Technical Communications Corporation reports 1.1% revenue decline in FY2018 and 9.8 pp EBITDA Margin growth from -48.9% to -39.1%
12/10/2018 • About Technical Communications Corporation (
$TCCO) • By InTwits
Technical Communications Corporation reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- The company operates at negative EBITDA Margin: -39.1%
- Technical Communications Corporation spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 0.0%. Average EBITDA Margin for the same period was -41.7%
- Technical Communications Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.1%. At the same time it's a lot of higher than industry average of 3.6%.
- CAPEX is quite volatile: $0m in FY2018, $0m in FY2017, $0m in FY2016, $0m in FY2015, $0m in FY2014
- The company has unprofitable business model: ROIC is -65.5%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.1x while industry average is -0.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Technical Communications Corporation's Revenue decreased slightly on 1.1%. Revenue decline showed acceleration in FY18Q4 - it was 85.2% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.8 pp from -48.9% to -39.1% in FY2018. During the last 5 years EBITDA Margin bottomed in FY2016 at -112% and was growing since that time.
Gross Margin dropped on 22.1 pp from 48.5% to 26.4% in FY2018. SG&A as a % of Revenue decreased on 4.9 pp from 57.6% to 52.7% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2016 at 106% and was declining since that time.
Net Income margin jumped on 11.2 pp from -51.4% to -40.2% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 1.2% in FY2018. CAPEX/Revenue increased slightly on 0.75 pp from 0.44% in FY2015 to 1.2% in FY2018. It's average CAPEX/Revenue for the last three years was 0.84%.
Return on investment
The company operates at negative ROIC (-65.5%) and ROE (-65.0%). ROIC dropped on 17.0 pp from -48.5% to -65.5% in FY2018. ROE dropped on 16.8 pp from -48.2% to -65.0% in FY2018. ROIC stuck to a declining trend at -12.6 pp per annum in FY2014-FY2018. ROE stuck to a declining trend at -10.6 pp per annum in FY2014-FY2018.
Leverage (Debt)
The company has no debt. Cash surged on 54.4%.
Financial and operational results
FY ended 09/29/2018
Technical Communications Corporation ($TCCO) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 6.139 | 5.942 | 2.523 | 3.725 | 3.685 | -1.1% |
| Gross Profit | 4.105 | 3.365 | 0.509 | 1.807 | 0.972 | -46.2% |
| SG&A | 2.980 | 2.940 | 2.671 | 2.145 | 1.941 | -9.5% |
| EBITDA | -1.403 | -1.676 | -2.830 | -1.823 | -1.441 | |
| Net Income | -2.565 | -1.822 | -2.472 | -1.913 | -1.480 | |
Balance Sheet
|
|---|
| Cash | 3.210 | 2.277 | 2.589 | 1.284 | 1.982 | 54.4% |
| Short Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
Cash flow
|
|---|
| Capex | 0.165 | 0.026 | 0.031 | 0.004 | 0.044 | 1,121.3% |
Ratios
|
|---|
| Revenue growth | -1.8% | -3.2% | -57.5% | 47.6% | -1.1% | |
| EBITDA growth | 4.2% | 19.4% | 68.9% | -35.6% | -20.9% | |
|
|---|
| Gross Margin | 66.9% | 56.6% | 20.2% | 48.5% | 26.4% | -22.1% |
| EBITDA Margin | -22.9% | -28.2% | -112.2% | -48.9% | -39.1% | 9.8% |
| SG&A, % of revenue | 48.6% | 49.5% | 105.9% | 57.6% | 52.7% | -4.9% |
| Net Income Margin | -41.8% | -30.7% | -98.0% | -51.4% | -40.2% | 11.2% |
| CAPEX, % of revenue | 2.7% | 0.4% | 1.2% | 0.1% | 1.2% | 1.1% |
|
|---|
| ROIC | -15.6% | -22.6% | -48.5% | -48.5% | -65.5% | -17.0% |
| ROE | -25.0% | -22.2% | -40.2% | -48.2% | -65.0% | -16.8% |
Technical Communications Corporation ($TCCO) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1 | 1 | 1 | 0 | | 32.4% | -42.0% | -15.0% | -85.2% |
| EBITDA | -0 | -0 | -0 | -1 | | | -382.0% | | |
| Net Income | -0 | -0 | -0 | -1 | | | -443.9% | | |
Balance Sheet
|
|---|
| Cash | 2 | 1 | 1 | 2 | | 18.9% | 26.7% | -4.5% | 54.4% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 34.9% | 30.2% | 21.4% | -875.3% | | -35.3% | -52.6% | -29.1% | -825.0% |
| EBITDA Margin | -38.4% | -52.8% | -48.7% | -1,429.3% | | 65.4% | -63.7% | -17.8% | -1,275.0% |
| Net Income Margin | -39.7% | -54.6% | -49.6% | -1,435.0% | | 70.3% | -63.8% | -17.3% | -1,278.6% |
Peers in Communications Equipment
Below we provide Technical Communications Corporation 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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.1% | 3.5% |
|---|
| Technical Communications Corporation ($TCCO) | | -3.2% | -57.5% | 47.6% | -1.1% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.9% | 41.0% | 41.2% |
|---|
| Technical Communications Corporation ($TCCO) | 66.9% | 56.6% | 20.2% | 48.5% | 26.4% |
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. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 6.1% | 5.9% | 6.5% | 5.4% |
|---|
| Technical Communications Corporation ($TCCO) | -22.9% | -28.2% | -112.2% | -48.9% | -39.1% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.2% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| Technical Communications Corporation ($TCCO) | 2.7% | 0.4% | 1.2% | 0.1% | 1.2% |
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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 2.1% | 2.3% | 2.4% | 2.2% | 0.7% |
|---|
| Technical Communications Corporation ($TCCO) | -15.6% | -22.6% | -48.5% | -48.5% | -65.5% |
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 | -0.7x | -0.9x | -0.7x | -0.1x |
|---|
