Comtech Telecommunications Corp. Net Income surged on 88.1% while EBITDA Margin decreased slightly on 1.3 pp from 13.5% to 12.2%
09/26/2018 • About Comtech Telecommunications Corp. (
$CMTL) • By InTwits
Comtech Telecommunications Corp. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 12.2% in FY2018, 13.5% in FY2017, 5.5% in FY2016, 15.2% in FY2015, 17.6% in FY2014
- Comtech Telecommunications Corp. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.4%. At the same time it's a lot of higher than industry average of 3.6%.
- CAPEX is quite volatile: $9m in FY2018, $8m in FY2017, $6m in FY2016, $3m in FY2015, $5m in FY2014
- The company has potentially unprofitable business model: ROIC is 5.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.8x 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 3.7%. Revenue growth showed acceleration in FY18Q4 - it increased 13.3% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.63 pp from 3.1% to 3.7% in 2018.
Gross Margin showed almost no change in FY2018. Gross Margin declined at -1.4 pp per annum in FY2014-FY2018. SG&A as a % of Revenue decreased slightly on 1.1 pp from 21.1% to 20.0% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2016 at 23.1% and was declining since that time.
Net Income margin increased on 2.3 pp from 2.9% to 5.2% in FY2018.
Investments (CAPEX, working capital and M&A)
Comtech Telecommunications Corp.'s CAPEX/Revenue was 1.5% in FY2018. Comtech Telecommunications Corp.'s CAPEX/Revenue showed almost no change from FY2015 to FY2018. For the last three years the average CAPEX/Revenue was 1.5%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2015 at 1.1% and was growing since that time.
Return on investment
The company operates at low ROIC (5.1%) and ROE (6.0%). ROIC showed almost no change in FY2018. ROE increased on 2.7 pp from 3.3% to 6.0% in FY2018. During the last 5 years ROE bottomed in FY2016 at -1.8% and was growing since that time.
Leverage (Debt)
Debt level is 1.8x Net Debt / EBITDA and 2.4x Debt / EBITDA. Net Debt / EBITDA dropped on 0.3x from 2.1x to 1.8x in FY2018. Debt dropped on 14.3% while cash increased on 3.9%.
Comtech Telecommunications Corp. has no short term refinancing risk: cash is higher than short term debt (228.3%).
Valuation and dividends
Comtech Telecommunications Corp.'s trades at EV/EBITDA 13.1x and P/E 26.5x.
Management team
Comtech Telecommunications Corp.'s CEO is Fred Kornberg. Fred Kornberg is a founder and has 43 years tenure with the company.
Financial and operational results
FY ended 07/31/2018
Comtech Telecommunications Corp. ($CMTL) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 347.2 | 307.3 | 411.0 | 550.4 | 570.6 | 3.7% |
| Gross Profit | 151.4 | 138.9 | 171.2 | 218.2 | 223.9 | 2.6% |
| SG&A | 67.1 | 62.7 | 94.9 | 116.1 | 113.9 | -1.9% |
| EBITDA | 61.2 | 46.8 | 22.7 | 74.2 | 69.8 | -5.9% |
| Net Income | 25.2 | 23.2 | -7.7 | 15.8 | 29.8 | 88.1% |
Balance Sheet
|
|---|
| Cash | 154.5 | 151.0 | 66.8 | 41.8 | 43.5 | 3.9% |
| Short Term Debt | 0.0 | 0.0 | 14.7 | 17.8 | 19.0 | 7.0% |
| Long Term Debt | 0.0 | 0.0 | 244.0 | 178.0 | 148.9 | -16.4% |
Cash flow
|
|---|
| Capex | 4.9 | 3.4 | 5.7 | 8.2 | 8.6 | 6.0% |
Ratios
|
|---|
| Revenue growth | 8.6% | -11.5% | 33.8% | 33.9% | 3.7% | |
| EBITDA growth | 18.1% | -23.5% | -51.6% | 227.4% | -5.9% | |
|
|---|
| Gross Margin | 43.6% | 45.2% | 41.7% | 39.6% | 39.2% | -0.4% |
| EBITDA Margin | 17.6% | 15.2% | 5.5% | 13.5% | 12.2% | -1.3% |
| SG&A, % of revenue | 19.3% | 20.4% | 23.1% | 21.1% | 20.0% | -1.1% |
| Net Income Margin | 7.2% | 7.6% | -1.9% | 2.9% | 5.2% | 2.3% |
| CAPEX, % of revenue | 1.4% | 1.1% | 1.4% | 1.5% | 1.5% | 0.0% |
|
|---|
| ROIC | 8.8% | 8.6% | -0.1% | 5.2% | 5.1% | -0.1% |
| ROE | 6.3% | 5.8% | -1.8% | 3.3% | 6.0% | 2.7% |
| Net Debt/EBITDA | -2.5x | -3.2x | 8.5x | 2.1x | 1.8x | -0.3x |
Comtech Telecommunications Corp. ($CMTL) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 122 | 134 | 148 | 167 | | -10.5% | -3.8% | 15.7% | 13.3% |
| EBITDA | 9 | 13 | 22 | 25 | | -2.6% | -40.0% | 17.1% | 6.5% |
| Net Income | -2 | 16 | 8 | 7 | | | 139.3% | 85.9% | 2.0% |
Balance Sheet
|
|---|
| Cash | 43 | 40 | 44 | 43 | | -32.2% | -35.9% | -24.9% | 3.9% |
| Short Term Debt | 18 | 19 | 20 | 19 | | 17.1% | 16.7% | 15.7% | 7.0% |
| Long Term Debt | 176 | 175 | 163 | 149 | | -26.8% | -24.7% | -23.8% | -16.4% |
Ratios
|
|---|
| Gross Margin | 39.3% | 38.0% | 42.2% | 37.6% | | 0.9% | -0.3% | 1.2% | -3.3% |
| EBITDA Margin | 7.3% | 10.1% | 15.2% | 15.0% | | 0.6% | -6.1% | 0.2% | -1.0% |
| Net Income Margin | -1.4% | 11.8% | 5.6% | 4.5% | | 0.5% | 7.0% | 2.1% | -0.5% |
Peers in Communications Equipment
Below we provide Comtech Telecommunications Corp. 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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.3% | 5.1% | 2.8% |
|---|
| Comtech Telecommunications Corp. ($CMTL) | | -11.5% | 33.8% | 33.9% | 3.7% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.9% | 41.7% | 41.2% |
|---|
| Comtech Telecommunications Corp. ($CMTL) | 43.6% | 45.2% | 41.7% | 39.6% | 39.2% |
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. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.9% | 6.0% | 4.6% |
|---|
| Comtech Telecommunications Corp. ($CMTL) | 17.6% | 15.2% | 5.5% | 13.5% | 12.2% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| Comtech Telecommunications Corp. ($CMTL) | 1.4% | 1.1% | 1.4% | 1.5% | 1.5% |
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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.4% | 2.1% | 0.3% |
|---|
| Comtech Telecommunications Corp. ($CMTL) | 8.8% | 8.6% | -0.1% | 5.2% | 5.1% |
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 ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.6x | -0.9x | -0.8x | -0.3x |
|---|
| Comtech Telecommunications Corp. ($CMTL) | -2.5x | -3.2x | 8.5x | 2.1x | 1.8x |
