MTS Systems Corporation reports 144% Net Income growth in 2018 and 1.3 pp EBITDA Margin growth from 11.5% to 12.8%
11/26/2018 • About MTS Systems Corporation (
$MTSC) • By InTwits
MTS Systems Corporation reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- MTS Systems Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $28m in 2018, $18m in 2017, $21m in 2016, $10m in 2015, $13m in 2014
- The company has potentially unprofitable business model: ROIC is 6.9%
- It operates with medium-size leverage: Net Debt/EBITDA is 3.2x while industry average is -0.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
MTS Systems Corporation's Revenue decreased slightly on 1.3%. Revenue decline showed acceleration in FY18Q4 - it was 1.8% YoY. During FY2014-FY2018 Revenue growth topped in FY2017 at 21.2%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.3 pp from 11.5% to 12.8% in FY2018.
Gross Margin increased slightly on 0.91 pp from 38.4% to 39.3% in FY2018. During FY2014-FY2018 Gross Margin bottomed in FY2016 at 35.6% and was growing since that time. SG&A as a % of Revenue decreased slightly on 0.54 pp from 27.0% to 26.4% in FY2018.
Net Income margin increased on 4.7 pp from 3.2% to 7.9% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 1.6% in FY2018. CAPEX/Revenue decreased slightly on 1.7 pp from 3.3% in FY2015 to 1.6% in FY2018. Average CAPEX/Revenue for the last three years was 2.3%. CAPEX as a % of Revenue followed a declining trend at -0.49 pp per annum in the last 5 years.
Return on investment
The company operates at good ROE (13.5%) while ROIC is low (6.9%). ROIC increased slightly on 1.2 pp from 5.7% to 6.9% in FY2018. ROE increased on 7.5 pp from 6.0% to 13.5% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.2x and Debt / EBITDA is 3.9x. Net Debt / EBITDA dropped on 0.7x from 3.9x to 3.2x in FY2018. Debt dropped on 15.1% while cash dropped on 34.0%.
MTS Systems Corporation has no short term refinancing risk: cash is higher than short term debt (219.3%).
Valuation and dividends
MTS Systems Corporation's trades at EV/EBITDA 11.8x and P/E 14.1x.
Management team
Jeffrey A Graves is a MTS Systems Corporation's CEO. Jeffrey A Graves is a founder and has spent 7 years with the company.
Financial and operational results
FY ended 09/29/2018
MTS Systems Corporation ($MTSC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 564.3 | 563.9 | 650.1 | 788.0 | 778.0 | -1.3% |
| Gross Profit | 223.6 | 219.6 | 231.4 | 302.3 | 305.5 | 1.1% |
| SG&A | 139.5 | 134.4 | 164.3 | 212.5 | 205.6 | -3.2% |
| EBITDA | 79.5 | 82.6 | 65.8 | 90.4 | 99.7 | 10.3% |
| Net Income | 42.0 | 45.5 | 27.5 | 25.1 | 61.3 | 144.5% |
Balance Sheet
|
|---|
| Cash | 60.4 | 51.8 | 84.8 | 108.7 | 71.8 | -34.0% |
| Short Term Debt | 60.0 | 21.2 | 9.9 | 39.1 | 32.7 | -16.3% |
| Long Term Debt | 0.0 | 0.0 | 455.0 | 418.5 | 355.6 | -15.0% |
Cash flow
|
|---|
| Capex | 20.0 | 18.4 | 20.8 | 17.8 | 12.3 | -30.8% |
Ratios
|
|---|
| Revenue growth | -0.9% | -0.1% | 15.3% | 21.2% | -1.3% | |
| EBITDA growth | -17.6% | 3.9% | -20.3% | 37.2% | 10.3% | |
|
|---|
| Gross Margin | 39.6% | 38.9% | 35.6% | 38.4% | 39.3% | 0.9% |
| EBITDA Margin | 14.1% | 14.6% | 10.1% | 11.5% | 12.8% | 1.3% |
| SG&A, % of revenue | 24.7% | 23.8% | 25.3% | 27.0% | 26.4% | -0.5% |
| Net Income Margin | 7.4% | 8.1% | 4.2% | 3.2% | 7.9% | 4.7% |
| CAPEX, % of revenue | 3.6% | 3.3% | 3.2% | 2.3% | 1.6% | -0.7% |
|
|---|
| ROIC | 19.0% | 19.8% | 6.7% | 5.7% | 6.9% | 1.2% |
| ROE | 16.3% | 17.6% | 8.3% | 6.0% | 13.5% | 7.5% |
| Net Debt/EBITDA | -0.0x | -0.4x | 5.8x | 3.9x | 3.2x | -0.7x |
MTS Systems Corporation ($MTSC) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 194 | 191 | 195 | 198 | | -2.6% | -1.1% | 0.5% | -1.8% |
| EBITDA | 25 | 25 | 25 | 24 | | 35.1% | 5.7% | -1.7% | 8.1% |
| Net Income | 33 | 8 | 9 | 11 | | 1,844.3% | 17.2% | -15.4% | 93.2% |
Balance Sheet
|
|---|
| Cash | 94 | 84 | 66 | 72 | | -2.0% | -13.4% | -34.7% | -34.0% |
| Short Term Debt | 60 | 53 | 49 | 33 | | 496.9% | 420.7% | 150.5% | -16.3% |
| Long Term Debt | 382 | 357 | 342 | 356 | | -15.5% | -20.7% | -22.2% | -15.0% |
Ratios
|
|---|
| Gross Margin | 40.1% | 39.1% | 39.2% | 38.7% | | 3.3% | -1.7% | 0.2% | 1.7% |
| EBITDA Margin | 13.0% | 13.2% | 12.7% | 12.3% | | 3.6% | 0.9% | -0.3% | 1.1% |
| Net Income Margin | 17.1% | 4.4% | 4.6% | 5.4% | | 16.2% | 0.7% | -0.9% | 2.7% |
Peers in Electronic Equipment & Instrum
Below you can find MTS Systems Corporation benchmarking vs. other companies in Electronic Equipment & Instrum 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 |
|---|
| Hickok Inc ($HICKA) | | -7.2% | 13.5% | 258.4% | 178.7% |
| Electro Scientific Industries, Inc. ($ESIO) | | -12.2% | 15.9% | -12.7% | 128.5% |
| Microvision, Inc. ($MVIS) | | 163.6% | 60.7% | -34.7% | 82.8% |
| Ipsidy Inc ($IDTY) | | | | | 66.2% |
| Magal Security Systems Ltd. ($MAGS) | | -17.8% | 6.4% | -5.2% | 44.0% |
| |
|---|
| Median (61 companies) | -78.5% | 4.5% | 0.3% | 3.6% | 10.4% |
|---|
| MTS Systems Corporation ($MTSC) | | -0.1% | 15.3% | 21.2% | -1.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Intellicheck, Inc. ($IDN) | 58.2% | 57.1% | 80.0% | 85.5% | 91.3% |
| Image Sensing Systems, Inc. ($ISNS) | 74.7% | 77.1% | 71.0% | 79.9% | 80.9% |
| National Instruments Corporation ($NATI) | 74.4% | 74.1% | 74.5% | 74.5% | 75.4% |
| Cognex Corporation ($CGNX) | 77.9% | 77.2% | 75.2% | 75.6% | 74.4% |
| Applied DNA Sciences Inc ($APDN) | | | 82.2% | 77.3% | 69.1% |
| |
|---|
| Median (60 companies) | 42.7% | 42.3% | 41.2% | 41.8% | 42.0% |
|---|
| MTS Systems Corporation ($MTSC) | 39.6% | 38.9% | 35.6% | 38.4% | 39.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Cognex Corporation ($CGNX) | 32.9% | 30.1% | 31.9% | 36.0% | 30.1% |
| Coherent, Inc. ($COHR) | 14.2% | 16.7% | 18.9% | 24.9% | 26.6% |
| Hollysys Automation Technologies, Ltd. ($HOLI) | 21.3% | 26.9% | 23.5% | 16.1% | 23.9% |
| Electro Scientific Industries, Inc. ($ESIO) | -10.1% | -19.1% | -2.0% | -17.8% | 23.1% |
| FLIR Systems, Inc. ($FLIR) | 20.7% | 22.8% | 21.3% | 20.0% | 21.7% |
| |
|---|
| Median (60 companies) | 5.3% | 3.9% | 3.0% | 3.0% | 3.3% |
|---|
| MTS Systems Corporation ($MTSC) | 14.1% | 14.6% | 10.1% | 11.5% | 12.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Wrap Technologies Inc ($WRTC) | | | | | 61.4% |
| ClearSign Combustion Corporation ($CLIR) | | 80.3% | 22.1% | 17.4% | 17.7% |
| LightPath Technologies, Inc. ($LPTH) | 16.8% | 5.0% | 6.5% | 7.8% | 7.7% |
| Giga-tronics Inc ($GIGA) | 1.7% | 0.1% | 1.3% | 0.3% | 7.0% |
| Applied DNA Sciences Inc ($APDN) | 8.4% | 3.9% | 16.1% | 3.1% | 6.8% |
| |
|---|
| Median (60 companies) | 1.8% | 1.9% | 2.1% | 1.6% | 2.3% |
|---|
| MTS Systems Corporation ($MTSC) | 3.6% | 3.3% | 3.2% | 2.3% | 1.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Evans & Sutherland Computer Corp ($ESCC) | | | 83.3% | 39.6% | 55.3% |
| Electro Scientific Industries, Inc. ($ESIO) | -11.7% | -19.7% | -7.1% | -22.9% | 31.5% |
| Coherent, Inc. ($COHR) | 9.9% | 13.1% | 15.6% | 24.0% | 21.5% |
| Zebra Technologies Corporation ($ZBRA) | 3.3% | 0.9% | 2.2% | 10.2% | 20.8% |
| Cognex Corporation ($CGNX) | 18.3% | 15.6% | 17.7% | 25.6% | 20.1% |
| |
|---|
| Median (72 companies) | 3.3% | 1.8% | 1.8% | 1.8% | 0.9% |
|---|
| MTS Systems Corporation ($MTSC) | 19.0% | 19.8% | 6.7% | 5.7% | 6.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Itron, Inc. ($ITRI) | 2.1x | 1.9x | 1.0x | 2.0x | 12.3x |
| Track Group Inc ($TRCK) | | | | | 12.2x |
| Mesa Laboratories, Inc. ($MLAB) | 0.7x | 1.1x | 1.7x | 2.0x | 3.5x |
| Trimble Inc. ($TRMB) | 1.3x | 1.7x | 1.1x | 1.3x | 3.4x |
| OSI Systems, Inc. ($OSIS) | -0.0x | -0.2x | 0.3x | 1.7x | 2.2x |
| |
|---|
| Median (35 companies) | -0.8x | -0.9x | -0.9x | -0.8x | -0.9x |
|---|
| MTS Systems Corporation ($MTSC) | -0.0x | -0.4x | 5.8x | 3.9x | 3.2x |
