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Netcall Net Income dropped on 90.8% in 2018 while Revenue jumped on 35.4%

16 Oct 2018 • About Netcall ($NET) • By InTwits

Netcall reported FY2018 financial results today. Overall looking at the company's long term financial model we can say that:
  • EBITDA Margin is declining: 12.3% in FY2018 vs. 18.5% in FY2017 vs. 25.5% in FY2014
  • Netcall has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.2%. At the same time it's a lot of higher than industry average of 2.1%.
  • CAPEX is quite volatile: 0.17 in FY2018, 0.12 in FY2017, 0.44 in FY2016, 0.16 in FY2015, 0.17 in FY2014
  • The company has potentially unprofitable business model: ROIC is at 3.2%
  • It operates with high leverage: Net Debt/EBITDA is 0.3x while industry average is 0.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Netcall ($NET) key annual financial indicators

mln. £201420152016201720182018/2017
P&L
Revenue16.86617.15116.62716.15121.87535.4%
Gross Profit15.35315.58715.16414.81819.73233.2%
SG&A13.54113.34911.91211.83017.04344.1%
EBITDA4.2934.0343.2522.9882.700-9.6%
Net Income2.2132.6551.8861.4750.136-90.8%
Balance Sheet
Cash11.37713.72614.12212.7245.779-54.6%
Short Term Debt0.0000.0000.0000.0000.000
Long Term Debt0.0000.0000.0000.0006.518
Cash flow
Capex0.1680.1630.4440.1210.17141.3%
Ratios
Revenue growth4.7%1.7%-3.1%-2.9%35.4%
EBITDA growth15.0%-6.0%-19.4%-8.1%-9.6%
Gross Margin91.0%90.9%91.2%91.7%90.2%-1.5%
EBITDA Margin25.5%23.5%19.6%18.5%12.3%-6.2%
Net Income Margin13.1%15.5%11.3%9.1%0.6%-8.5%
SG&A, % of revenue80.3%77.8%71.6%73.2%77.9%4.7%
CAPEX, % of revenue1.0%1.0%2.7%0.7%0.8%0.0%
ROIC15.1%12.0%7.1%7.5%3.2%-4.3%
ROE11.9%12.4%8.3%6.8%0.6%-6.1%
Net Debt/EBITDA-2.7x-3.4x-4.3x-4.3x0.3x4.5x

Revenue and profitability


Netcall's Revenue surged on 35.4% in FY2018. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 6.2 pp from 18.5% to 12.3% in FY2018.

Gross Margin decreased slightly on 1.5 pp from 91.7% to 90.2% in FY2018. SG&A as a % of Revenue increased on 4.7 pp from 73.2% to 77.9% in FY2018.

Net Income marign decreased on 8.5 pp from 9.1% to 0.62% in FY2018.

Capital expenditures (CAPEX) and working capital investments


The company's CAPEX/Revenue was 0.78% in FY2018. The company showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average level of CAPEX/Revenue for the last three years was 1.4%.

Return on investment


The company operates at low ROIC (3.18%) and ROE (0.64%). ROIC decreased on 4.3 pp from 7.5% to 3.2% in FY2018. ROE decreased on 6.1 pp from 6.8% to 0.64% in FY2018.

Leverage (Debt)


Company's Net Debt / EBITDA is 0.3x and Debt / EBITDA is 2.4x. Net Debt / EBITDA jumped on 4.5x from -4.3x to 0.3x in FY2018. Debt surged while cash dropped on 54.6% in FY2018.

Valuation


The company's trades at EV/EBITDA 33.1x and P/E 652.6x.

Appendix 1: Peers in Software & Computer Services


Below we provide Netcall benchmarking against other companies in Software & Computer Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Proactis Holdings ($PHD)26.2%69.6%12.5%31.1%
Accesso Technology Grp ($ACSO)27.3%24.1%10.0%30.2%
Gresham Computing ($GHT)-8.7%15.7%15.6%26.3%
IMImobile ($IMO)12.6%26.1%23.5%46.3%
Dotdigital Group ($DOTD)31.8%26.0%18.7%34.8%
 
Median (7 companies)0.8%4.1%10.9%23.5%40.6%
Netcall ($NET)1.7%-3.1%-2.9%35.4%


Top companies by Gross margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Dotdigital Group ($DOTD)90.5%89.3%87.4%86.1%78.9%
Proactis Holdings ($PHD)73.6%80.4%82.4%86.0%
Gresham Computing ($GHT)73.4%81.0%82.6%84.8%
Idox ($IDOX)89.4%89.3%86.8%83.0%
Oxford Metrics ($OMG)62.1%63.3%65.9%70.5%
 
Median (7 companies)57.8%58.8%56.6%83.0%62.3%
Netcall ($NET)91.0%90.9%91.2%91.7%90.2%


Top companies by EBITDA margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Dotdigital Group ($DOTD)29.2%32.0%30.4%31.7%26.9%
Gresham Computing ($GHT)8.8%18.1%20.6%22.6%
Oxford Metrics ($OMG)14.7%28.4%23.1%19.9%
Accesso Technology Grp ($ACSO)14.3%15.7%17.7%17.5%
Idox ($IDOX)26.0%28.6%27.3%16.6%
 
Median (7 companies)11.1%12.3%11.0%17.5%16.8%
Netcall ($NET)25.5%23.5%19.6%18.5%12.3%


Top companies by CAPEX/Revenue, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Oxford Metrics ($OMG)2.8%2.4%1.8%5.8%
IMImobile ($IMO)3.9%2.0%3.3%2.8%1.0%
Idox ($IDOX)1.5%0.9%0.8%1.9%
Gresham Computing ($GHT)1.9%1.5%3.0%1.3%
Dotdigital Group ($DOTD)3.7%3.1%1.9%1.2%1.1%
 
Median (7 companies)1.9%1.3%1.2%1.3%1.0%
Netcall ($NET)1.0%1.0%2.7%0.7%0.8%


Top companies by ROIC, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Dotdigital Group ($DOTD)28.5%31.4%28.9%29.3%26.6%
Gresham Computing ($GHT)3.8%12.6%12.3%13.6%
Oxford Metrics ($OMG)0.8%14.6%16.3%12.7%
IMImobile ($IMO)27.2%0.5%9.7%10.6%4.6%
Accesso Technology Grp ($ACSO)9.3%11.9%6.4%
 
Median (7 companies)9.8%5.3%9.8%10.6%15.6%
Netcall ($NET)15.1%12.0%7.1%7.5%3.2%


Top companies by Net Debt / EBITDA

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Idox ($IDOX)1.0x1.3x1.2x2.2x
Proactis Holdings ($PHD)-0.7x-0.3x0.1x1.0x
Accesso Technology Grp ($ACSO)1.3x0.7x0.2x-0.5x
Oxford Metrics ($OMG)-2.0x-1.6x-1.2x-1.6x
IMImobile ($IMO)0.2x-5.6x-2.2x-1.6x-0.6x
 
Median (7 companies)-0.3x-0.5x-0.8x-1.6x-0.9x
Netcall ($NET)-2.7x-3.4x-4.3x-4.3x0.3x