Optical Cable Corporation reports 892% EBITDA growth in 2018 and 37.0% Revenue growth
12/19/2018 • About Optical Cable Corporation (
$OCC) • By InTwits
Optical Cable Corporation reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 4.1% in FY2018, 0.6% in FY2017, 1.3% in FY2016, -0.4% in FY2015, 4.0% in FY2014
- Optical Cable Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.0%. At the same time it's in pair with industry average of 5.2%
- CAPEX is quite volatile: $1m in FY2018, $1m in FY2017, $1m in FY2016, $3m in FY2015, $3m in FY2014
- The company has potentially unprofitable business model: ROIC is 4.8%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.6x 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
The company's Revenue surged on 37.0%. Revenue growth showed slowdown in FY18Q4 - it was 17.8% YoY. During the last 5 years Revenue growth bottomed in FY2016 at -12.2% and was accelerating since that time. Despite revenue decline the EBITDA margin expanded. EBITDA Margin jumped on 11.4 pp from -2.3% to 9.1% in 2018.
Gross Margin decreased slightly on 0.71 pp from 32.4% to 31.7% in FY2018. SG&A as a % of Revenue decreased on 4.5 pp from 34.3% to 29.8% in FY2018.
Net Income margin increased on 3.9 pp from -2.7% to 1.2% in FY2018. During the last 5 years Net Income margin bottomed in FY2015 at -5.8% and was growing since that time.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 0.78%. CAPEX/Revenue decreased on 3.5 pp from 4.3% in FY2015 to 0.78% in FY2018. For the last three years the average CAPEX/Revenue was 0.85%. During FY2014-FY2018 CAPEX as a % of Revenue topped in FY2015 at 4.3% and was declining since that time.
Return on investment
The company operates at low ROIC (4.8%) and ROE (4.2%). ROIC increased on 8.4 pp from -3.6% to 4.8% in FY2018. ROE surged on 11.4 pp from -7.2% to 4.2% in FY2018.
Leverage (Debt)
Debt level is 2.6x Net Debt / EBITDA and 2.6x Debt / EBITDA. Net Debt / EBITDA dropped on 29.4x from 32.0x to 2.6x in FY2018. Debt dropped on 23.9% while cash dropped on 80.1%.
Optical Cable Corporation has short term refinancing risk: cash is only 68.0% of short term debt.
Valuation and dividends
Optical Cable Corporation's trades at EV/EBITDA 9.5x and P/E 22.9x.
Management team
Neil D Wilkin Jr is a the company's CEO. Neil D Wilkin Jr is a founder and has spent 15 years with the company. Optical Cable Corporation's CFO is Tracy G Smith. Tracy G Smith has 15 years tenure at the company.
Financial and operational results
FY ended 10/31/2018
Optical Cable Corporation ($OCC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 82.978 | 73.569 | 64.616 | 64.093 | 87.829 | 37.0% |
| Gross Profit | 28.472 | 21.796 | 19.725 | 20.798 | 27.873 | 34.0% |
| SG&A | 26.989 | 24.043 | 20.761 | 21.969 | 26.131 | 18.9% |
| EBITDA | 3.355 | -0.305 | 0.838 | 0.359 | 3.558 | 892.4% |
| Net Income | 0.684 | -4.256 | -1.779 | -1.739 | 1.069 | |
Balance Sheet
|
|---|
| Cash | 1.090 | 1.083 | 1.879 | 0.891 | 0.177 | -80.1% |
| Short Term Debt | 0.270 | 0.281 | 0.294 | 0.251 | 0.261 | 4.1% |
| Long Term Debt | 9.727 | 12.946 | 11.652 | 12.120 | 9.159 | -24.4% |
Cash flow
|
|---|
| Capex | 2.820 | 3.149 | 0.635 | 0.509 | 0.689 | 35.4% |
Ratios
|
|---|
| Revenue growth | 10.2% | -11.3% | -12.2% | -0.8% | 37.0% | |
| EBITDA growth | 19.0% | -109.1% | -374.5% | -57.2% | 892.4% | |
|
|---|
| Gross Margin | 34.3% | 29.6% | 30.5% | 32.4% | 31.7% | -0.7% |
| EBITDA Margin | 4.0% | -0.4% | 1.3% | 0.6% | 4.1% | 3.5% |
| SG&A, % of revenue | 32.5% | 32.7% | 32.1% | 34.3% | 29.8% | -4.5% |
| Net Income Margin | 0.8% | -5.8% | -2.8% | -2.7% | 1.2% | 3.9% |
| CAPEX, % of revenue | 3.4% | 4.3% | 1.0% | 0.8% | 0.8% | -0.0% |
|
|---|
| ROIC | 3.4% | -6.0% | -3.2% | -3.6% | 4.8% | 8.4% |
| ROE | 2.2% | -14.8% | -6.9% | -7.2% | 4.2% | 11.4% |
| Net Debt/EBITDA | 2.7x | | 12.0x | 32.0x | 2.6x | -29.4x |
Optical Cable Corporation ($OCC) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 18 | 27 | 23 | 20 | | 20.2% | 69.7% | 40.7% | 17.8% |
| EBITDA | 0 | 2 | 1 | 0 | | -10.8% | 9,634.1% | 341.0% | |
| Net Income | -0 | 1 | 0 | -0 | | | | | |
Balance Sheet
|
|---|
| Cash | 1 | 0 | 1 | 0 | | -57.5% | -65.1% | 96.0% | -80.1% |
| Short Term Debt | 0 | 2 | 0 | 0 | | -18.2% | 671.1% | 4.1% | 4.1% |
| Long Term Debt | 12 | 13 | 12 | 9 | | 9.8% | 16.1% | 0.9% | -24.4% |
Ratios
|
|---|
| Gross Margin | 29.8% | 33.3% | 30.4% | 32.9% | | -3.1% | -2.4% | -1.9% | 3.7% |
| EBITDA Margin | 0.4% | 7.5% | 4.9% | 1.6% | | -0.2% | 7.3% | 3.4% | 1.7% |
| Net Income Margin | -2.3% | 5.2% | 1.9% | -1.7% | | 1.9% | 6.7% | 3.7% | 1.7% |
Peers in Communications Equipment
Below we provide Optical Cable 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% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| Arista Networks, Inc. ($ANET) | | 43.4% | 34.8% | 45.8% | 30.7% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.6% | 2.8% |
|---|
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| Optical Cable Corporation ($OCC) | 34.3% | 29.6% | 30.5% | 32.4% | 31.7% |
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. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 6.1% | 5.9% | 6.5% | 5.4% |
|---|
| Optical Cable Corporation ($OCC) | 4.0% | -0.4% | 1.3% | 0.6% | 4.1% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.2% | 2.2% | 2.0% | 1.9% | 1.7% |
|---|
| Optical Cable Corporation ($OCC) | 3.4% | 4.3% | 1.0% | 0.8% | 0.8% |
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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.3% | 2.4% | 2.2% | 0.3% |
|---|
| Optical Cable Corporation ($OCC) | 3.4% | -6.0% | -3.2% | -3.6% | 4.8% |
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 ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.8x | -0.7x | -0.9x | -0.8x | -0.3x |
|---|
| Optical Cable Corporation ($OCC) | 2.7x | | 12.0x | 32.0x | 2.6x |
