Franklin Wireless Corp reports 240% EBITDA decline in 2018 and 10.0 pp EBITDA Margin decline from 3.1% to -6.9%
09/28/2018 • About Franklin Wireless Corp (
$FKWL) • By InTwits
Franklin Wireless Corp reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- The company operates at negative EBITDA Margin: -6.9%
- EBITDA Margin is quite volatile: -6.9% in FY2018, 3.1% in FY2017, 5.2% in FY2016, 4.3% in FY2015, -4.4% in FY2014
- Franklin Wireless Corp has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.2%.
- The company has unprofitable business model: ROIC is -14.9%
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 dropped on 38.1%. Annual revenue decline showed slowdown in FY18Q4 - revenue dropped on 36.2%. During FY2014-FY2018 Revenue growth topped in FY2015 at 49.7% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 358 pp from -332% to 25.5% in 2018. During FY2014-FY2018 EBITDA Margin topped in FY2016 at 5.2% and was declining since that time.
Gross Margin decreased slightly on 1.7 pp from 19.0% to 17.3% in FY2018. SG&A as a % of Revenue increased on 4.9 pp from 10.1% to 15.0% in FY2018. During the last 5 years SG&A as a % of Revenue bottomed in FY2016 at 8.1% and was growing since that time.
Net Income margin decreased on 8.8 pp from 1.8% to -7.0% in FY2018. During FY2014-FY2018 Net Income margin topped in FY2016 at 2.7% and was declining since that time.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.080% in FY2018. Franklin Wireless Corp showed almost no change in CAPEX/Revenue from FY2015 to FY2018. Average CAPEX/Revenue for the last three years was 0.15%.
Return on investment
The company operates at negative ROIC (-14.9%) and ROE (-12.2%). ROIC dropped on 19.6 pp from 4.7% to -14.9% in FY2018. ROE dropped on 17.2 pp from 5.0% to -12.2% in FY2018. During the last 5 years ROIC topped in FY2016 at 12.2% and was declining since that time. During the last 5 years ROE topped in FY2016 at 9.8% and was declining since that time.
Leverage (Debt)
The company has no debt. Cash dropped on 16.2%.
Financial and operational results
FY ended 06/30/2018
Franklin Wireless Corp ($FKWL) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 30.953 | 46.344 | 59.805 | 48.566 | 30.066 | -38.1% |
| Gross Profit | 4.379 | 8.400 | 9.925 | 9.218 | 5.192 | -43.7% |
| SG&A | 4.513 | 4.973 | 4.816 | 4.899 | 4.512 | -7.9% |
| EBITDA | -1.366 | 1.972 | 3.087 | 1.489 | -2.084 | -240.0% |
| Net Income | -0.972 | 0.760 | 1.611 | 0.874 | -2.092 | -339.4% |
Balance Sheet
|
|---|
| Cash | 8.241 | 11.823 | 13.157 | 14.285 | 11.976 | -16.2% |
| Short Term Debt | 0.148 | 0.148 | 0.000 | 0.000 | 0.000 | |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
Cash flow
|
|---|
| Capex | 0.128 | 0.053 | 0.173 | 0.045 | 0.024 | -47.4% |
Ratios
|
|---|
| Revenue growth | -5.5% | 49.7% | 29.0% | -18.8% | -38.1% | |
| EBITDA growth | -194.6% | -244.4% | 56.5% | -51.8% | -240.0% | |
|
|---|
| Gross Margin | 14.1% | 18.1% | 16.6% | 19.0% | 17.3% | -1.7% |
| EBITDA Margin | -4.4% | 4.3% | 5.2% | 3.1% | -6.9% | -10.0% |
| SG&A, % of revenue | 14.6% | 10.7% | 8.1% | 10.1% | 15.0% | 4.9% |
| Net Income Margin | -3.1% | 1.6% | 2.7% | 1.8% | -7.0% | -8.8% |
| CAPEX, % of revenue | 0.4% | 0.1% | 0.3% | 0.1% | 0.1% | -0.0% |
|
|---|
| ROIC | -18.9% | 3.2% | 12.2% | 4.7% | -14.9% | -19.6% |
| ROE | -6.1% | 4.9% | 9.8% | 5.0% | -12.2% | -17.2% |
| Net Debt/EBITDA | | -5.9x | -4.3x | -9.6x | |
Franklin Wireless Corp ($FKWL) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 8 | 8 | 7 | 8 | | -39.8% | -41.8% | -32.7% | -36.2% |
| EBITDA | -0 | -0 | -0 | -1 | | -187.4% | -146.1% | -527.8% | -974.9% |
| Net Income | -0 | -1 | -0 | -1 | | -266.6% | -239.2% | -291.5% | -6,316.2% |
Balance Sheet
|
|---|
| Cash | 12 | 14 | 12 | 12 | | 7.5% | 15.5% | -3.3% | -16.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 19.0% | 16.6% | 22.0% | 12.1% | | 1.2% | -3.6% | 2.0% | -5.8% |
| EBITDA Margin | -6.1% | -4.3% | -4.2% | -13.1% | | -10.3% | -9.7% | -4.9% | -14.0% |
| Net Income Margin | -5.7% | -8.8% | -2.1% | -10.4% | | -7.8% | -12.4% | -2.9% | -10.5% |
Peers in Communications Equipment
Below you can find Franklin Wireless Corp benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.3% | 5.6% | 3.5% |
|---|
| Franklin Wireless Corp ($FKWL) | | 49.7% | 29.0% | -18.8% | -38.1% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| Franklin Wireless Corp ($FKWL) | 14.1% | 18.1% | 16.6% | 19.0% | 17.3% |
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. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 6.1% | 5.9% | 6.5% | 5.4% |
|---|
| Franklin Wireless Corp ($FKWL) | -4.4% | 4.3% | 5.2% | 3.1% | -6.9% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| Franklin Wireless Corp ($FKWL) | 0.4% | 0.1% | 0.3% | 0.1% | 0.1% |
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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 2.1% | 2.0% | 2.2% | 2.1% | 0.7% |
|---|
| Franklin Wireless Corp ($FKWL) | -18.9% | 3.2% | 12.2% | 4.7% | -14.9% |
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 (46 companies) | -0.7x | -0.6x | -0.8x | -0.6x | -0.1x |
|---|
