NetDragon Websoft Inc reports 181% Net Income decline and 23.4 pp EBITDA Margin decline from 22.3% to -1.1%
30/03/2016 • About NetDragon Websoft Inc (
$777) • By InTwits
NetDragon Websoft Inc reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- NetDragon Websoft Inc doesn't have a profitable business model yet: 2015 ROIC is -3.4%
- EBITDA Margin is declining: -1.1% in 2015 vs. 22.3% in 2014 vs. 31.1% in 2011
- EBITDA Margin is quite volatile: -1.1% in 2015, 22.3% in 2014, 29.4% in 2013, 39.2% in 2012, 31.1% in 2011
- NetDragon Websoft Inc has high CAPEX intensity: 5 year average CAPEX/Revenue was 33.3%. At the same time it's a lot of higher than industry average of 4.7%.
- CAPEX is quite volatile: 546 in 2015, 526 in 2014, 306 in 2013, 174 in 2012, 101 in 2011
- The company has unprofitable business model: ROIC is at -3.4%
- It operates with high leverage: Net Debt/EBITDA is -0.6x while industry average is -1.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
NetDragon Websoft Inc ($777) key annual financial indicators
| mln. CNY | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 761 | 826 | 885 | 963 | 1,272 | 32.1% |
| Gross Profit | 686 | 771 | 803 | 860 | 958 | 11.4% |
| SG&A | 351 | 320 | 472 | 479 | 727 | 51.6% |
| EBITDA | 236 | 323 | 260 | 215 | -14 | -106.4% |
| Net Income | 135 | 39 | 6,141 | 177 | -143 | -180.9% |
Balance Sheet
|
|---|
| Cash | 1,469 | 1,537 | 4,356 | 3,036 | 1,710 | -43.7% |
| Short Term Debt | 31 | 184 | 105 | 237 | 304 | 28.2% |
| Long Term Debt | 132 | 195 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 101 | 174 | 306 | 526 | 546 | 3.7% |
Ratios
|
|---|
| Revenue growth | 43.1% | 8.5% | 7.1% | 8.9% | 32.1% | |
| EBITDA growth | 80.9% | 36.8% | -19.5% | -17.4% | -106.4% | |
| Gross Margin | 90.1% | 93.4% | 90.8% | 89.3% | 75.3% | -14.0% |
| EBITDA Margin | 31.1% | 39.2% | 29.4% | 22.3% | -1.1% | -23.4% |
| Net Income Margin | 17.8% | 4.7% | 694.3% | 18.4% | -11.2% | -29.6% |
| SG&A, % of revenue | 46.2% | 38.7% | 53.4% | 49.8% | 57.1% | 7.3% |
| CAPEX, % of revenue | 13.3% | 21.1% | 34.6% | 54.6% | 42.9% | -11.7% |
| ROIC | 11.8% | 16.3% | 5.8% | 2.6% | -3.4% | -6.0% |
| ROE | 9.2% | 2.7% | 204.4% | 3.8% | -3.2% | -7.1% |
| Net Debt/EBITDA | -5.5x | -3.6x | -16.3x | -13.0x | | 13.0x |
Revenue and profitability
The company's Revenue jumped on 32.1% in 2015. Revenue growth was financed by EBITDA margin decline. EBITDA Margin dropped on 23.4 pp from 22.3% to -1.1% in 2015.
Gross Margin dropped on 14.0 pp from 89.3% to 75.3% in 2015. SG&A as a % of Revenue increased on 7.3 pp from 49.8% to 57.1% in 2015.
Net Income marign dropped on 29.6 pp from 18.4% to -11.2% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 NetDragon Websoft Inc had CAPEX/Revenue of 42.9%. CAPEX/Revenue jumped on 21.8 pp from 21.1% in 2012 to 42.9% in 2015. It's average CAPEX/Revenue for the last three years was 44.0%.
Return on investment
The company operates at negative ROIC (-3.37%) and ROE (-3.23%). ROIC decreased on 6.0 pp from 2.6% to -3.4% in 2015. ROE decreased on 7.1 pp from 3.8% to -3.2% in 2015.
Leverage (Debt)
Debt level is -0.6x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA jumped on 13.0x from -13.0x to in 2015. Debt jumped on 28.2% in 2015 while cash dropped on 43.7% in 2015.
Appendix 1: Peers in Software
Below we provide NetDragon Websoft Inc benchmarking against other companies in Software 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 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Yunbo Digital Synergy Group Ltd ($8050) | | -84.6% | 241.6% | -31.9% | 348.0% |
| Pizu Group Holdings Ltd ($8053) | | 40.3% | -42.9% | 1,742.9% | 157.9% |
| China Eco-Farming Ltd ($8166) | | -23.6% | -7.7% | 21.8% | 155.5% |
| Aurum Pacific China Group Ltd ($8148) | | | | 50.0% | 92.7% |
| Kingsoft Corp Ltd ($3888) | | 38.3% | 54.0% | 54.2% | 69.4% |
| |
|---|
| Median (33 companies) | -14.9% | 15.6% | 11.4% | 21.5% | 7.8% |
|---|
| NetDragon Websoft Inc ($777) | | 8.5% | 7.1% | 8.9% | 32.1% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| China Bio Cassava Holdings Ltd ($8129) | 90.2% | 90.4% | 97.4% | 98.4% | 98.3% |
| Chanjet Information Technology Co Ltd ($1588) | 91.9% | 89.2% | 91.3% | 92.4% | 91.4% |
| China Binary Sale Technology Ltd ($8255) | 60.0% | 63.5% | 68.5% | 67.7% | 85.9% |
| Kingdee International Software Group Co Ltd ($268) | 70.1% | 65.0% | 75.3% | 82.5% | 81.5% |
| Tian Ge Interactive Holdings Ltd ($1980) | 87.5% | 88.5% | 87.6% | 84.8% | 77.7% |
| |
|---|
| Median (33 companies) | 49.2% | 45.4% | 42.5% | 42.1% | 43.3% |
|---|
| NetDragon Websoft Inc ($777) | 90.1% | 93.4% | 90.8% | 89.3% | 75.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| International Entertainment Corp ($1009) | 235.1% | 50.8% | 64.0% | 54.9% | 62.0% |
| Sinosoft Technology Group Ltd ($1297) | 55.5% | 62.6% | 54.9% | 57.2% | 59.0% |
| China Binary Sale Technology Ltd ($8255) | 41.3% | 35.1% | 35.4% | 44.4% | 50.5% |
| Boyaa Interactive International Ltd ($434) | 38.9% | 38.5% | 25.8% | 30.7% | 47.6% |
| Kingdee International Software Group Co Ltd ($268) | 19.5% | 7.8% | 33.2% | 37.2% | 31.9% |
| |
|---|
| Median (33 companies) | 11.9% | 11.1% | 14.0% | 10.1% | 9.8% |
|---|
| NetDragon Websoft Inc ($777) | 31.1% | 39.2% | 29.4% | 22.3% | -1.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Aurum Pacific China Group Ltd ($8148) | 0.0% | | 2.9% | 7.5% | 20.6% |
| Kingsoft Corp Ltd ($3888) | 6.8% | 4.3% | 3.8% | 14.3% | 11.1% |
| Beijing Beida Jade Bird Universal Sci-Tech Co Ltd ($8095) | 3.5% | 8.7% | 5.5% | 4.3% | 10.9% |
| Tian Ge Interactive Holdings Ltd ($1980) | 3.2% | 18.0% | 7.9% | 7.3% | 7.4% |
| Microsoft Corp ($4338) | 3.4% | 3.1% | 5.5% | 6.3% | 6.4% |
| |
|---|
| Median (33 companies) | 2.4% | 1.4% | 1.8% | 3.5% | 2.0% |
|---|
| NetDragon Websoft Inc ($777) | 13.3% | 21.1% | 34.6% | 54.6% | 42.9% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Pizu Group Holdings Ltd ($8053) | -3.2% | -21.8% | -13.4% | -6.8% | 120.0% |
| IGG Inc ($8002) | | | 55.9% | 41.4% | 25.9% |
| Boyaa Interactive International Ltd ($434) | 100.4% | 75.3% | 21.3% | 20.0% | 21.4% |
| Sinosoft Technology Group Ltd ($1297) | 31.6% | 34.0% | 21.9% | 20.2% | 20.8% |
| ITE Holdings Ltd ($8092) | -19.6% | -15.0% | 10.6% | 16.8% | 19.8% |
| |
|---|
| Median (33 companies) | 1.6% | 5.2% | 6.7% | 5.6% | 2.3% |
|---|
| NetDragon Websoft Inc ($777) | 11.8% | 16.3% | 5.8% | 2.6% | -3.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Pizu Group Holdings Ltd ($8053) | | | | 346.1x | -0.4x |
| Epicurean and Co Ltd ($8213) | 2.9x | 2.3x | 4.7x | 12.3x | 12.0x |
| Sing Lee Software Group Ltd ($8076) | | | | 6.2x | 4.4x |
| China Technology Solar Power Holdings Ltd ($8111) | | | 7.4x | 3.3x | 0.2x |
| Chinasoft International Ltd ($354) | -1.3x | -0.7x | 0.7x | 1.5x | 0.7x |
| |
|---|
| Median (24 companies) | -0.7x | -0.9x | -1.4x | -1.3x | -0.5x |
|---|
| NetDragon Websoft Inc ($777) | -5.5x | -3.6x | -16.3x | -13.0x | |
