TESSCO Technologies Incorporated EBITDA jumped on 75.3% and Revenue increased on 8.8%
05/07/2018 • About TESSCO Technologies Incorporated (
$TESS) • By InTwits
TESSCO Technologies Incorporated reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 2.0% in FY2018, 1.3% in FY2017, 2.6% in FY2016, 3.5% in FY2015, 5.6% in FY2014
- TESSCO Technologies Incorporated has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.5%.
- The company has potentially unprofitable business model: ROIC is 6.8%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.9x while industry average is -0.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 8.8%. Revenue growth showed acceleration in FY18Q4 - it increased 21.5% YoY. Revenue decline was slowing down on average by 7.1 pp per annum in FY2014-FY2018. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 5.7 pp from 8.5% to 14.2% in FY2018. EBITDA Margin stuck to a declining trend at -0.93 pp per annum in FY2014-FY2018.
Gross Margin showed almost no change in FY2018. Gross Margin pursued a declining trend in the last 5 years. SG&A as a % of Revenue decreased slightly on 0.97 pp from 20.3% to 19.4% in FY2018.
Net Income margin increased slightly on 0.62 pp from 0.27% to 0.90% in FY2018. During the last 5 years Net Income margin bottomed in FY2017 at 0.27%.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.28% in FY2018. TESSCO Technologies Incorporated showed almost no change in CAPEX/Revenue from FY2015 to FY2018. For the last three years the average CAPEX/Revenue was 0.36%.
Return on investment
The company operates at low ROIC (6.8%) and ROE (4.8%). ROIC increased on 4.6 pp from 2.2% to 6.8% in FY2018. ROE increased on 3.5 pp from 1.3% to 4.8% in FY2018. During the last 5 years ROIC bottomed in FY2017 at 2.2%. During FY2014-FY2018 ROE bottomed in FY2017 at 1.3%.
Leverage (Debt)
Debt level is 0.9x Net Debt / EBITDA and 0.9x Debt / EBITDA. Net Debt / EBITDA surged on 2.2x from -1.3x to 0.9x in FY2018. Debt jumped on 19,198% while cash dropped on 99.8%.
TESSCO Technologies Incorporated has short term refinancing risk: cash is only 0.2% of short term debt.
Valuation and dividends
TESSCO Technologies Incorporated's trades at EV/EBITDA 12.8x and P/E 27.2x.
Management team
Murray H Wright is a TESSCO Technologies Incorporated's CEO. Murray H Wright is a founder and has spent 2 years with the company. TESSCO Technologies Incorporated's CFO Aric M Spitulnik has spent 5 years with the company.
Financial and operational results
FY ended 04/01/2018
TESSCO Technologies Incorporated ($TESS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 560.1 | 549.6 | 530.7 | 533.3 | 580.3 | 8.8% |
| Gross Profit | 138.2 | 117.6 | 112.0 | 111.8 | 120.2 | 7.6% |
| SG&A | 111.7 | 102.7 | 102.9 | 108.4 | 112.3 | 3.6% |
| EBITDA | 31.4 | 19.0 | 13.8 | 6.8 | 11.9 | 75.3% |
| Net Income | 16.2 | 8.6 | 5.3 | 1.4 | 5.2 | 259.5% |
Balance Sheet
|
|---|
| Cash | 11.5 | 7.5 | 16.9 | 8.5 | 0.0 | -99.8% |
| Short Term Debt | 0.3 | 0.3 | 0.3 | 0.0 | 10.9 | 40,891.3% |
| Long Term Debt | 2.2 | 2.0 | 1.7 | 0.0 | 0.0 | -92.3% |
Cash flow
|
|---|
| Capex | 4.7 | 3.0 | 3.5 | 0.7 | 1.6 | 125.5% |
Ratios
|
|---|
| Revenue growth | -25.6% | -1.9% | -3.4% | 0.5% | 8.8% | |
| EBITDA growth | -8.3% | -39.5% | -27.4% | -50.7% | 75.3% | |
|
|---|
| Gross Margin | 24.7% | 21.4% | 21.1% | 21.0% | 20.7% | -0.2% |
| EBITDA Margin | 5.6% | 3.5% | 2.6% | 1.3% | 2.0% | 0.8% |
| SG&A, % of revenue | 19.9% | 18.7% | 19.4% | 20.3% | 19.4% | -1.0% |
| Net Income Margin | 2.9% | 1.6% | 1.0% | 0.3% | 0.9% | 0.6% |
| CAPEX, % of revenue | 0.8% | 0.5% | 0.7% | 0.1% | 0.3% | 0.1% |
|
|---|
| ROIC | 22.2% | 11.8% | 7.7% | 2.2% | 6.8% | 4.6% |
| ROE | 14.8% | 7.6% | 4.7% | 1.3% | 4.8% | 3.5% |
| Net Debt/EBITDA | -0.3x | -0.3x | -1.1x | -1.3x | 0.9x | 2.2x |
TESSCO Technologies Incorporated ($TESS) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 140 | 145 | 146 | 149 | | 8.7% | 7.8% | -0.6% | 21.5% |
| EBITDA | 2 | 4 | 3 | 2 | | 71.4% | 36.4% | -0.2% | |
| Net Income | 1 | 2 | 2 | 1 | | 748.3% | 78.4% | 27.9% | |
Balance Sheet
|
|---|
| Cash | 0 | 0 | 0 | 0 | | -98.7% | -97.7% | -99.5% | -99.8% |
| Short Term Debt | 8 | 13 | 6 | 11 | | 31,706.1% | 50,109.4% | 22,405.7% | 40,891.3% |
| Long Term Debt | 0 | 0 | 0 | 0 | | -54.1% | -62.6% | -74.2% | -92.3% |
Ratios
|
|---|
| Gross Margin | 20.8% | 20.6% | 20.2% | 21.2% | | -0.2% | -0.7% | -0.1% | 0.0% |
| EBITDA Margin | 1.6% | 3.0% | 2.2% | 1.4% | | 0.6% | 0.6% | 0.0% | 2.2% |
| Net Income Margin | 0.5% | 1.2% | 1.1% | 0.8% | | 0.4% | 0.5% | 0.2% | 1.5% |
Peers in Communications Equipment
Below we provide TESSCO Technologies Incorporated benchmarking against other companies in Communications Equipment 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 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.6% | 2.8% |
|---|
| TESSCO Technologies Incorporated ($TESS) | | -1.9% | -3.4% | 0.5% | 8.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| TESSCO Technologies Incorporated ($TESS) | 24.7% | 21.4% | 21.1% | 21.0% | 20.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 6.1% | 5.9% | 6.5% | 5.4% |
|---|
| TESSCO Technologies Incorporated ($TESS) | 5.6% | 3.5% | 2.6% | 1.3% | 2.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| TESSCO Technologies Incorporated ($TESS) | 0.8% | 0.5% | 0.7% | 0.1% | 0.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| TESSCO Technologies Incorporated ($TESS) | 22.2% | 11.8% | 7.7% | 2.2% | 6.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.8x | -0.8x | -0.8x | -0.6x | -0.3x |
|---|
| TESSCO Technologies Incorporated ($TESS) | -0.3x | -0.3x | -1.1x | -1.3x | 0.9x |
