It is my privilege to address Subex's shareholders for the first timesince taking on the role of CEO and Managing Director of the Company.
The Financial Year 2017-18 (FY18) was a dramatic one marked by a numberof challenges. The telecom BSS market where we predominantly operate reported flatgrowth and several countries in emerging markets encountered geopolitical and forexchallenges. Even though our revenues were negatively impacted we completed the year withan increase in contracted order bookings and improved operational profitability.
Our contracted new order booking increased by 15% over the previousyear and we ended FY18 with revenues of $50.5Million EBITDA of $7.9 Million and PAT of$3.2 Million. Creditably we repaid our entire outstanding FCCB debt and reduced ourworking capital debt which resulted in significant interest cost savings.
We also made significant progress to our products and solutionsportfolio. To appreciate this it is important to understand some key trends of ourindustry.
Voice revenues are declining: As we approach the Fourth IndustrialRevolution the way people communicate is drastically changing. Voice calling and textmessaging that dominated the communication industry are giving way to internet messagingand VoIP (Voice Over Internet Protocol). This substantial reduction in voice and textingalong with a reduction in tariff have resulted in a decline of ARPU (Average Revenue PerUser) and aggregate revenues for telcos.
Massive telco consolidation: In the recent past the communicationsindustry has been marked by several mergers and acquisitions. Commoditization of legacyservices and telcos' desire to monetize their data are driving telco consolidation. Byconsolidating they intend to leverage synergies and operational efficiencies. Wewitnessed this in India when Vodafone India and Idea Cellular announced their merger.
5G moves from trial to production phase: Several operators areplanning for a limited 5G launch in the near future. 5G technology is expected to bringabout new digitized services in retail manufacturing precision engineering and healthverticals.
Unlocking the IoT (Internet of Things): According to GSMAIntelligence the number of global IoT connections could increase more than threefold andreach $25 Billion by 2025. The IoT security space promises tremendous growth and Gartnerpredicts the IoT security market could grow multi-fold to reach $3 Billion by 2021.
Artificial intelligence: Artificial Intelligence (AI) and MachineLearning (ML) is moulding the future and poised to unleash the next wave of digitaldisruption. Along with the adoption of technologies like virtualization SDN-NFV andorchestration Artificial Intelligence will be key to business and digital transformationin telcos driving an improved customer experience.
Increasing appetite for open standards: Major telcos have startedexperimenting with open source software and this trend is gaining traction as operatorsmimic the computing world and deepen their innovation focus. Further Blockchaintechnology is reducing complexities in multi-party transactions thereby moderating costsand enhancing digital competitiveness.
It is clear that telcos are transforming from being CommunicationService Providers (CSP) to Digital Service Providers (DSP). In line with this we tooksome significant steps last year to make Subex more relevant to our customers.
We rebranded Subex as a digital transformation enabler around threevalue pillars: driving new business models enhancing the customer experience andoptimising operations. We incubated a multi-vertical IoT security solution thatdifferentiates itself by having 30% more threat signatures than any other player. Weimproved the application of Artificial Intelligence (AI) and Machine Learning (ML)capabilities in our products to solve use cases hitherto unsolved in the industry.
We engaged with a Tier 1 telco on Network Analytics and proactivelyevolved our solution capabilities to graduate us ahead of the curve. We concluded therestructuring of entities to attract strategic partners and talents into our relevantbusiness areas.
It is abundantly clear that we need to break out from our currentrevenue level. Towards this we plan to build on the strong foundation laid last year andaggressively pursue a growth strategy. The growth strategy will cover our core new andemerging growth areas. We intend to perform well in our core areas and drive efficienciesthat will help us invest in new growth areas. The near-term growth is expected from IoTSecurity and Network Analytics. We also plan to work on one or two new areas with theintention of bringing a new product to the market by the end of this year. During thecourse of this year we expect to maintain our revenues from core areas conclude ongoingtrials around new areas and sign strategic partnerships. Considering that SaaS-basedrevenue models are prevalent in new areas we expect revenues from new areas to kick infrom the next year.
The current management team consists of Subexians who have been aroundfor a while. They clearly understand our strengths challenges and opportunities. We planto add new talents and capabilities to our teams as and when new areas of growth areidentified. The team is well aligned and confident to drive our strategy leading theCompany out of the past into a bright future that makes Subex vibrant again. We aremindful of the fact that our FCCB resolution resulted in a significant equity dilution andpain to our investors. We are indeed thankful to our investors for their continued trustand patience. As elaborated above we are committed to growing Subex and are optimisticthat this strategy will enhance value and benefit our shareholders.
We look forward to your support during this crucial phase of ourjourney.
Managing Director and CEO