Subex Limited (532348) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY 2022 Earnings Conference Call of Subex Limited. [Operator Instructions] Please note, this conference is recorded. I would now like to hand over the call to Mr. G. V. Krishnakanth. Thank you, and over to you, sir.

Thank you very much. Good afternoon to everyone who have joined the earnings call for the period ended March 31, 2022. Now I'd like to introduce the members of the management, who are present for the call. Along with me, I have Mr. Vinod Kumar, Managing Director and CEO; Mr. Shankar Roddam, Executive Director, Chief Operating Officer; Mr. Suresh Chintada, Chief Technology Officer; Mr. Sumit Agarwal, Chief Financial Officer; and Mr. Himanshu Singhal, Financial Controller of the company. I would like to start the conference call by going through the safe harbor clause. Certain statements in this call concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but not limited to, fluctuations in earnings, our ability to successfully integrate acquisitions, competition in our area of business, client concentration, liability for damages in our contracts, withdrawal of tax incentives, political instability, unauthorized use of our intellectual property and general economic conditions affecting our industry. So with this, I hand over the call to Mr. Vinod Kumar, to take it forward.

Good afternoon, everyone. [indiscernible] I thank you for joining this call. As you would have seen from the FY '22 published results last evening, the revenue for FY '22 stood at INR 333 crores. The EBITDA for the year is INR 35 crores and the PAT is INR 21 crores. The cash and the cash equivalent at the end of the year stood at INR 118.5 crores. Obviously, the financial results have been below our expectation. The delivery issues that we faced on the large deployments around our legacy ROC products had a significant negative impact on our revenues and is the primary reason for the revenue dip last year. Having said this, the last quarter was exceptionally good from a business acquisition standpoint and this has resulted in increase of the total contracted backlog up to $117 million from the last quarter levels of $106 million. The financial results for the last year, while not -- while definitely not in line with expectations, are also not a true reflection of the progress that we have made across our portfolio and directionally, in general, for the last 12 months. HyperSense AI, which is our multipersonal AI/ML platform, has made its mark and are seeing excellent traction from customers. Everyone in -- just about every vertical is adopting AI/ML, and the category of multipersonal AI/ML platform is becoming an important one. Let me briefly explain the problem and how we are solving it. In every enterprise, particularly who is looking at digital transformation, the CXOs wants to make the enterprise into an AI/ML-driven enterprise. However, the lack of sufficient data scientists, their inability to -- the data scientists to discuss with the business is resulting in a very small portion of the total models that they are developing, getting deployed and generating business results. These multipersonal AI/ML platforms solve this problem by significantly enhancing the bandwidth of the data scientist and also creating a new category called citizen data scientists who are smart analysts, both from the business side and the technical side, to start solving data science problems without being a data scientist by itself. Now indeed, this is a new segment for telcos, and we are one of the only ones who are focused in this segment, and I'm meaning about the telco segment. Our platform has received multiple accolades, recognition from the media and have also been listed as a prominent player in this space by Gartner. I've personally seen the interest in my meetings with CXOs, and I believe that we are sitting on a gold mine with high HyperSense AI. Now I will request Suresh, our CTO, to provide you a general update on our core portfolio.

Thank you, Vinod. Thank you, everyone. So as part of our vision to enrich lives through AI-driven trust, Subex has actualized several initiatives that allow organizations to leverage cloud, 5G, Big Data and analytics to essentially unify the operations, optimize costs and enable faster and better decision making using advanced and augmented analytic, right. As Vinod also mentioned, our award-winning platform HyperSense has evolved over the past year, as we have now started transitioning all of our core products -- portfolio of products like business assurance, sort management, network analytics on the HyperSense platform, right. Our partner ecosystem management portfolio also is evolving smartly as we look forward to integrating some of the key standards into our product as we -- into this year. We're also seeing increased traction on the platform, given the inherent AI/ML capabilities that are embedded in our HyperSense platform, as Vinod already mentioned. Thank you.

I now request Shankar, our COO, to provide you an update on IDcentral identity analytics.

Good afternoon, everyone. Subex has a vision of enriching lives by leveraging AI for Digital Trust. Identity today forms a key aspect of that vision of Subex, and in line with that, IDcentral is an incubation which has been created with the vision of solving the problem of onboarding customers. If you look at the journey in the last quarter, we launched the MVP of IDcentral in Q1, followed by GTM in Q2. We established the product market fit for IDcentral by Q3 wherein we secured about 10 customer contracts. We were able to take that product into production. We were also able to establish clients across different industries such as fintech, gaming, banking, agritech and many others. In Q4, we exceeded our goal of 1 million APIs. We signed our first telco customer. We also signed our first customer for anti-money laundering. And additionally, we also registered Subex or IDcentral, as a TSP with Sahamati. All of this is evidence enough to say that we are able to take a product to the market, be able to serve the needs of enterprises, which is emerging more so with the digital transformation that is happening across all industries and be able to make a mark for ourselves. In the first phase, we have chosen consciously to focus on two markets, Indonesia and India. This is primarily based on the growth that we have seen in these two countries, and we continue to build our relationships and interfaces into government databases and many others, which are required as part of this on-boarding validation. From a customer standpoint, the other strategy that we have started to look at is the possibility of trying to not only acquire more customers, but also go after segments of customers with a much higher MRR. The pricing mechanism for IDcentral is also based on a per API model, which is largely in line with the typical SaaS kind of an industry. And we do believe that we are on track to be able to now take IDcentral to the market and showcase the required velocity in terms of customer acquisition and API growth. Thank you.

Thank you, Shankar. I also wanted to update you that in line with what we had said earlier, we have started providing details of IDcentral and Sectrio in our investor deck. Now let me cover the progress that we have made on Sectrio, our securities portfolio. During the last year, we pivoted to address OT security, which is a $10 billion market -- which is expected to grow up to $10 billion market in 2025, and the current CAGR is about 25%. Now this was done as we saw delays in IoT deployment due to COVID and supply chain constraints. This also meant that it was necessary for us to have a new identity for this product portfolio, and we launched the Sectrio brand successfully. During the last quarter call, I had indicated about a significant wins -- about significant wins, both in private and the public sector in India. We have provided those details in our investor presentation. We are completing the implementation at State Bank of India, and we hope to make it as a reference for the banking segments. And this will be a very important segment that we are looking to cater with our security portfolio. Our current focus for OT/IoT security is in the markets of India, Middle East, particularly Saudi, and North America, specifically Mexico. In these markets, primarily we are in the evaluation phase when it -- when we talk about a deployment and post evaluation phase from the customers, we expect the market to move to a continuous threat monitoring and detection and remediation phase in the coming months. So at this point in time, we are doing a lot of vulnerability assessment and visibility of the asset, those kind of exercises. And once those exercises are completed, they will get into the phase of deployment of product and continuous monitoring. Now let me also provide you an update on the delivery issues that I had alluded to earlier in the briefing. Now this issue pertains to our old ROC platform where some of the contracts that we had, we had challenges with delivering the contracts due to multiple issues, some issues from a platform standpoint, some issues from a customer standpoint. And all these things have resulted in a negative revenue impact. As we stand today, we have -- we still have a few ROC-based projects to be implemented, and we expect that implementation to complete by the second quarter of this year, post which most of the deployments, if not all, will be on our new HyperSense platform. Now with respect to the guidance, we are not specifically providing any guidance going forward. However, let me also clearly tell you the transformations that we are going as a -- that we're undergoing as a company. The first phase from a license model, we are transforming into a subscription model. And most of the contracts that we have secured in quarter 4 are of this nature. For sure, when compared with the earlier license model, which was a very established model in the telco vertical where most of our business -- our core business comes from, having a subscription-based model, it's something new. Therefore, the contracting is taking significantly more time than otherwise will happen for a license contract. However, directionally, I think it is a right thing for us to do. And we believe that this will have the right impact, both for customers and for us. And also it is significantly increasing the competitive advantage that we have. I also want to preempt some questions on the ESOP space on some of the investor clarifications that we have received. The ESOPs have been provided to the current management in the financial year FY '19 and FY '20. And these were provided at a strike rate, which was more than the prevailing market rate at that point in time. Now as with any ESOP scheme, the success of the ESOP schemes happens based on the increase in the market capitalization of the company. And in that sense, these ESOPs have been -- ESOP scheme has been reasonably successful because our market cap from the '20 -- '19, FY '20 time frame is significantly higher. However, as per this ESOP scheme, the best thing and therefore, the exercising happens in a delayed nature, and some of the listings that we have done to the stock exchanges with respect to ESOP exercise is the exercise of the ESOPs pertaining to the financial year '19 and financial year '20. Now in the history of Subex, I cannot recall a time when we had a portfolio that we can engage with the customer on an enterprise level. With HyperSense AI, we have that now. And with all the enhancements that we are talking about in our core portfolio, in Sectrio and IDcentral, we are also generating interest from various other stakeholders of society like government, public sector undertaking, research institutions. This also needed pertinent to reframe our vision towards -- from our old vision of being the leaders in Digital Trust. Our new vision is to enrich lives with AI-led Digital Trust -- enriching lives with AI-led Digital Trust. We have made several changes to our leadership and now have a team that is balanced to drive both of our core and new areas. While the transition from a license to a subscription model for our core products will come at short-term financial impacts, we are confident that directionally, it is the right thing to do. All of -- as I mentioned, all of these new deals are our subscription plan. We also have a significant competitive advantage and the increase in the contracted backlog in Q4 is a validation to that effect. Looking ahead, we are entering the new year with good momentum with a fantastic order book in Q4 and with a great portfolio. During the course of this year, along with migrating our existing customers of fraud and revenue assurance onto our new HyperSense platform, we intend to increase our market share for our new solutions that is HyperSense AI, Sectrio and IDcentral. I fully understand that the last year results are not in line with the expectation. However, I would like to again reiterate that what the financials do not convey is the tremendous progress that we have made, including the possibility of creating a category in telcos around multipersonal AI and ML platform and own it at Subex. This is our future, and we will make it work for all stakeholders. Your continued support means a lot to us, and I also thank you for the same. Thank you very much, and now we will open for questions.

[Operator Instructions] Our first question from Mr. [ Deepak Chhugani ] from Ray Capital.

I come on this call every quarter and I ask this same question, great assurance, great words, but nothing reflects in the number. When will we see that?

Okay. Look, Deepak, I understand where you're coming. We have done two things. We have provided a lot more information with respect to the details on the progress that we are making. The investor deck that we have provided that gives you sort of qualitative information about what is happening. I've also detailed some of the key reasons why we had -- particularly a different last year, I would say the delivery issues, which was sort of towards the end of it because, as I said, most of the ROC projects are getting to end of the delivery and all the new projects on our new platforms, which is significantly easier and faster to deliver. The second aspect is with respect to the migration -- the model change for the license via subscription. Now some of these things, we could not factor it actually and looking back, we could have been more careful in factoring some of these things. But now with the benefit of the hindsight, we can say that this will have some impact for -- in a short-term basis. But I would say that if you look at the contracted backlog, that should give you some confidence as to the fact that we are securing new logos and the ticket size, even though small, the ticket size -- sorry, the new logos that we are securing in a much larger market, we should be able to grow and meet the expectations. So I -- as I said, I'm not going to provide any specific guidance, but we will continue to provide qualitative information that will help you to make a judgment as to how the company will perform. I also feel that we will start providing more specific revenue-based -- financial-based information around our new portfolio going forward. But as I said, we're just waiting for the right time so that it will convey the right story, Deepak.

This is all good, Mr. Vinod. The problem is we're not able to judge. Because every time we attend the call, it's all good talks. It's all good presentation. It's all good kind of assurances. There's no research report. There's always good talks in the calls. So we, as retail investors, just are not able to judge. So I think it's high time the management -- even if it is -- you're not going to achieve targets, even if not growing, we need to know. We need to know from the management where we are heading. I mean, it's been like 8 quarters. I don't know. I mean it's like we keep hearing the same thing again and again. I'm not pointing any faults, but let the truth come out. We need to know where we're heading. Just -- we can't judge because -- just basis this call.

Yes. So look, I think the reason why we are -- first of all, we don't want to give any guidance, but even just this whole aspect of license to subscription conversion is the first time we are doing at this scale because, as I told you, almost 90% of the contracts that we have secured in Q4, which was a very large order book in -- order book in quarter for us, have been in the subscription where earlier it used to secure the revenue in a period of about 12 to 18 months that is coming over a period of 5 years. So we will see revenue going up and gradually. But as I said, you would have to give me 1 or 2 quarters more so that we can completely profile this and provide you some more information on -- at least on the annuity based growth or the monthly subscription-based growth that we can kind of, at least show that to you. At this point, it's too early for us also to figure out how the whole thing will work on, but we are acquiring customers. We are converting the customers. And directionally, as I said, the whole effort is to make this as Subex known in the new category, which is a large opportunity. So that's where we are, Deepak -- I mean...

The next question from Mr. Pratap Maliwal from Mount Intra Finance.

I have got a few questions. When it comes to Sectrio, so we called out SBI as a potentially referential client. As I understand, Sectrio offering that we give to clients on multiple sides. So how should we look at it? Maybe how many branches of SBI [indiscernible]? Or if you can give some color on this. We've got some clients in manufacturing and banking so is it more also a standard offering? Or are we giving different use cases across industries? And when it comes to SBI, how many branches have we signed? How do you see the capability? That's my first question.

Okay. So just obviously, I don't want to get into the specifics of the deal because there is a security in nature. Having said that, this -- we give you a scale. At this point in time, we are covering about 5,000 devices. And the total footprint that we intend to cover going forward is about 300,000. Now is this a standard offering? It is a module of our Sectrio, which is around disruption. So it's a standard offering that we -- it is repeatable in nature. So we expect -- I mean, we are nearing the completion. And once this is completed, we expect to make it referenceable, and that will be a big further in our cap. There are other verticals that we have secured such market customers. You can see that in the list in the investor presentations. And there, again, we are the initial phase of deployments in one plant, in one factory and things like that. And our expectation is that once this is completed, we will scale that to other sites and factories of those elements.

Okay. Now it comes to IDcentral, are we giving out -- maybe is it -- are we giving on the ARR and the MRR number for the IDC and Sectrio right now? Or is that possible to provide? Because I believe last time we heard the number like 100,000, 250,000. So can we get an update on that, please?

Look, I think we are still in the range of about 100,000 -- around 100,000 at this -- I mean this quarter, we're getting to the range of 100,000. We will provide you the details because -- let's provide at one by one. At this point in time, we have provided the growth that we are seeing in the API pool. We were comfortable in providing that. And as we go along, we will provide you the details of both MRR and ARR for that.

Okay, sure. And just one last question, maybe if I could squeeze in. When it comes to the revenue composition, you see that EMEA has fallen by 8% and APAC has risen by 8%. So what could be the reason behind it? And is this something that's expected to reverse? Or should we look at this as a trend going ahead?

So I think it is just the question of when the revenue was -- revenue was booked and it could be movement, as I told you, because of delay some revenues get moved from one quarter to other. From a trend perspective, there is nothing specific. We are extremely strong in the EMEA and APAC region. In the EMEA region, we are exceptionally strong. We have seen a lot of this is coming from, the Middle East region, in particular, followed by Europe and Africa. In APAC, we are again -- the things have been stable. Obviously, one more thing, I'll take the opportunity to update that with travels opening up, we are having much more fruitful and better conversations with our customer, particularly for our new range of products. Obviously, for our core range, if there is any requirement, we will come to know about it because we are a prominent player there. But for our some of the new products like the HyperSense AI, et cetera, there is a lot of market education that we have to do and so pitching to the right level. Those things were very difficult when we were not traveling. But with that opening up, we have been in much better control, and we are a way to generate a much bigger impact. So directionally, there's not much of change. It might be just a movement of some revenues from one quarter to another.

I've got a few other questions. I'll get back in the queue.

Our next question from Mr. [ Abhishek Kala ], individual investor.

Am I audible, Vinod?

Yes, Abhishek.

Yes. Vinod, question regarding the Sectrio deployment with SBI. Can you provide the details around the revenue and the margins that we are expecting from this contract? Or is it more at the POC level that we are in?

Okay. Abhishek, I'm unable to provide any specific details because of the security deployment, et cetera. However, I can tell you, this is a commercial engagement going to production. It is not POC or anything like that. We have an agreement, as I told, to cover 500 devices. And we also have, as a part of the agreement, extensible -- option to extend that to 300,000 devices.

Okay. And Vinod, one probably concern or take it, I mean, whichever ways you would like to. But in the investors deck, I mean, we are talking more about the awards or we have more to talk about the awards that our products have won, but not more about actually the contract wins. And you have called it out yourself, but I would like to reiterate that for an investor like me and a retail investor like me, it doesn't matter how many awards the product wins, so long as -- it doesn't translate into an order book or an increase in the order book, a top line and a bottom line growth, it means nothing to me, right? I mean, yes, we have received accolades from Gartner, our product is referred here and there. Point taken, well said. But these are not translating into the top line and the bottom line growth. And at least for the last 3 quarters, this has been the story. And I have been -- I'm a very patient investor, but now -- I mean, this has started to bother me as well. So I would like the management to comment on this as to what the way forward from here?

So Abhishek, I think, again, thanks for that question. So let me start that -- I mean, it's a new area -- I mean, the new area, as I told you, particularly in the telco segment, this particular segment, the multi-person AI/ML platform is a new category. And if you look at the go-to-market of a new category, there's a lot of market teaching that we have to provide to say that this is the value and this is how it can solve the problem. And towards these awards and Gartner mentioned, et cetera, is very significant. In fact, I can tell you that the Gartner mentioned has been one of the key significant achievement last year because it's so huge that it gives us immediate kind of validation and so it's not referenceability, but at least the credibility is established for us to engage with that. So it's huge. So if you look at Sectrio, which is a security, if you look at we had -- we have provided similar validation. Now we are not providing any more of the validation in the awards that we are winning in the Sectrio side. We have provided -- providing the list of customers which we have in and which are big logos, very critical locos and critical segments in each of the markets. So it's a kind of journey that we have to go through. At this point in time, HyperSense AI, I can also tell you that we have secured the first customer each in Africa and in the Australian region. And we have just secured it, and this is very, very important because -- I mean probably just to reiterate again, with this product, the first time we have a product that can engage into every part of an organization, that is CFO, CMO, CIO, CEO, CTO, everyone. We never have that capability. And we are starting with telco and -- but this is multi -- this problem -- and this need is there across all of the verticals.

Okay. Vinod, one last question, if I may, please? Probably ask more of a nature is if -- while we announced the deal and order wins, right? It would be helpful if we publish the deal side or contractor numbers, unless and until we are bound by some secrecy cases like with SBI, where we are not able to, for some security reasons, disclose the revenue that we expect from this -- of the order size. Would it be possible to include this in our future communications that we send to the exchanges? And as well...

Abhishek, our contracts, specifically call out that, that cannot be done. So I guess, we are -- I mean, in some places, we cannot even provide the detail. Security, in particular, we will not be comfortable further in providing many details considering the fact that it is in the security space. But even other customers, getting the deal size, et cetera, will be -- I mean we cannot get that. Overall sense for a very [ multimillion-dollar ] those kind of things we can broadly -- can be communicated, which we are doing it at this point in time. But otherwise, it's very specific and is quite difficult, Abhishek.

Appreciate that and I'll get back in the queue if I have questions.

Our next question from Mr. Akhil Arora, individual investor.

I mean, again -- I mean, I know things haven't gone as per the plan, and you have been explaining to us what we have been doing qualitatively and I do see like there has been progress. There are just a couple of questions that I just want to understand why we felt sort of we land here. So -- and pardon my ignorance in terms of the implementation of these solutions. So if my understanding is correct, our customers are still using our existing core revenue assurance and fraud management solutions. It's just that we haven't been able to move them to HyperSense or convince them to move to HyperSense on a timely basis. Is that what is leading us in not meeting our revenue targets?

So Akhil, two things, okay? One is that our -- we had an earlier platform called RAFM platform, where we had -- most of our current deployments have the revenue is from that deployment of that product. And some of those projects, we had difficulty for -- multiple difficulties. One was that we had some issues -- some challenges with our platform, which we got resolved only by the latter part of last quarter. Then we had some challenges from the customer end with delays on account of providing us hardware because of supply chain issues. So several issues meant that the project that we secured is taking much more time than what it is otherwise taken -- otherwise should have taken for deployment. So this is point number one. The second point is that all the new deals that we are getting for HyperSense, now that's our preference and our preference -- our insistence is that it has to be of a subscription nature. So that is -- there is no license implementation, which is you give a license implement and recognize the revenue. But this is on a subscription basis. So it means that, that is get converted into a 4-year, 5-year term. Similar to what the Microsoft has done for their OF365 [indiscernible] have done. And if you look at some of the challenge -- if you look at the revenue profile of these companies who have gone through the transition, when you make the transition from a license to a subscription, there would be a dip in the revenue because whatever you are taking over 12 months or 18 months come over a much longer duration. So we are going through that phase in all our new contracts. So these are the two things that I called out, Akhil.

Okay. Okay. Perfect. No, that's helpful. And the second thing that I want to understand, like I think these contracts that we are winning recently, both from the newer areas of Sectrio and IDcentral, obviously focus on India and Indonesia. But on Sectrio and some of the other products are more EMEA and APAC base, whereas the tie-ups that we have done in the past with Snowflake or Tech Mahindra or even for that matter with Telefónica in Europe and U.S. So what's the reason that we haven't been able to track or been able to convince logos in U.S. and Europe?

Okay. See, in this space, right -- I mean in the Sectrio space, if you look at the go-to-market, there are 3, 4 types of channels that we are using. One is the direct to customers through partners. So they are distributors. So we have appointed key distributors in the markets that we are focused on, which is India, Middle East and North America. And through the distributors, we directly approach the customers. So for example, the -- many of the manufacturing customers that we have listed like [indiscernible] et cetera, we have -- we reach them through the distributors and local partners. So this is one route. The second is through large OEMs, which are global in nature because when we talk about operational technology, there are the OEMs providing those technologies and there is a lot of influence they have on the choice or the suggestion of the securities that they work with their platform. So it's important for us to work with some of these partners -- the OEM partners. The third is the larger size. So if you look at some of the size that we are talking about, Tech Mahindra, Telefónica, et cetera, these are large MSSPs, which have bundled our product offerings and taking into the market as a part of their offering. Now what most of these partnerships initially focused on was IoT security because that is where we enable them and we created the product offerings. Another is delaying this adoption of those things because the IoT deployment projects itself are delayed and most of them are happening -- many expectations that will start this year or towards next year because of COVID and supply chain issues and their inability to get on the ground and deploy it. This is not our product. I'm talking about the core IoT deployment. That is getting delayed. So therefore, some of these projects, while we have enabled them, we have had initial things, we have to scale back many of these efforts because of the lack of traction in the market. That's where we have invested ourselves to cover OT security. OT is very, very hot and active with a number of cyber attacks on companies and factories. It is very, very hot. And so therefore, and now we completed -- the product offering is there. There, I think we are marketing very, very closely with some of the OEMs that are very -- OEMs, MSIs that are very focused on this market. So it's not that we have enabled and that will not be there. But because of the market realities, we have -- we are focusing more on OT, and that's a separate set of partners and MSIs that we are currently enabling.

Okay. Okay. Perfect. That's helpful. I just have one last question, if you may allow. So that's on IDcentral. I mean, I heard you saying that still a revenue run rate is around 100,000, whereas the numbers in terms of the KPIs that we are tracking, which is APIs, that has increased significantly, and that's encouraging for us to see as well. Like -- is there a trial period initially for some of these customers and once [indiscernible]?

IDcentral -- this is Shankar here. IDcentral is a self-serve platform where customers come in and sign up. We tend to then talk to customers to understand the business case and propose solution. There is no free credits or anything like that. Customers come in and buy a certain number of APIs and then start continuing the service.

Okay. That's helpful, Shankar. And just -- so if we see that then, I think from quarter 3 to quarter 4, the APIs have almost tripled like from 1.5 million to 4 million. Why is it that -- like it's still not reflecting in a run rate? And as an extension to that, if you can also give us some guidance based on your discussions on the number of customers or the run rate that you see and any indication of the APIs please?

Look, I think overall, the customer acquisition, we are sort of almost doubling per quarter at this point in time, but we are looking at also qualitatively improving the type of customers so that we can get higher MRR. It's a very competitive market. And at this point in time, we are replacing the existing providers based on both on terms of the higher accuracy that we can provide and also the appropriate commercial engagement. Now that said, we have had seen an increase in the MRR with addition of it. There is also a detail in on boarding these customers because after, Shankar mentioned, they come in to buy an API, there has been particularly with some of the larger customers, there's time taking -- that's something which we are trying to resolve. It's a market reality that it's taking both than that -- more time than normally a SaaS to get into a production kind of thing, a full production, particularly from the larger set of customers. So we are going through this space. So it's not that MRR is not increasing in line with our expectation. Look, I think the -- as I told you, the next milestone is for us to get to an ARR level of [ $1 billion ]. And as soon as we get that details, we will come back to you, and we hope that in -- at least during the course of this year, we will get very, very close to that number, if not across that. I'm talking about ARR, not MRR.

Okay. No, no. I mean, I was just curious because we had that target to achieve by this financial year so just thought - I just asked. But anyways, best of luck for the next year.

Next question from Mr. Lalit Tomar from Contemi Trading Solutions.

I mean, as you stated, we are -- I mean we are in transition phase from subscription-based model to -- I mean, sorry, from license base to subscription-based model. So I would just like to know, I mean, how much time it will take? And plus -- I mean, what percentage of customers are migrated and how much time it will be going to take?

Okay, there are two aspects to it. One is our existing customers, and we are migrating from the current model to a subscription model. There are two things we are -- I mean many customers are ready. But of course, they will have to secure the budget, et cetera, because this will come with some cost from there end, even if, let's say, we are making it very, very compelling. So that is the budget we allowed to go through the budget cycle, but most of the customers are very, very interested because it's a much better model. The second part is that all the new deals that we are winning -- so new customers, both replacement of existing vendor or brand-new customers, all of them are on subscription model. We are only offering subscription model for the products like fraud and revenue assurance for HyperSense AI and things like that. So pretty much everything that we are signing up except for maybe some things which we are not ready or that perform is not ready as yet on our HyperSense platform. Everything else, we are securing on a subscription model at this point in time.

Okay. I also have a concern, I mean, related to dividend, though I mean, I was not expecting it last year. But just I would like to know why we did not took a call on dividend this year? Plus, I mean, how much cash is lying in our books and what call we are going to take on it going ahead?

So this time, because of the way the -- in the stand-alone entity, we did not have the sufficient accumulated results to consider that. So you know that -- you might be aware that we have done a restructuring. We completed during the end of last quarter, whereby we moved all the assets from Subex Assurance LLP, which is bulk of our core offering into the stand-alone entity. So that issue has gotten resolved. And I guess that going forward based on how the Board -- based on Board's consideration, we will do what is the right thing. And obviously, I guess that emphasis is to have the growth balance with other aspects. But as I said, this is not considered this time because of the reserves not being adequate.

Okay. I mean how much cash is lying in our books and what call we are going to take it to in future? I mean, will there be any buyback? Or are we going for any acquisition in near term? Or I mean it will take more time?

Look, as I told, at this point in time, our closing cash and cash equivalents were about INR 118.5 crores, that was where our cash and cash equivalents. At this point in time, the emphasis is that we are -- I mean, we have identified these areas of HyperSense AI, et cetera, et cetera. These are large markets, multi-vertical markets. At this point in time, we are focused on a small market because we want to make an impact rather than spreading through thins. We will definitely need a lot of capital to scale it to the level that we want. That would be our priority. But as I mentioned, the Board -- will consider what is the right thing to do once we get there.

Okay. I'll wait for queuing for more question.

Next question from Mr. Mahesh Kumar, individual investor.

Vinod Kumar. My question is what is your order book as on today? And how much of that order book can we build in the next year -- financial year 2022, 2023?

We have provided that information in the investor deck. The total contracted book is about [ INR 118.5 million ]. Out of that, about [ INR 36 million ] is what is -- out of that, [ INR 36 million ] is what is revenue coming from this financial year.

Okay. So my next question is Mr. Anil Singhvi, who is the Chairman of the Board, he has sold all his shares. Now what is his scheme in the business? And he is not attending any investor call. So what is his value addition to the Board and to the company?

Look, Mr. Singhvi has been on the Board for several years and has been very instrumental in turnaround from a completely bedridden company to where we are today. So he has been providing the direction on some of the new things that we are doing and very, very actively involved in guiding me and the management on taking the company forward. With respect to the investments, et cetera, that is his personal thing, and that's not something which I would like to comment in this call.

See, he is coming on the television for Shree Digvijay Cement, but he has never come for Subex. What is the reason for that?

So -- I think he is here as an Independent Direction and there he is an Executive Director. That is the main reason. But that's what I can -- that's what I can think -- I mean I just want to confirm that he's very, very actively involved in -- on an ongoing basis on how to help me and the management in taking our strategy forward.

See, we expect him to be present in the investor call, even though he's independent. So independent, he will be more useful to us to analyze the future.

Okay. I'll take that feedback. But again, I think -- I'll take that feedback and we'll see.

Yes, I have one suggestion. You need to take somebody on the Board, who has global experience in SaaS business so that we can guide you where are the pitfalls like whatever problems you will be facing for last 1 year. Such person would have -- in advance told you that these are the problems we need to address upfront. You should get somebody global experience person.

Okay. So this is precisely the reason why we augmented the Board with George Zacharias. George comes with a tremendous SaaS experience and been associated both as a Director and a mentor to many of the SaaS successes in India. That's the reason. And we are taking a lot of his help in driving that. So SaaS business takes time for us to set up. And that's why I think if you look at, we are very, very focused in a small market -- small-large market to create an impact. So if you look at the way we are running SaaS, it is very, very different than what we are doing core and this is some of the guidance that we are getting from -- guidance and mentorship that we are getting from George as a Director. We also have Nisha on our Board. Nisha is also very well connected with this thing. So we are -- at this point in time, we see that we have sufficient cover for both our core and new areas.

Yes, I'm not saying any global person on the Board. All are local Indians.

Okay.

Some global person.

Yes. I hear you. I hear you.

Our next question from Mr. Vivek Kumar, individual investor.

I have been an investor with Subex since 2015, since the era of Surjeet Singh and when the company was bedridden, as you mentioned, and the company has turned around. So two things, I'm invested in Subex for lifetime. That's -- when I invested, I took that call. So I have only two questions. I understand when we are transiting from one kind of business to another, there will be a time lag. Like I remember in 2015 of Surjeet Singh, he had told that we would become [ $100 ] million revenue company in 2 years. We haven't become so far yet. So my first question, what is the vision? I know you are not giving guidance, though you had given last year that we will be having a double-digit growth, though we are having reducing -- there is no growth. So what is the vision for 10 years? In 10 years, where do we see Subex?

Look, I think the vision is, as I mentioned [indiscernible] Digital Trust. What does that mean? At a near-term basis, by FY '24, that is in next 24 months, we want to ensure that we enable about 100,000 business users with AI. And the second thing is that if you also have to also have to do that, we are -- we should make Subex as a place where we are able to attract exceptional minds coming together to create great results while having fun. So that's where we want to have that. This would also ensure that from a stakeholder standpoint or investor stakeholder standpoint, if we can get to that, we will establish as a key player in the space of a multipersonal AI/ML platform, which is, I think it is our future. And we have an opportunity as Subex to own it and particularly in the telco space. So that's our focus at this point in time. I know that this is -- I mean this was -- some of the numbers is hard to chew for us as well. But I think that's not deterring us from the single -- I mean single -- the focus of getting it -- getting the execution right in this area. Now once we get that, I just again want to -- don't want to hazard the guess and give you a number, but we will be a significantly larger company once we get to that phase. So our near term is whether we can -- we are able to enable 100,000 business users with our HyperSense AI.

See, anyway, I was not expecting. As I said, when I invested, I knew that this company has a potential that I can see in my old days also to become a global leader. So -- and I agreed with our previous investor that perhaps there is some lack of vision. Like I just said that you were not giving guidance. But though I saw that potential that you were going to give a vision when you spoke to us last year, and you were so confident that we will definitely have a double-digit growth, I could see that there is not -- so I don't know -- so much focus on the number per se, but the vision of the company or the business per se. But though numbers also, they -- at some point in time, that has to be reflected and translated into the number also. That's something, when I see missing, I feel a little bit of dent in myself confident whether I can be -- I can leave my investment in Subex for my future generation. So that thing I see somehow now that somebody who has a long-term vision, like I can give you one example of InfoBeans, a very small company like yours or same market cap and almost same revenue, though they have a better EBITDA. I also don't understand why EBITDA has gotten dent on your revenue side when you had a long -- a very large amount of interest outgo, I could understand that your EBITDA was negative. Now there is no interest outgo, but your EBITDA is still coming down, down, down and your employee benefit is increasing multifold. So when you're giving the benefit to the -- yes, yes, please.

Yes, Vivek, I think at that point in time, you are right, we had the interest [indiscernible] management. Today, these are the core. Obviously, these are -- I wouldn't call it as not important. It's important. We are progressing there. But today, we have a portfolio that -- I mean when we talk about enriching lives with AI, like Digital Trust, what do we mean by that? That -- it's working on a very large space and making a significant impact in the market. Now we are very excited by that vision. Obviously, like you said, somehow at some point in time, the number should reflect the progress, not the portfolio at all. And I sincerely hope that, that will happen, and it will happen soon. But I think the fact that we are now three core new portfolio added would mean that we have more resources driving those things because that's the future, right? I mean, as you hopefully agree that, that's our future. So we are investing on the future. So that's why the costs have not -- the cost -- I mean, our view is that we will continue to invest even though, as I said, there's been a dent for us. We'll chew this, and we will get on with it and probably in the coming quarters, slowly, we will build this up.

Next question from Mr. Arun Thirumalai, individual investor.

I represent the company called Earthwise Investor. So just wanted to check, Vinod, in terms of the EBITDA, the previous question also, so you have a steady state kind of an employee expenditure on a quarterly basis of about INR 50 crores, INR 55 crores, right? So just wanted to understand that since you're going to be SaaS-based in terms of the revenue model, so is there a platform effect to these businesses? Because I'm assuming that the entire [ INR 117 ] million of order book going forward is completely on a SaaS-based kind of revenue model. So would that entail an operating leverage to your business because I just see that if you're -- for example, as your revenue uptake happens, your costs should not increase proportionately, right? So will that happen going forward? And also because you're more or less guiding for a flattish growth, right, because you're saying that executable order book for the next year is only going to be, say, about [INR 36 million to INR 40 million ]. So even if it translates about [ INR 10 million ] a quarter. So would that -- the cost is about 5 -- as of now, say, about INR 55 crores. Would that remain or where do you see your employee cost going up? And will there be some kind of operating leverage inherent in this business because I'm sure the development costs would already be undertaken for most of these?

Okay. So see, the cost will remain more or less at this level -- at the revenue -- at the current revenue levels. As the revenue goes up, as you rightly said, there could not be a proportionate increase, but there will be some increase as we have to increase the delivery capacity and things like that. So for the -- so the EBITDA levels on a steady state basis will come up because this year, the EBITDA is much lower because we had a revenue dip. But as that gets resolved, we will get back to the EBITDA that we normally are setting the expectation of 15% to 20%. But I just want to also caveat that -- caveat with that if we find a huge opportunity to scale any of our new businesses, we will not hold back, and we let say, we'll definitely make that investment to scale that because it's early days for us for some of the new areas. And if you think that -- I mean, we are just moderated the investments in line with what we are expecting the market to absorb. But if we see a fast traction there, our EBITDA might -- I mean our investments will go up. But by and large, we're right in the time that we'll be at that current level of spend.

So just to rephrase that. So what I'm saying, for example, [ INR 117 ] million of order book you have. So that would it cost in terms of, say, as of this month, which is roughly the same revenue on an annualized basis of what we've done last year or something like approximately. I'm not asking you for this one. So would your -- the cost -- the employee cost, which is the main component of the thing, right, would it remain in that INR 200 crore, INR 250 crore? So for example, if say, following year if you order book increase '23, '24 in the future as you're expecting these products to catch up. So if we hit, say, a revenue run rate of, say, INR 500 crores per annum, then would you see that entire thing translating into EBITDA? Agreed. I agree that you would want to invest a little bit more on future, but at least on the current core, which is IDcentral and the three products, right, the security product, the other one. So that should start the scaling and give you the operating leverage, right, at least on those particular products?

Yes. Look, I think the expectation that probably we want to set is that we will still operate around 20% EBITDA. That's what we are looking at on a steady-state basis. Obviously, as we really scale the SaaS business, it will go up. But at least for the next 2, 3 years, that's what we're expecting our -- our view is that we will be around that range of revenue.

And also, just one last question in terms of the execution of your order book, right? For example, you currently -- you've said that about [ INR 36 ] million will happen at 12 months. Is there any upside to that? Or either only these existing orders that are going to be executed? Will something new come through the year? Or do you expect something like that to happen through the current year?

Obviously, there will be some new contracts that we will book and recognize during the course of this year. So that will definitely happen on top of it.

No, but in terms of contract win to the actual revenue, what is the kind of time frame which you generally foresee on an average across order?

Look, I think that has changed significantly, right? As I said, typically, otherwise, I would say that within the 12 to maximum 18 months the entire contract will get executed. However, now that is getting extended to the contract duration, which would be either 3 years or in many cases, 5 years. So that's the way I would put it that. It is currently getting executed over a period of 5 years.

Okay. Okay. So when you're saying the 117 will keep -- yes, I'll come back in the queue.

So our next question from Mr. Aditya Sharma, ICICI Mutual Fund.

I just sort of wanted to understand over the last 5 years that I've been tracking this company, you keep talking about turnaround, empowering, additionally adding attracting talent and all. The way I see it is basically, I had a INR 60 crore interest outflow, which we all sort of dilute our equity, stop that interest outflow and then somehow we just managed to just take care of that INR 60 crore by increasing the employee cost. I just sort of wanted to understand is there an action -- a lot of previous questions are also revolving around this. Do we actually have a vision because I see this company for the last almost a decade or so, just hovering around at INR 300 crores, INR 350-odd crores of top line number. Is there an actual plan that we sort of intend to scale it up real -- like actually scale it up or just sort of keep pounding around these numbers and make stories?

Yes. So first of all, I don't know the interest that you're talking about. If you're talking about 5 years back, that might be there. But of late, there is no interest or anything like that. On the -- again, on the business of SaaS -- I'm not going to repeat it because I hope you heard that. The key is, like I agree with you, Aditya, unless we -- the numbers translate to -- this translates to number that believability will be there. But I think if you look at SaaS businesses take more time and we're also hit -- we just have the new portfolio, and we were hit by COVID also. So we lost some time on -- these are new areas. And new areas, which will take time for us to tell the customer what this new value is all about. So it's taking more time, but I'm confident that it will show up in the numbers and then you'll also start believing the story.

So is the number that I'm talking about is 2015 ahead of INR 60 crore interest outgo in my P&L. I don't know if you have that number or not. There, I diluted my equity, I increased my share capital at whatever [ $13, $14 ]. Got in equity, repaid my debt or converted my debt to equity. And basically, today, if I would have done nothing and just simply just selling the same business, I would have had a INR 60 crore EBITDA. Somehow...

No, I agree -- I agree with you would have had an EBITDA but no portfolio to sell and grow the future. So what we have done today is that we have a portfolio, which we can make it. Otherwise, it would have been a declining business. Today, we can talk about it because we have a new set of portfolio, which is an emerging growth market. That should -- that is giving us the confidence that we will be able to grow the company. If you have not done anything, it would have been -- I mean the story would have been -- I mean we could have managed this like that, but I think we have managed the growth, created a portfolio competing well in the market and the numbers will come Aditya.

Ladies and gentlemen, that would be the last question. I would now like to hand over the floor to the management for closing comments.

We thank you all for taking time for attending this call. And thank you, again, for your continued interest in Subex. You can always reach us to -- reach out to us at investor relations hit -- [email protected] if you need any further clarification. Thank you again.

Thank you, sir. Ladies and gentlemen, with this, we conclude our conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day, everyone.