CA Inc. Net Income dropped on 38.6% while Revenue increased on 4.9%
05/08/2018 • About CA Inc. (
$CA) • By InTwits
CA Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- CA Inc. 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 5.2%.
- CAPEX is quite volatile: $50m in FY2018, $72m in FY2017, $34m in FY2016, $30m in FY2015, $45m in FY2014
- In the last 5 years the company invested considerably less than D&A: $261m vs. $1,888m. In FY2018 this situation was still the same: CAPEX was 48 while D&A was 378
- The company has highly profitable business model: ROIC is 13.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
CA Inc.'s Revenue increased on 4.9%. Revenue growth showed acceleration in FY18Q4 - it increased 7.0% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 15.7 pp from 20.9% to 36.5% in 2018. During the last 5 years EBITDA Margin topped in FY2016 at 37.2% and was declining since that time.
Gross Margin showed almost no change in FY2018. Gross Margin followed a growing trend at 0.18 pp per annum in FY2014-FY2018. SG&A as a % of Revenue showed almost no change in FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. SBC as a % of Revenue followed a growing trend at 0.26 pp per annum in FY2014-FY2018.
Net Income margin decreased on 8.0 pp from 19.2% to 11.2% in FY2018. Net Income margin pursued a declining trend in FY2014-FY2018. The efficient tax rate was 53.4% in FY2018 while the average for the last five years was 29.6%.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 1.1% in FY2018. CAPEX/Revenue showed almost no change from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 1.2%. CAPEX as a % of Revenue was relatively stable in the last 5 years.
Accounts payable as a % of Revenue decreased slightly on 1.7 pp from 15.9% to 14.2% in FY2018.
CA Inc. has spent
$15m on M&A in FY2018 which accounts for 0.35% of revenue.
Return on investment
The company operates at good ROIC (13.2%) while ROE is low (8.1%). ROIC decreased slightly on 1.5 pp from 14.8% to 13.2% in FY2018. ROE decreased on 5.7 pp from 13.8% to 8.1% in FY2018. During FY2014-FY2018 ROIC topped in FY2016 at 16.3% and was declining since that time. ROE followed a declining trend at -1.8 pp per annum in FY2014-FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.4x and Debt / EBITDA is 1.9x. Debt showed almost no change in FY2018 while cash jumped on 22.9%.
CA Inc. has no short term refinancing risk: cash is higher than short term debt (1,265.8%).
Valuation and dividends
CA Inc.'s trades at EV/EBITDA 9.4x and P/E 30.8x.
The company paid 89.9% of Net Income as dividends in FY2018. Dividends grew on average at -1.1% per annum in the last 5 years).
Management team
At the end of financial year the company had 0.039% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 11,300 employees. The number of employees decreased on 4.2%. Average revenue per employee in FY2018 was
$374,779 and it increased on 9.6%.
Financial and operational results
FY ended 03/31/2018
CA Inc. ($CA) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 4,412 | 4,262 | 4,025 | 4,036 | 4,235 | 4.9% |
| Gross Profit | 3,763 | 3,627 | 3,442 | 3,463 | 3,635 | 5.0% |
| SG&A | 1,499 | 1,437 | 1,373 | 1,403 | 1,467 | 4.6% |
| EBITDA | 1,496 | 1,564 | 1,497 | 1,455 | 1,497 | 2.9% |
| EBIT | 1,070 | 1,162 | 1,135 | 1,135 | 1,119 | -1.4% |
| Tax | 129 | 305 | 315 | 298 | 545 | 82.9% |
| Net Income | 914 | 846 | 783 | 775 | 476 | -38.6% |
| Stock Based Compensation | 82 | 87 | 97 | 108 | 120 | 11.1% |
Balance Sheet
|
|---|
| Cash | 3,252 | 2,804 | 2,812 | 2,771 | 3,405 | 22.9% |
| Accounts Receivable | 800 | 652 | | | | |
| Accounts Payable | 129 | 105 | 77 | 91 | 85 | -6.6% |
| Short Term Debt | 514 | 10 | 6 | 18 | 269 | 1,394.4% |
| Long Term Debt | 1,252 | 1,253 | 1,947 | 2,773 | 2,514 | -9.3% |
Cash flow
|
|---|
| Capex | 65 | 53 | 48 | 47 | 48 | 2.1% |
| Dividends | 453 | 444 | 429 | 428 | 428 | 0.0% |
| Acquisitions | 133 | 38 | 644 | 1,288 | 15 | -98.8% |
Ratios
|
|---|
| Revenue growth | -5.0% | -3.4% | -5.6% | 0.3% | 4.9% | |
| EBITDA growth | -18.6% | 4.5% | -4.3% | -2.8% | 2.9% | |
|
|---|
| Gross Margin | 85.3% | 85.1% | 85.5% | 85.8% | 85.8% | 0.0% |
| EBITDA Margin | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% | -0.7% |
| EBIT Margin | 24.3% | 27.3% | 28.2% | 28.1% | 26.4% | -1.7% |
| SG&A, % of revenue | 34.0% | 33.7% | 34.1% | 34.8% | 34.6% | -0.1% |
| SBC, % of revenue | 1.9% | 2.0% | 2.4% | 2.7% | 2.8% | 0.2% |
| Net Income Margin | 20.7% | 19.8% | 19.5% | 19.2% | 11.2% | -8.0% |
| CAPEX, % of revenue | 1.5% | 1.2% | 1.2% | 1.2% | 1.1% | -0.0% |
|
|---|
| ROIC | 14.8% | 16.2% | 16.3% | 14.8% | 13.2% | -1.5% |
| ROE | 16.6% | 15.1% | 14.1% | 13.8% | 8.1% | -5.7% |
| Net Debt/EBITDA | -1.0x | -1.0x | -0.6x | 0.0x | -0.4x | -0.4x |
People
|
|---|
| Insider ownership | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Employees | 12,700 | 11,600 | 11,000 | 11,800 | 11,300 | -4.2% |
| Revenue/Employee, th. $ | 347 | 367 | 366 | 342 | 375 | 9.6% |
CA Inc. ($CA) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,025 | 1,034 | 1,093 | 1,083 | | 2.6% | 1.6% | 8.5% | 7.0% |
| EBITDA | 359 | 376 | 401 | 361 | | -5.0% | -5.3% | 4.7% | 21.5% |
| Net Income | 178 | 184 | -93 | 207 | | -10.1% | -13.2% | -144.7% | 31.8% |
Balance Sheet
|
|---|
| Cash | 2,971 | 2,822 | 2,971 | 3,405 | | 7.0% | 9.2% | 5.1% | 22.9% |
| Short Term Debt | 18 | 268 | 269 | 269 | | 350.0% | 6,600.0% | 6,625.0% | 1,394.4% |
| Long Term Debt | 2,770 | 2,517 | 2,518 | 2,514 | | 42.3% | 29.3% | 29.4% | -9.3% |
Ratios
|
|---|
| Gross Margin | 86.0% | 85.8% | 85.8% | 85.8% | | 0.3% | -0.6% | -0.1% | 0.5% |
| EBITDA Margin | 35.0% | 36.4% | 36.7% | 33.3% | | -2.8% | -2.6% | -1.3% | 4.0% |
| Net Income Margin | 17.4% | 17.8% | -8.5% | 19.1% | | -2.5% | -3.0% | -29.2% | 3.6% |
Peers in Systems Software
Below we provide CA Inc. benchmarking against other companies in Systems 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 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 20.6% | 14.7% | 16.6% | 20.4% |
|---|
| CA Inc. ($CA) | | -3.4% | -5.6% | 0.3% | 4.9% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| |
|---|
| Median (53 companies) | 76.1% | 74.5% | 73.1% | 73.9% | 73.5% |
|---|
| CA Inc. ($CA) | 85.3% | 85.1% | 85.5% | 85.8% | 85.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| Progress Software Corporation ($PRGS) | 28.9% | 14.9% | 2.4% | 28.6% | 32.9% |
| |
|---|
| Median (47 companies) | -2.4% | -6.6% | -9.8% | -5.4% | -4.7% |
|---|
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| |
|---|
| Median (48 companies) | 2.9% | 2.2% | 2.1% | 2.4% | 2.6% |
|---|
| CA Inc. ($CA) | 1.5% | 1.2% | 1.2% | 1.2% | 1.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | -4.3% | -4.7% | -1.9% |
|---|
| CA Inc. ($CA) | 14.8% | 16.2% | 16.3% | 14.8% | 13.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
| |
|---|
| Median (22 companies) | -2.7x | -1.5x | -1.5x | -0.8x | -0.4x |
|---|
| CA Inc. ($CA) | -1.0x | -1.0x | -0.6x | 0.0x | -0.4x |
