Oracle Financial Services Software reports 12.3% Net Income decline while 4.4% Revenue growth

15-05-2015 • About Oracle Financial Services Software ($OFSS) • By InTwits

Oracle Financial Services Software reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Oracle Financial Services Software has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's a lot of higher than industry average of 4.7%.
CAPEX is quite volatile: 151 in FY2015, 311 in FY2014, 429 in FY2013, 896 in FY2012, 678 in FY2011
The company has highly profitable business model: ROIC is at 24.2%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Oracle Financial Services Software ($OFSS) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	29,969	31,467	34,740	37,413	39,049	4.4%
Gross Profit	16,626
SG&A	5,406
EBITDA	11,220	11,111	12,245	13,995	15,508	10.8%
Net Income	11,110	9,093	10,751	13,593	11,923	-12.3%
Balance Sheet
Cash	2,964	5,150	54,703	5,194	35,531	584.1%
Short Term Debt	0	0	0	0	0
Long Term Debt	0	0	0	0	0
Cash flow
Capex	678	896	429	311	151	-51.3%
Ratios
Revenue growth	-39.8%	5.0%	10.4%	7.7%	4.4%
EBITDA growth	8.6%	-1.0%	10.2%	14.3%	10.8%
Gross Margin	55.5%					0.0%
EBITDA Margin	37.4%	35.3%	35.2%	37.4%	39.7%	2.3%
Net Income Margin	37.1%	28.9%	30.9%	36.3%	30.5%	-5.8%
SG&A, % of revenue	18.0%					0.0%
CAPEX, % of revenue	2.3%	2.8%	1.2%	0.8%	0.4%	-0.4%
ROIC	22.0%	18.0%	16.8%	16.3%	24.2%	8.0%
ROE	22.9%	15.5%	15.7%	16.8%	19.5%	2.7%
Net Debt/EBITDA	-0.3x	-0.5x	-4.5x	-0.4x	-2.3x	-1.9x

Revenue and profitability

The company's Revenue increased on 4.4% in FY2015. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.3 pp from 37.4% to 39.7% in FY2015.

Net Income marign decreased on 5.8 pp from 36.3% to 30.5% in FY2015.

Capital expenditures (CAPEX) and working capital investments

Oracle Financial Services Software's CAPEX/Revenue was 0.39% in FY2015. CAPEX/Revenue decreased on 2.5 pp from 2.8% in FY2012 to 0.39% in FY2015. It's average level of CAPEX/Revenue for the last three years was 0.82%.

Return on investment

The company operates at high and attractive ROIC (24.24%) while ROE is a bit lower (19.51%). ROIC increased on 8.0 pp from 16.3% to 24.2% in FY2015. ROE increased on 2.7 pp from 16.8% to 19.5% in FY2015.

Leverage (Debt)

The company has no debt. Cash surged on 584% in FY2015.

Management team

Oracle Financial Services Software's CEO is Chaitanya M Kamat "Chet". Chaitanya M Kamat "Chet" has 8 years tenure at the company. Oracle Financial Services Software's CFO is Makarand Padalkar. Makarand Padalkar has 11 years tenure at the company.

Appendix 1: Peers in IT Consulting & Software

Below you can find Oracle Financial Services Software benchmarking vs. other companies in IT Consulting & Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tech Mahindra ($TECHM)	-85.8%	6.8%	25.2%	174.0%
Tata Consultancy Services ($TCS)		31.0%	28.8%	29.9%	15.7%
Mindtree ($MINDTREE)		26.6%	23.2%	28.8%	17.0%
Infinite Computer Solutions (India) ($INFINITE)	-57.9%	19.5%	31.7%	24.6%
Infosys ($INFY)		22.7%	19.6%	24.2%	6.4%
Median (21 companies)	2.7%	22.9%	20.6%	14.3%	11.0%
Oracle Financial Services Software ($OFSS)		5.0%	10.4%	7.7%	4.4%

Top companies by Gross margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)				47.4%	42.4%
Infosys ($INFY)	45.3%	41.3%	98.1%	35.9%	38.3%
Mindtree ($MINDTREE)	32.8%	31.5%	36.2%		34.8%
Wipro ($WIPRO)	31.5%	29.2%	30.4%	32.0%	31.6%
Median (4 companies)	32.8%	32.7%	36.2%	35.9%	36.6%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)	29.9%	29.5%	28.6%	30.7%	26.1%
Infosys ($INFY)	32.5%	31.6%	27.9%	26.3%	27.1%
Wipro ($WIPRO)	21.1%	19.1%	20.9%	22.4%	22.3%
Tech Mahindra ($TECHM)	19.5%	16.7%	20.7%	22.2%
Mindtree ($MINDTREE)	11.8%	15.1%	19.8%	20.6%	20.3%
Median (18 companies)	18.0%	15.1%	16.5%	18.3%	15.9%
Oracle Financial Services Software ($OFSS)	37.4%	35.3%	35.2%	37.4%	39.7%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ramco Systems ($RAMCOSYS)	16.4%		22.1%	15.3%	12.4%
Niit Technologies ($NIITTECH)	4.1%	5.9%	4.6%	6.1%	7.9%
Infosys ($INFY)	4.7%	4.9%	5.2%	5.5%	4.2%
Mindtree ($MINDTREE)	5.6%	2.5%	4.5%	5.0%	5.6%
Tech Mahindra ($TECHM)	3.0%	5.4%	2.6%	5.0%
Median (17 companies)	4.2%	3.9%	3.5%	3.5%	3.2%
Oracle Financial Services Software ($OFSS)	2.3%	2.8%	1.2%	0.8%	0.4%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)	47.1%	48.6%	48.4%	50.2%	40.5%
Tech Mahindra ($TECHM)	19.2%	15.4%	20.1%	43.0%
Geometric ($GEOMETRIC)	19.6%	29.9%	46.4%	41.1%	20.6%
Mindtree ($MINDTREE)	14.9%	24.9%	34.6%	36.2%	32.0%
Cmc ($CMC)	31.5%	26.2%	33.2%	35.3%	26.0%
Median (30 companies)	16.0%	19.6%	21.4%	23.2%	20.6%
Oracle Financial Services Software ($OFSS)	22.0%	18.0%	16.8%	16.3%	24.2%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
3I Infotech ($3IINFOTECH)	3.5x	8.5x	20.3x	27.7x
Ramco Systems ($RAMCOSYS)	4.0x	8.8x		27.6x	4.2x
Starcom Information Technology ($STARCOM)				17.4x
Onward Technologies ($ONWARDTEC)	2.7x	2.4x	2.2x	4.1x	1.9x
Kpit Technologies ($KPIT)	-0.7x	0.3x	0.5x	0.7x	0.4x
Median (23 companies)	-0.1x	-0.0x	-0.2x	-0.2x	-0.7x
Oracle Financial Services Software ($OFSS)	-0.3x	-0.5x	-4.5x	-0.4x	-2.3x

Oracle Financial Services Software stock price chart

Oracle Financial Services Software financials

mln.	FY2010	FY2011	FY2012

Revenue	49,822	29,969	31,467
EBITDA	10,331	11,220	11,111
Net income	7,737	11,110	9,093
CAPEX	400.3	677.7	895.9
Debt	0.000	0.000	0.000
Cash	5,105	2,964	5,150

About Oracle Financial Services Software

Oracle Financial Services Software Limited provides information technology (IT) solutions and knowledge processing services to the financial services industry worldwide. It offers Oracle FLEXCUBE, a banking product suite for consumer, corporate, investment, private wealth management, mobile and Internet banking, consumer lending, asset management, and investor servicing with payments; Oracle FLEXCUBE Enterprise Limits and Collateral Management that enables centralized collateral management, limits definition, tracking, and exposure measuring; Oracle FLEXCUBE Private Banking solution, which offers a wealth management portal, a customer interaction tool, and portfolio management capabilities for private banking; and Oracle FLEXCUBE Investor Servicing, a process enabled transfer agency and investor servicing solution. The company also provides Oracle Financial Services Leasing and Lending that automates and unifies the lending, leasing, and mortgage lifecycles; Oracle Financial Services Analytical Applications for enterprise risk, performance management, regulatory compliance, and customer insight; and Oracle Banking Platform for global banks. In addition, it offers consulting services in the areas of business and IT, process improvement and transformation, quality consulting, SOA strategy and governance, IT architecture planning, product evaluation and selection, IT portfolio assessment, program management, and IT architecture and governance; and application services for banking, securities, and insurance. Further, the company conceptualizes, designs, evaluates, implements, and manages IT infrastructure for financial institutions; and provides business process outsourcing services, such as back-office work to contact center services for the banking, capital markets, insurance, and asset management domains. The company was incorporated in 1989 and is based in Mumbai, India. Oracle Financial Services Software Limited is a subsidiary of Oracle Global (Mauritius) Limited.