Redknee Solutions Inc EBITDA dropped on 268% in 2016 and Revenue dropped on 23.2%
12.12.2016 • About Redknee Solutions Inc (
$RKN) • By InTwits
Redknee Solutions Inc reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Redknee Solutions Inc doesn't have a profitable business model yet: FY2016 ROIC is -40.8%
- EBITDA Margin is quite volatile: -23.2% in FY2016, 10.6% in FY2015, 4.7% in FY2014, 3.7% in FY2013, 11.6% in FY2012
- Redknee Solutions Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.3%. At the same time it's in pair with industry average of 1.7%.
- CAPEX is quite volatile: 2.6 in FY2016, 2.8 in FY2015, 3.3 in FY2014, 2.4 in FY2013, 0.57 in FY2012
- The company has unprofitable business model: ROIC is at -40.8%
- It operates with high leverage: Net Debt/EBITDA is -0.8x while industry average is -4.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Redknee Solutions Inc ($RKN) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 56.5 | 142.0 | 257.7 | 222.7 | 171.1 | -23.2% |
| Gross Profit | 38.7 | 78.9 | 131.8 | 130.5 | 92.6 | -29.1% |
| SG&A | | 45.8 | 70.0 | 62.5 | 60.4 | -3.4% |
| EBITDA | 6.6 | 5.2 | 12.1 | 23.6 | -39.7 | -268.1% |
| Net Income | 5.3 | -0.3 | -39.9 | -10.0 | -66.9 | |
Balance Sheet
|
|---|
| Cash | 17.2 | 79.1 | 108.6 | 55.0 | 37.1 | -32.6% |
| Short Term Debt | 0.0 | 0.4 | 0.8 | 1.8 | 50.4 | 2,702.5% |
| Long Term Debt | 5.6 | 33.0 | 45.8 | 55.0 | 0.0 | -100.0% |
Cash flow
|
|---|
| Capex | 0.6 | 2.4 | 3.3 | 2.8 | 2.6 | -8.0% |
Ratios
|
|---|
| Revenue growth | -4.5% | 151.6% | 81.4% | -13.6% | -23.2% | |
| EBITDA growth | 453.7% | -20.8% | 132.3% | 95.3% | -268.1% | |
| Gross Margin | 68.6% | 55.6% | 51.1% | 58.6% | 54.1% | -4.5% |
| EBITDA Margin | 11.6% | 3.7% | 4.7% | 10.6% | -23.2% | -33.8% |
| Net Income Margin | 9.3% | -0.2% | -15.5% | -4.5% | -39.1% | -34.6% |
| SG&A, % of revenue | | 32.2% | 27.2% | 28.1% | 35.3% | 7.2% |
| CAPEX, % of revenue | 1.0% | 1.7% | 1.3% | 1.2% | 1.5% | 0.2% |
| ROIC | 13.8% | -1.5% | -0.3% | 7.4% | -40.8% | -48.3% |
| ROE | 16.8% | -0.4% | -37.0% | -8.7% | -90.3% | -81.6% |
| Net Debt/EBITDA | -1.8x | -8.8x | -5.1x | 0.1x | | -0.1x |
Redknee Solutions Inc ($RKN) key quoterly financial indicators
| mln. $ | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 50 | 40 | 41 | 41 | -19.9% | -26.0% | -13.2% | -32.0% |
| EBITDA | 3 | -29 | -6 | -8 | -64.5% | -445.9% | | -227.2% |
| Net Income | -4 | -36 | -12 | -15 | -314.1% | | | |
Balance Sheet
|
|---|
| Cash | 43 | 39 | 38 | 37 | -57.0% | -62.5% | -56.8% | -32.6% |
| Short Term Debt | 2 | 2 | 8 | 50 | -20.0% | -28.9% | 86.7% | 2,702.5% |
| Long Term Debt | 54 | 54 | 48 | 0 | 24.1% | 25.4% | 14.9% | -100.0% |
Ratios
|
|---|
| Gross Margin | 59.3% | 53.9% | 45.3% | 56.8% | 0.8% | -7.0% | -11.7% | -1.1% |
| EBITDA Margin | 6.9% | -71.8% | -16.0% | -19.8% | -8.7% | -87.2% | -14.4% | -30.4% |
| Net Income Margin | -8.6% | -89.5% | -30.2% | -36.1% | -11.8% | -85.7% | -18.4% | -28.7% |
Revenue and profitability
The company's Revenue dropped on 23.2%. Revenue decline showed acceleration in FY16Q4 - it was 32.0% YoY. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin dropped on 33.8 pp from 10.6% to -23.2% in FY2016.
Gross Margin decreased on 4.5 pp from 58.6% to 54.1% in FY2016. SG&A as a % of Revenue increased on 7.2 pp from 28.1% to 35.3% in FY2016.
Net Income marign dropped on 34.6 pp from -4.5% to -39.1% in FY2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 1.5% in FY2016. CAPEX/Revenue showed almost no change from FY2013 to FY2016. It's average CAPEX/Revenue for the last three years was 1.3%.
Return on investment
The company operates at negative ROIC (-40.84%) and ROE (-90.32%). ROIC dropped on 48.3 pp from 7.4% to -40.8% in FY2016. ROE dropped on 81.6 pp from -8.7% to -90.3% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.8x and Debt / EBITDA is . Net Debt / EBITDA decreased on 0.1x from 0.1x to in FY2016. Debt dropped on 11.1% while cash dropped on 32.6%.
Appendix 1: Peers in Technology
Below we provide Redknee Solutions Inc benchmarking against other companies in Technology 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Intrinsyc Technologies Corp ($ITC) | | -21.7% | 70.8% | 24.5% | 39.2% |
| ProntoForms Corp ($PFM) | | 75.4% | 43.9% | 46.4% | 28.2% |
| Kinaxis Inc ($KXS) | | 30.3% | 15.2% | 30.3% | 27.0% |
| NexJ Systems Inc ($NXJ) | | 4.3% | -12.6% | 19.7% | 17.3% |
| Constellation Software Inc/Canada ($CSU) | | 35.9% | 37.9% | 10.1% | 15.6% |
| |
|---|
| Median (12 companies) | | 0.3% | 13.3% | 11.5% | 12.7% |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Constellation Software Inc/Canada ($CSU) | 86.2% | 85.5% | 86.1% | 86.2% | 87.1% |
| ProntoForms Corp ($PFM) | 96.1% | 98.1% | 98.0% | 79.4% | |
| Espial Group Inc ($ESP) | 77.5% | 81.7% | 78.5% | 74.3% | 74.7% |
| Halogen Software Inc ($HGN) | 72.0% | 74.8% | 71.8% | 73.8% | 76.2% |
| Kinaxis Inc ($KXS) | 71.8% | 70.4% | 70.4% | 71.8% | 69.1% |
| |
|---|
| Median (12 companies) | 71.8% | 55.6% | 61.9% | 61.9% | 71.9% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Wi-LAN Inc ($WIN) | 40.9% | 12.2% | 56.2% | 53.2% | 57.8% |
| Kinaxis Inc ($KXS) | 18.7% | 23.0% | 19.2% | 28.0% | 17.6% |
| Constellation Software Inc/Canada ($CSU) | 20.9% | 20.1% | 21.8% | 25.2% | 26.0% |
| Intrinsyc Technologies Corp ($ITC) | -10.5% | -38.8% | 2.2% | 10.8% | |
| Mitel Networks Corp ($MNW) | 10.2% | 10.0% | 7.0% | 7.7% | |
| |
|---|
| Median (14 companies) | 0.9% | 3.9% | 4.4% | 0.1% | 7.1% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kinaxis Inc ($KXS) | 2.9% | 2.3% | 5.0% | 4.7% | 5.0% |
| Halogen Software Inc ($HGN) | 4.9% | 9.0% | 8.4% | 2.9% | 2.6% |
| Espial Group Inc ($ESP) | 1.6% | 0.2% | 1.9% | 2.1% | 1.5% |
| ProntoForms Corp ($PFM) | 1.1% | 0.8% | 3.6% | 1.9% | |
| Critical Control Energy Services Corp ($CCZ) | | 0.5% | 1.0% | 1.6% | |
| |
|---|
| Median (14 companies) | 1.1% | 1.1% | 1.2% | 1.2% | 1.0% |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Constellation Software Inc/Canada ($CSU) | 45.9% | 22.4% | 24.7% | 38.5% | 40.5% |
| Kinaxis Inc ($KXS) | | 61.8% | 63.6% | 44.0% | 22.6% |
| Halogen Software Inc ($HGN) | | -28.4% | -45.9% | -40.5% | 12.6% |
| Wi-LAN Inc ($WIN) | 2.6% | -7.6% | 8.9% | 7.4% | 8.4% |
| NexJ Systems Inc ($NXJ) | | -44.6% | -19.8% | -13.9% | 4.5% |
| |
|---|
| Median (14 companies) | -7.5% | -17.5% | 0.5% | -1.2% | 8.4% |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mitel Networks Corp ($MNW) | 3.7x | 3.8x | 2.6x | 6.2x | |
| Pivot Technology Solutions Inc ($PTG) | | -0.4x | 1.1x | 4.8x | |
| Constellation Software Inc/Canada ($CSU) | 0.0x | 1.6x | 0.6x | 0.4x | -0.0x |
| Wi-LAN Inc ($WIN) | -4.9x | -12.1x | -2.3x | -1.7x | -2.0x |
| Kinaxis Inc ($KXS) | 1.9x | 4.7x | -4.2x | -3.9x | -6.3x |
| |
|---|
| Median (7 companies) | 0.9x | 1.5x | -0.8x | -1.7x | -6.3x |
|---|
