Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Subex Ltd (BOM:532348, Financial) achieved a quarter-on-quarter revenue growth of approximately 9%, indicating a positive trend despite challenging market conditions.
- The company has successfully improved its bottom line with a cost reduction of about 9% year-on-year, turning positive after seven quarters.
- Subex Ltd (BOM:532348) has retained its clients well, converting every single renewal opportunity and acquiring a competitor account in the quarter.
- The company is focusing on long-term sustainable growth through market expansion, product expansion, and cost efficiencies, with AI investments leading to a higher contracted order book.
- Subex Ltd (BOM:532348) has delivered a 16% growth on a trailing 12-month basis, outperforming many of its peers in the market.
Negative Points
- The growth rate, although positive, was considered muted due to ambitious targets not being fully met.
- There is an overall slowdown in Telco investments due to the lack of 5G use cases materializing, impacting decision-making on new software projects.
- The company is facing a tough geopolitical climate in key operational geographies, particularly in the Middle East and Asia Pacific, causing delays in decision-making.
- Subex Ltd (BOM:532348) has significant exposure to the Middle East, a region currently experiencing instability, affecting business operations.
- The company has faced criticism for strategic flip-flops, particularly in divesting from areas like IoT security and identity verification, which were previously highlighted as growth areas.
Q & A Highlights
Q: Why has there been a strategic shift from focusing on IoT security and identity verification to AI in the telecom sector?
A: The CEO explained that the initial strategy to venture into non-telecom areas like IoT security was based on a business case that did not pan out as expected. The investments did not generate the anticipated revenue, leading to a strategic pivot back to core telecom areas where the company has more expertise and potential for growth.
Q: What is the status of the sale of ID Central, and how has it impacted the financials?
A: The CFO confirmed that the sale of ID Central resulted in a profit of 4.22 crores, but no cash was accrued as the transaction was settled in equity. The company has carry-forward losses, so there was no cash outlay for capital gains.
Q: How does the company plan to address the challenges in revenue growth and market conditions?
A: The CEO acknowledged the muted market conditions, particularly in the Middle East and APAC regions, due to geopolitical instability and deferred telecom investments. The company is focusing on cost efficiencies and exploring more stable geographies to mitigate these challenges.
Q: What measures are in place to protect intellectual property, especially with departing employees?
A: The CEO assured that all employees sign IP agreements, and there are non-compete clauses for key employees. However, enforcing these agreements can be challenging, and the company is aware of the risks involved.
Q: Are there any plans for further divestments or strategic shifts similar to the sale of ID Central?
A: While the CEO did not provide specific forward-looking statements, they emphasized the importance of making capital allocation decisions based on return on invested capital (ROIC). Any business that does not meet these criteria may be subject to reevaluation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
