NetSol Technologies Inc. reports 187% Net Income growth in 2018 and 5.7 pp EBITDA Margin growth from 8.5% to 14.2%
09/26/2018 • About NetSol Technologies Inc. (
$NTWK) • By InTwits
NetSol Technologies Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 14.2% in FY2018, 8.5% in FY2017, 20.8% in FY2016, 10.1% in FY2015, -12.0% in FY2014
- NetSol Technologies Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.2%. At the same time it's in pair with industry average of 13.2%
- CAPEX is quite volatile: $2m in FY2018, $2m in FY2017, $3m in FY2016, $4m in FY2015, $13m in FY2014
- The company has potentially unprofitable business model: ROIC is 3.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
NetSol Technologies Inc.'s Revenue decreased on 6.8%. Annual revenue decline showed slowdown in FY18Q4 - revenue surged on 12.5%. During the last 5 years Revenue growth topped in FY2015 at 40.3% and was decelerating since that time. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 5.7 pp from 8.5% to 14.2% in FY2018.
Gross Margin increased on 4.5 pp from 43.5% to 47.9% in FY2018. Gross Margin grew at 5.8 pp per annum in FY2014-FY2018. SG&A as a % of Revenue decreased slightly on 1.3 pp from 40.5% to 39.2% in FY2018.
Net Income margin jumped on 14.7 pp from -7.6% to 7.1% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 NetSol Technologies Inc. had CAPEX/Revenue of 4.0%. The company showed decline in CAPEX/Revenue of 3.0 pp from 7.0% in FY2015 to 4.0% in FY2018. For the last three years the average CAPEX/Revenue was 4.2%. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2017 at 3.4%.
Return on investment
The company operates at low ROIC (3.5%) and ROE (6.8%). ROIC increased on 4.6 pp from -1.2% to 3.5% in FY2018. ROE jumped on 14.6 pp from -7.8% to 6.8% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -1.5x and Debt / EBITDA is 1.1x. Debt dropped on 15.6% while cash surged on 55.9%.
NetSol Technologies Inc. has no short term refinancing risk: cash is higher than short term debt (248.0%).
Valuation and dividends
The company's trades at EV/EBITDA 7.8x and P/E 18.6x.
Management team
The company's CEO is Najeeb Ullah Ghauri. Najeeb Ullah Ghauri is a founder and has 12 years tenure with the company. Roger K Almond is a NetSol Technologies Inc.'s CFO. Roger K Almond has spent 5 years at the company.
Financial and operational results
FY ended 06/30/2018
NetSol Technologies Inc. ($NTWK) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 36.385 | 51.049 | 64.550 | 65.366 | 60.930 | -6.8% |
| Gross Profit | 8.664 | 17.457 | 30.802 | 28.408 | 29.207 | 2.8% |
| SG&A | 19.618 | 20.301 | 22.789 | 26.494 | 23.875 | -9.9% |
| EBITDA | -4.359 | 5.178 | 13.454 | 5.561 | 8.628 | 55.2% |
| Net Income | -11.356 | -5.549 | 3.403 | -4.978 | 4.307 | |
Balance Sheet
|
|---|
| Cash | 11.463 | 14.169 | 11.558 | 14.173 | 22.089 | 55.9% |
| Short Term Debt | 5.791 | 4.368 | 4.928 | 10.584 | 8.907 | -15.8% |
| Long Term Debt | 1.532 | 0.363 | 0.478 | 0.367 | 0.331 | -9.9% |
Cash flow
|
|---|
| Capex | 13.236 | 3.559 | 3.336 | 2.203 | 2.449 | 11.2% |
Ratios
|
|---|
| Revenue growth | -27.0% | 40.3% | 26.4% | 1.3% | -6.8% | |
| EBITDA growth | -122.8% | -218.8% | 159.8% | -58.7% | 55.2% | |
|
|---|
| Gross Margin | 23.8% | 34.2% | 47.7% | 43.5% | 47.9% | 4.5% |
| EBITDA Margin | -12.0% | 10.1% | 20.8% | 8.5% | 14.2% | 5.7% |
| SG&A, % of revenue | 53.9% | 39.8% | 35.3% | 40.5% | 39.2% | -1.3% |
| Net Income Margin | -31.2% | -10.9% | 5.3% | -7.6% | 7.1% | 14.7% |
| CAPEX, % of revenue | 36.4% | 7.0% | 5.2% | 3.4% | 4.0% | 0.6% |
|
|---|
| ROIC | -14.2% | -6.2% | 7.8% | -1.2% | 3.5% | 4.6% |
| ROE | -16.9% | -9.1% | 5.5% | -7.8% | 6.8% | 14.6% |
| Net Debt/EBITDA | | -1.8x | -0.5x | -0.6x | -1.5x | -0.9x |
NetSol Technologies Inc. ($NTWK) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 13 | 14 | 17 | 17 | | -24.9% | -8.9% | -5.0% | 12.5% |
| EBITDA | 0 | 2 | 4 | 3 | | -87.7% | 37.9% | 18.6% | |
| Net Income | -0 | 1 | 3 | 1 | | | | 309.2% | |
Balance Sheet
|
|---|
| Cash | 9 | 10 | 13 | 22 | | -23.3% | 5.3% | 50.4% | 55.9% |
| Short Term Debt | 10 | 10 | 9 | 9 | | 127.2% | 131.9% | 61.0% | -15.8% |
| Long Term Debt | 0 | 0 | 0 | 0 | | -43.0% | -50.0% | -40.7% | -9.9% |
Ratios
|
|---|
| Gross Margin | 37.5% | 46.3% | 53.9% | 51.2% | | -10.3% | 4.3% | 3.8% | 18.2% |
| EBITDA Margin | 2.3% | 11.8% | 24.1% | 15.1% | | -12.0% | 4.0% | 4.8% | 23.8% |
| Net Income Margin | -2.9% | 4.4% | 16.8% | 7.1% | | -0.6% | 18.1% | 12.9% | 26.9% |
Peers in Application Software
Below we provide NetSol Technologies Inc. benchmarking against other companies in Application 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 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 13.5% | 13.6% | 15.7% | 15.2% |
|---|
| NetSol Technologies Inc. ($NTWK) | | 40.3% | 26.4% | 1.3% | -6.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 63.4% | 61.9% | 64.2% | 64.6% | 66.0% |
|---|
| NetSol Technologies Inc. ($NTWK) | 23.8% | 34.2% | 47.7% | 43.5% | 47.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.1% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| NetSol Technologies Inc. ($NTWK) | -12.0% | 10.1% | 20.8% | 8.5% | 14.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| NetSol Technologies Inc. ($NTWK) | 36.4% | 7.0% | 5.2% | 3.4% | 4.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.8% |
|---|
| NetSol Technologies Inc. ($NTWK) | -14.2% | -6.2% | 7.8% | -1.2% | 3.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -0.9x | -0.9x | -0.9x | -0.6x |
|---|
| NetSol Technologies Inc. ($NTWK) | | -1.8x | -0.5x | -0.6x | -1.5x |
