AudioCodes Ltd. reports 235% Net Income growth in 2018 and 12.4% Revenue growth
01/28/2019 • About AudioCodes Ltd. (
$AUDC) • By InTwits
AudioCodes Ltd. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is expanding: 10.8% in 2018 vs. 8.1% in 2017 vs. 5.0% in 2014
- AudioCodes Ltd. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.2%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $15m in 2018, $47m in 2017, $52m in 2016, $17m in 2015, $11m in 2014
- The company has highly profitable business model: ROIC is 16.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 12.4%. Revenue growth showed slowdown in 18Q4 - it was 10.5% YoY. During 2014-2018 Revenue growth bottomed in 2015 at -7.8% and was accelerating since that time. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 7.0 pp from 11.8% to 4.8% in FY2018. EBITDA Margin followed a growing trend at 1.5 pp per annum in 2014-2018.
Gross Margin showed almost no change in 2018. Gross Margin grew at 1.1 pp per annum in 2014-2018. SG&A as a % of Revenue decreased on 3.1 pp from 36.9% to 33.8% in 2018.
Net Income margin increased on 5.1 pp from 2.6% to 7.7% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 0.76%. The company showed small CAPEX/Revenue decline of 0.65 pp from 1.4% in 2015 to 0.76% in 2018. Average CAPEX/Revenue for the last three years was 0.93%. CAPEX as a % of Revenue stuck to a declining trend at -0.22 pp per annum in 2014-2018.
Return on investment
The company operates at good ROIC (16.1%) and ROE (14.4%). ROIC increased on 7.5 pp from 8.6% to 16.1% in 2018. ROE surged on 10.4 pp from 4.0% to 14.4% in 2018. ROIC grew at 3.3 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is -1.3x Net Debt / EBITDA and 0.3x Debt / EBITDA. Debt dropped on 29.5% while cash surged on 30.0%.
AudioCodes Ltd. has no short term refinancing risk: cash is higher than short term debt (1,266.7%).
Valuation and dividends
AudioCodes Ltd.'s trades at EV/EBITDA 19.7x and P/E 29.6x.
Financial and operational results
FY ended 12/31/2018
AudioCodes Ltd. ($AUDC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 151.6 | 139.8 | 145.6 | 156.7 | 176.2 | 12.4% |
| Gross Profit | 89.0 | 82.8 | 88.3 | 97.8 | 110.6 | 13.0% |
| SG&A | 53.2 | 52.1 | 51.4 | 57.8 | 59.6 | 3.0% |
| EBITDA | 7.6 | 6.8 | 11.6 | 12.7 | 19.0 | 50.3% |
| Net Income | -0.1 | 0.4 | 16.2 | 4.0 | 13.5 | 234.8% |
Balance Sheet
|
|---|
| Cash | 14.8 | 18.9 | 24.3 | 24.2 | 31.5 | 30.0% |
| Short Term Debt | 4.7 | 5.3 | 3.5 | 2.5 | 2.5 | -1.3% |
| Long Term Debt | 5.1 | 6.0 | 8.5 | 6.2 | 3.7 | -40.9% |
Cash flow
|
|---|
| Capex | 2.5 | 2.0 | 1.5 | 1.6 | 1.3 | -14.9% |
Ratios
|
|---|
| Revenue growth | 10.5% | -7.8% | 4.2% | 7.7% | 12.4% | |
| EBITDA growth | 20.0% | -10.4% | 72.2% | 8.7% | 50.3% | |
|
|---|
| Gross Margin | 58.7% | 59.2% | 60.7% | 62.4% | 62.8% | 0.3% |
| EBITDA Margin | 5.0% | 4.8% | 8.0% | 8.1% | 10.8% | 2.7% |
| SG&A, % of revenue | 35.1% | 37.3% | 35.3% | 36.9% | 33.8% | -3.1% |
| Net Income Margin | -0.1% | 0.3% | 11.2% | 2.6% | 7.7% | 5.1% |
| CAPEX, % of revenue | 1.7% | 1.4% | 1.0% | 1.0% | 0.8% | -0.2% |
|
|---|
| ROIC | 2.7% | 2.0% | 6.1% | 8.6% | 16.1% | 7.5% |
| ROE | -0.1% | 0.3% | 14.4% | 4.0% | 14.4% | 10.4% |
| Net Debt/EBITDA | -0.7x | -1.1x | -1.1x | -1.2x | -1.3x | -0.1x |
AudioCodes Ltd. ($AUDC) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 42 | 44 | 45 | 46 | | 13.5% | 12.3% | 13.5% | 10.5% |
| EBITDA | 4 | 4 | 6 | 6 | | 29.4% | 49.9% | 68.6% | 49.7% |
| Net Income | 2 | 2 | 4 | 5 | | 88.0% | 136.1% | 294.2% | 574.1% |
Balance Sheet
|
|---|
| Cash | 22 | 22 | 21 | 32 | | 22.5% | 21.6% | -3.3% | 30.0% |
| Short Term Debt | 3 | 3 | 2 | 2 | | -17.7% | -10.9% | -0.4% | -1.3% |
| Long Term Debt | 6 | 5 | 4 | 4 | | -28.7% | -33.2% | -36.8% | -40.9% |
Ratios
|
|---|
| Gross Margin | 64.0% | 62.3% | 62.2% | 62.6% | | 1.6% | 0.9% | -0.6% | -0.5% |
| EBITDA Margin | 8.5% | 9.1% | 12.6% | 12.8% | | 1.0% | 2.3% | 4.1% | 3.3% |
| Net Income Margin | 5.7% | 5.5% | 9.3% | 9.9% | | 2.3% | 2.9% | 6.6% | 8.3% |
Peers in Communications Equipment
Below we provide AudioCodes Ltd. 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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.1% | 2.8% |
|---|
| AudioCodes Ltd. ($AUDC) | | -7.8% | 4.2% | 7.7% | 12.4% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.7% | 41.0% | 40.5% |
|---|
| AudioCodes Ltd. ($AUDC) | 58.7% | 59.2% | 60.7% | 62.4% | 62.8% |
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. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 6.0% | 5.5% | 6.0% | 4.6% |
|---|
| AudioCodes Ltd. ($AUDC) | 5.0% | 4.8% | 8.0% | 8.1% | 10.8% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| AudioCodes Ltd. ($AUDC) | 1.7% | 1.4% | 1.0% | 1.0% | 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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.3% | 2.2% | 2.1% | 0.3% |
|---|
| AudioCodes Ltd. ($AUDC) | 2.7% | 2.0% | 6.1% | 8.6% | 16.1% |
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 ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.8x | -0.6x | -0.8x | -0.6x | 0.2x |
|---|
| AudioCodes Ltd. ($AUDC) | -0.7x | -1.1x | -1.1x | -1.2x | -1.3x |
