Oracle Financial Services Software ROIC surged on 21.4 pp from 24.2% to 45.7% in 2016 and Revenue increased on 4.8%

11-05-2016 • About Oracle Financial Services Software ($OFSS) • By InTwits

Oracle Financial Services Software reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is expanding: 41.1% in FY2016 vs. 39.7% in FY2015 vs. 35.3% in FY2012
Oracle Financial Services Software 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 4.8%.
CAPEX is quite volatile: ₹270m in FY2016, ₹151m in FY2015, ₹311m in FY2014, ₹429m in FY2013, ₹896m in FY2012
The company has highly profitable business model: ROIC is 45.7%

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

Revenue and profitability

Oracle Financial Services Software's Revenue increased on 4.8%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.4 pp from 39.7% to 41.1% in FY2016. EBITDA Margin stuck to a growing trend at 1.6 pp per annum in FY2012-FY2016.

Net Income margin decreased on 2.1 pp from 30.5% to 28.5% in FY2016. During the last 5 years Net Income margin topped in FY2014 at 36.3% and was declining since that time.

Investments (CAPEX, working capital and M&A)

In FY2016 Oracle Financial Services Software had CAPEX/Revenue of 0.66%. Oracle Financial Services Software showed small CAPEX/Revenue decline of 0.57 pp from 1.2% in FY2013 to 0.66% in FY2016. Average CAPEX/Revenue for the last three years was 0.63%. During FY2012-FY2016 CAPEX as a % of Revenue bottomed in FY2015 at 0.39%.

Return on investment

The company operates at high and attractive ROIC (45.7%) and ROE (32.7%). ROIC surged on 21.4 pp from 24.2% to 45.7% in FY2016. ROE surged on 13.2 pp from 19.5% to 32.7% in FY2016. During FY2012-FY2016 ROIC bottomed in FY2014 at 16.3% and was growing since that time. ROE followed a growing trend in the last 5 years.

Leverage (Debt)

The company has no debt. Cash dropped on 23.5%.

Management team

The company's CEO is Chaitanya M Kamat "Chet". Chaitanya M Kamat "Chet" has 10 years tenure with the company. Makarand Padalkar is a Oracle Financial Services Software's CFO. Makarand Padalkar has spent 13 years at the company.

Financial and operational results

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

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	31,467	34,740	37,413	39,049	40,928	4.8%
EBITDA	11,111	12,245	13,995	15,508	16,807	8.4%
Net Income	9,093	10,751	13,593	11,923	11,658	-2.2%
Balance Sheet
Cash	5,150	54,703	5,194	35,531	27,167	-23.5%
Short Term Debt	0	0	0	0	0
Long Term Debt	0	0	0	0	0
Cash flow
Capex	896	429	311	151	270	78.5%
Ratios
Revenue growth	5.0%	10.4%	7.7%	4.4%	4.8%
EBITDA growth	-1.0%	10.2%	14.3%	10.8%	8.4%

EBITDA Margin	35.3%	35.2%	37.4%	39.7%	41.1%	1.4%
Net Income Margin	28.9%	30.9%	36.3%	30.5%	28.5%	-2.1%
CAPEX, % of revenue	2.8%	1.2%	0.8%	0.4%	0.7%	0.3%

ROIC	18.0%	16.8%	16.3%	24.2%	45.7%	21.4%
ROE	15.5%	15.7%	16.8%	19.5%	32.7%	13.2%
Net Debt/EBITDA	-0.5x	-4.5x	-0.4x	-2.3x	-1.6x	0.7x

Peers in IT Consulting & Software

Below we provide Oracle Financial Services Software benchmarking against other companies in IT Consulting & 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	FY2012	FY2013	FY2014	FY2015	FY2016
Ramco Systems ($RAMCOSYS)	9.3%	7.3%	9.9%	37.0%	-
Cyient ($CYIENT)	-	20.6%	17.8%	24.0%	13.1%
Empower India ($EMPOWER)	-3.7%	-13.2%	-32.6%	23.9%	-
Hexaware Technologies ($HEXAWARE)	34.3%	17.3%	13.0%	21.0%	-
Tech Mahindra ($TECHM)	6.8%	25.2%	174.0%	20.1%	-
Median (22 companies)	9.3%	20.6%	14.2%	9.1%	13.0%
Oracle Financial Services Software ($OFSS)	-	10.4%	7.7%	4.4%	4.8%

Top companies by Gross margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Consultancy Services ($TCS)	-	-	47.4%	42.4%	43.9%
Infosys ($INFY)	41.3%	98.1%	35.9%	38.3%	37.4%
Mindtree ($MINDTREE)	31.5%	36.2%	-	34.8%	32.4%
Wipro ($WIPRO)	29.2%	30.4%	32.0%	31.6%	30.4%
Median (4 companies)	32.7%	36.2%	35.9%	36.6%	34.9%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Infosys ($INFY)	31.6%	27.9%	26.3%	27.1%	27.1%
Tata Consultancy Services ($TCS)	29.5%	28.6%	30.7%	26.1%	28.2%
Wipro ($WIPRO)	19.1%	20.9%	22.4%	22.3%	21.1%
Mindtree ($MINDTREE)	15.1%	19.8%	20.6%	20.3%	17.7%
Sqs India Bfsi ($SQSBFSI)	10.6%	18.8%	20.5%	19.4%	18.4%
Median (25 companies)	15.1%	16.5%	18.3%	12.3%	14.3%
Oracle Financial Services Software ($OFSS)	35.3%	35.2%	37.4%	39.7%	41.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ramco Systems ($RAMCOSYS)	-	22.1%	15.3%	12.4%	-
Niit Technologies ($NIITTECH)	5.9%	4.6%	6.1%	7.9%	6.0%
Financial Technologies (India) ($FINANTECH)	8.9%	11.4%	-	6.5%	5.4%
Mindtree ($MINDTREE)	2.5%	4.5%	5.0%	5.6%	3.4%
Tech Mahindra ($TECHM)	5.4%	2.6%	5.0%	5.0%	-
Median (20 companies)	3.9%	3.5%	3.5%	3.1%	3.4%
Oracle Financial Services Software ($OFSS)	2.8%	1.2%	0.8%	0.4%	0.7%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Consultancy Services ($TCS)	48.6%	48.4%	50.2%	40.5%	44.4%
Hexaware Technologies ($HEXAWARE)	33.5%	39.2%	34.7%	35.7%	-
Mindtree ($MINDTREE)	24.9%	34.6%	36.2%	32.0%	28.9%
Sqs India Bfsi ($SQSBFSI)	12.1%	27.0%	29.4%	30.6%	39.9%
Tech Mahindra ($TECHM)	15.4%	20.1%	43.0%	29.7%	-
Median (30 companies)	19.6%	21.4%	23.2%	20.6%	25.1%
Oracle Financial Services Software ($OFSS)	18.0%	16.8%	16.3%	24.2%	45.7%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
3I Infotech ($3IINFOTECH)	8.5x	20.3x	27.7x	14.7x	-
Ramco Systems ($RAMCOSYS)	8.8x	-	27.6x	4.2x	-
Onward Technologies ($ONWARDTEC)	2.4x	2.2x	4.1x	1.9x	-
Kpit Technologies ($KPIT)	0.3x	0.5x	0.7x	0.4x	-0.3x
Mphasis ($MPHASIS)	-0.1x	0.2x	-	0.2x	-
Median (23 companies)	-0.0x	-0.2x	-0.2x	-0.2x	-0.3x
Oracle Financial Services Software ($OFSS)	-0.5x	-4.5x	-0.4x	-2.3x	-1.6x

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.