Nuance Communications, Inc. Net Debt / EBITDA surged on 8.1x from 7.1x to 15.2x in 2018 and Revenue increased on 5.8%
11/19/2018 • About Nuance Communications, Inc. (
$NUAN) • By InTwits
Nuance Communications, 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: 6.0% in FY2018, 14.8% in FY2017, 19.0% in FY2016, 14.8% in FY2015, 10.4% in FY2014
- Nuance Communications, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 was 8.6% while average EBITDA Margin was 12.9% for the sames years
- Nuance Communications, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's in pair with industry average of 13.2%
- CAPEX is quite volatile: $25m in 2018, $30m in 2017, $7m in 2016, $5m in 2015, $6m in 2014
- In the last 5 years the company invested considerably less than D&A: $284m vs. $1,129m. In FY2018 this situation was still the same: CAPEX was 49 while D&A was 210
- The company has unprofitable business model: ROIC is -2.0%
- It operates with high leverage: Net Debt/EBITDA is 15.2x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Nuance Communications, Inc.'s Revenue increased on 5.8%. Revenue growth showed acceleration in FY18Q4 - it increased 14.4% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 16.3 pp from 51.6% to 35.3% in 2018. During the last 5 years EBITDA Margin topped in FY2016 at 19.0% and was declining since that time.
Gross Margin increased slightly on 1.4 pp from 56.0% to 57.4% in FY2018. SG&A as a % of Revenue increased slightly on 1.0 pp from 29.1% to 30.1% in FY2018. During the last 5 years SG&A as a % of Revenue bottomed in FY2016 at 28.7% and was growing since that time. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 0.61 pp from 8.0% to 7.3% in FY2018. SBC as a % of Revenue followed a declining trend at -0.66 pp per annum in the last 5 years.
Net Income margin showed almost no change in FY2018. During FY2014-FY2018 Net Income margin topped in FY2016 at -0.64% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In FY2018 Nuance Communications, Inc. had CAPEX/Revenue of 2.4%. Nuance Communications, Inc.'s CAPEX/Revenue decreased slightly on 0.62 pp from 3.0% in FY2015 to 2.4% in FY2018. Average CAPEX/Revenue for the last three years was 2.8%.
Accounts receivable as a % of Revenue decreased on 3.4 pp from 20.4% to 17.0% in FY2018. Accounts payable as a % of Revenue decreased slightly on 1.8 pp from 11.1% to 9.3% in FY2018.
Nuance Communications, Inc. has spent
$110m on M&A in FY2018 which accounts for 5.4% of revenue.
Return on investment
The company operates at negative ROIC (-2.0%) and ROE (-8.8%). ROIC decreased on 3.2 pp from 1.1% to -2.0% in FY2018. ROE decreased slightly on 0.95 pp from -7.8% to -8.8% in FY2018. During the last 5 years ROIC topped in FY2016 at 3.1% and was declining since that time. During the last 5 years ROE topped in FY2016 at -0.59% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 15.2x and Debt / EBITDA is 17.7x. Net Debt / EBITDA surged on 8.1x from 7.1x to 15.2x in FY2018. Debt dropped on 16.5% while cash dropped on 46.7%. During FY2014-FY2018 Net Debt/EBITDA bottomed in FY2016 at 5.3x and was growing since that time.
The company has no short term refinancing risk: short term debt is zero.
Average interest expence paid by the company was 6.3% in FY2018.
Management team
Nuance Communications, Inc.'s CEO is Mark D Benjamin. Mark D Benjamin is a founder and has 1 year tenure with the company. CEO total compensation was
$29,622,609 in FY2018 which included
$1,087,308 salary and
$850,000 annual bonus.
The company has 1.0% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 10,400 employees. The number of employees dropped on 10.3%. Average revenue per employee in FY2018 was
$197,275 and it jumped on 18.0%.
Financial and operational results
FY ended 09/30/2018
Nuance Communications, Inc. ($NUAN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,923 | 1,931 | 1,949 | 1,939 | 2,052 | 5.8% |
| Gross Profit | 1,079 | 1,103 | 1,119 | 1,086 | 1,178 | 8.5% |
| SG&A | 609 | 598 | 559 | 565 | 618 | 9.4% |
| EBITDA | 200 | 286 | 370 | 286 | 123 | -56.9% |
| EBIT | -21 | 55 | 139 | 52 | -87 | -267.3% |
| Interest expence | 0 | 119 | 133 | 157 | 137 | -12.5% |
| Tax | -5 | 35 | 14 | 32 | -57 | -277.6% |
| Net Income | -150 | -115 | -12 | -151 | -160 | |
| Stock Based Compensation | 193 | 177 | 164 | 154 | 151 | -2.3% |
Balance Sheet
|
|---|
| Cash | 547 | 479 | 482 | 592 | 316 | -46.7% |
| Accounts Receivable | 428 | 373 | 380 | 395 | 348 | -12.0% |
| Accounts Payable | 62 | 57 | 95 | 95 | 81 | -14.5% |
| Short Term Debt | 5 | 5 | 0 | 376 | 0 | -100.0% |
| Long Term Debt | 2,127 | 2,103 | 2,433 | 2,241 | 2,185 | -2.5% |
Cash flow
|
|---|
| Capex | 60 | 58 | 55 | 62 | 49 | -21.0% |
| Acquisitions | 253 | 83 | 173 | 114 | 110 | -3.2% |
Ratios
|
|---|
| Revenue growth | 3.7% | 0.4% | 0.9% | -0.5% | 5.8% | |
| EBITDA growth | -22.1% | 42.5% | 29.6% | -22.6% | -56.9% | |
|
|---|
| Gross Margin | 56.1% | 57.1% | 57.4% | 56.0% | 57.4% | 1.4% |
| EBITDA Margin | 10.4% | 14.8% | 19.0% | 14.8% | 6.0% | -8.8% |
| EBIT Margin | -1.1% | 2.8% | 7.1% | 2.7% | -4.2% | -6.9% |
| SG&A, % of revenue | 31.7% | 31.0% | 28.7% | 29.1% | 30.1% | 1.0% |
| SBC, % of revenue | 10.0% | 9.2% | 8.4% | 8.0% | 7.3% | -0.6% |
| Net Income Margin | -7.8% | -6.0% | -0.6% | -7.8% | -7.8% | -0.0% |
| CAPEX, % of revenue | 3.1% | 3.0% | 2.8% | 3.2% | 2.4% | -0.8% |
|
|---|
| ROIC | -0.4% | 1.2% | 3.1% | 1.1% | -2.0% | -3.2% |
| ROE | -5.8% | -4.7% | -0.6% | -7.8% | -8.8% | -0.9% |
| Net Debt/EBITDA | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x | 8.1x |
| Interest coverage ratio (ICR) | | 0.5x | 1.0x | 0.3x | |
| Interest expence / Average debt | 0.0% | 5.6% | 5.8% | 6.2% | 6.3% | 0.1% |
People
|
|---|
| Insider ownership | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | 0.0% |
| Employees | 14,000 | 13,500 | 13,200 | 11,600 | 10,400 | -10.3% |
| Revenue/Employee, th. $ | 137 | 143 | 148 | 167 | 197 | 18.0% |
Nuance Communications, Inc. ($NUAN) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 447 | 466 | 503 | 533 | | -8.3% | -6.7% | 3.4% | 14.4% |
| EBITDA | 57 | -87 | 83 | 54 | | -30.6% | -196.2% | 14.0% | 30.1% |
| Net Income | 53 | -164 | -14 | -35 | | | | | |
Balance Sheet
|
|---|
| Cash | 398 | 469 | 331 | 316 | | -58.6% | -25.1% | -52.2% | -46.7% |
| Short Term Debt | 0 | 0 | 0 | 0 | | -100.0% | -100.0% | -100.0% | -100.0% |
| Long Term Debt | 2,300 | 2,311 | 2,324 | 2,185 | | 17.3% | 4.2% | 4.2% | -2.5% |
Ratios
|
|---|
| Gross Margin | 53.4% | 53.4% | 57.6% | 60.6% | | -3.0% | -3.8% | 2.0% | 6.1% |
| EBITDA Margin | 12.7% | -18.6% | 16.4% | 10.2% | | -4.1% | -36.6% | 1.5% | 1.2% |
| Net Income Margin | 11.9% | -35.2% | -2.8% | -6.6% | | 16.8% | -28.4% | 2.9% | 7.5% |
Peers in Application Software
Below you can find Nuance Communications, Inc. benchmarking vs. other companies in Application Software 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 |
|---|
| 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 ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| Nuance Communications, Inc. ($NUAN) | | 0.4% | 0.9% | -0.5% | 5.8% |
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. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 63.4% | 61.9% | 64.2% | 64.6% | 66.0% |
|---|
| Nuance Communications, Inc. ($NUAN) | 56.1% | 57.1% | 57.4% | 56.0% | 57.4% |
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. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Nuance Communications, Inc. ($NUAN) | 10.4% | 14.8% | 19.0% | 14.8% | 6.0% |
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. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Nuance Communications, Inc. ($NUAN) | 3.1% | 3.0% | 2.8% | 3.2% | 2.4% |
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. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.8% |
|---|
| Nuance Communications, Inc. ($NUAN) | -0.4% | 1.2% | 3.1% | 1.1% | -2.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Asure Software Inc ($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 |
| Five9, Inc. ($FIVN) | | | -6.7x | -8.6x | 7.3x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.9x | -0.7x |
|---|
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
