crores in the previous quarter. Normalized EBITDA for Q4 stood at INR 5.3 crores, a 32.5% increase QoQ from INR 4.0 crores. Notably, normalized PAT turned positive at INR 6.6 crores in Q4, compared to a negative INR 1.78 crores QoQ. For the full fiscal year FY25, revenue was INR 285.6 crores, an 8% YoY decline from INR 309.7 crores in FY24, primarily due to non-core business. Normalized EBITDA for FY25 was INR 6.5 crores, a significant improvement from a negative INR 9.5 crores in FY24.

Despite overall revenue decline, the core telco business demonstrated resilience, maintaining steady performance and achieving profitability. The company reported an 8% YoY margin expansion in its core telco business, moving from -4% to +4%. This improvement underscores the strength and focus within the organization, allowing for reinvestment for growth. Management emphasized its focus on bringing the core telco business back to profitability.

The company faced challenges on the growth front due to delayed closure of order intakes in earlier quarters. Sales cycles in the telco sector have become longer, and decision-making has slowed due to ongoing macroeconomic conditions. This impacted conversion timelines, causing deals expected in Q1 to materialize later in Q3, affecting revenue realization. Management noted that many contracts were pushed out and are now expected to close in H1 FY26.

The Secure division, particularly the Sectrio business, continued to be a drag on profitability. As part of a strategy to deprioritize non-core initiatives, Subex divested ID Central via a slump sale in Q1 FY25. The company recognized an impairment allowance of INR 16.89 crores on disputed trade receivables, specifically from a pre-closed Sectrio contract. This provision was made on a prudent and cautionary basis, in line with internal accounting policies for receivables exceeding 365 days, though management expects to recover the money.

Subex is doubling down on embedding advanced AI and GenAI across its solutions to stay ahead of evolving threats and deliver more value. In Q4, the company secured strong wins, including a new Hyper Sense fraud management product logo in Europe, and extended managed services contracts. The AI agent market is projected to grow at a 45% CAGR to $5 billion, while the fraud management market in telcos is a $39 billion market growing at 39% CAGR. Subex is also expanding into telco fintech adjacencies, leveraging its existing relationships and products.

Significant progress was made on cost optimization, leading to an INR 22 crores EBITDA improvement. Over the past two years, employee productivity has improved by 31%, driven by a systematic approach to talent effectiveness, operational discipline, and digital enablement. This has lowered the fixed cost breakeven point, making the company more competitive and financially resilient. Efforts included manpower optimization, aligning R&D spend, and optimizing facilities, such as consolidating office floors.

Following investor feedback, management acknowledged the need for more proactive communication regarding new developments, particularly around AI agents and LLM solutions, to improve market perception. The company agreed to increase engagement with analysts and investors, including organizing an Investor Day in Q2 FY26. This commitment aims to provide greater visibility into the company's strategic direction and operational progress.

Management candidly discussed historical challenges, including a significant 'tech lag' accumulated between 2012-2018 and execution issues, which contributed to past stagnation. The current focus is on fixing fundamentals, generating cash, and reinvesting in the core portfolio to drive future growth. The ambition is to achieve a ₹100 crore revenue quarter and reach an operating margin in the 10% to 17% benchmark range, emphasizing that top-line growth is now the primary lever for sustained profitability.