ServiceSource International, Inc. reports 8.8% CAPEX decline in 2018 and almost no change in Revenue of 238
02/20/2019 • About ServiceSource International, Inc. (
$SREV) • By InTwits
ServiceSource International, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- ServiceSource International, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 0.0% while average EBITDA Margin was -6.9% for the sames years
- ServiceSource International, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.5%. At the same time it's in pair with industry average of 6.1%
- CAPEX is quite volatile: $16m in 2018, $17m in 2017, $26m in 2016, $12m in 2015, $9m in 2014
- The company has unprofitable business model: ROIC is -8.7%
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 showed almost no change in 2018. Revenue decline showed acceleration in 18Q4 - it was 6.9% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.72 pp from -0.47% to 0.26% in 2018.
Gross Margin decreased slightly on 0.64 pp from 31.5% to 30.9% in 2018. During 2014-2018 Gross Margin topped in 2016 at 34.7% and was declining since that time. SG&A as a % of Revenue decreased slightly on 1.2 pp from 36.0% to 34.8% in 2018.
Net Income margin increased on 2.0 pp from -12.5% to -10.4% in 2018. Net Income margin pursued a growing trend in 2014-2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 6.5% in 2018. The company showed small growth in CAPEX/Revenue of 1.8 pp from 4.7% in 2015 to 6.5% in 2018. For the last three years the average CAPEX/Revenue was 8.0%. ServiceSource International, Inc. has spent a lot to CAPEX (2,562% of EBITDA) which didn't stop revenue from falling. During 2014-2018 CAPEX as a % of Revenue topped in 2016 at 10.4% and was declining since that time.
Return on investment
The company operates at negative ROIC (-8.7%) and ROE (-23.3%). ROIC showed almost no change in 2018. ROE increased slightly on 1.7 pp from -25.0% to -23.3% in 2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -35.5x and Debt / EBITDA is 8.0x. Debt dropped on 96.6% while cash dropped on 48.4%.
ServiceSource International, Inc. has no short term refinancing risk: cash is higher than short term debt (541.3%).
Management team
ServiceSource International, Inc.'s CEO is Gary B Moore. Gary B Moore is a founder and has 0 years tenure with the company. ServiceSource International, Inc.'s CFO is Richard G Walker "Rich". Richard G Walker "Rich" has 0 years tenure at the company.
Financial and operational results
FY ended 12/31/2018
ServiceSource International, Inc. ($SREV) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 272.2 | 252.2 | 252.9 | 239.1 | 238.3 | -0.3% |
| Gross Profit | 78.2 | 80.8 | 87.8 | 75.4 | 73.6 | -2.3% |
| SG&A | 107.8 | 90.4 | 95.0 | 86.1 | 82.9 | -3.7% |
| EBITDA | -70.6 | -16.0 | 0.6 | -1.1 | 0.6 | |
| Net Income | -95.2 | -40.4 | -32.1 | -29.8 | -24.9 | |
Balance Sheet
|
|---|
| Cash | 90.4 | 72.3 | 47.7 | 51.4 | 26.5 | -48.4% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 144.2 | 4.9 | -96.6% |
| Long Term Debt | 121.1 | 126.2 | 134.9 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 9.4 | 12.0 | 26.3 | 17.1 | 15.6 | -8.8% |
Ratios
|
|---|
| Revenue growth | -0.1% | -7.3% | 0.3% | -5.4% | -0.3% | |
| EBITDA growth | 1,095.3% | -77.4% | -103.5% | -300.2% | -154.4% | |
|
|---|
| Gross Margin | 28.7% | 32.1% | 34.7% | 31.5% | 30.9% | -0.6% |
| EBITDA Margin | -25.9% | -6.3% | 0.2% | -0.5% | 0.3% | 0.7% |
| SG&A, % of revenue | 39.6% | 35.8% | 37.6% | 36.0% | 34.8% | -1.2% |
| Net Income Margin | -35.0% | -16.0% | -12.7% | -12.5% | -10.4% | 2.0% |
| CAPEX, % of revenue | 3.4% | 4.7% | 10.4% | 7.2% | 6.5% | -0.6% |
|
|---|
| ROIC | -27.6% | -10.4% | -5.8% | -9.1% | -8.7% | 0.4% |
| ROE | -46.2% | -25.3% | -23.4% | -25.0% | -23.3% | 1.7% |
| Net Debt/EBITDA | | | 156.0x | | -35.5x |
ServiceSource International, Inc. ($SREV) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 59 | 61 | 57 | 61 | | 3.3% | 4.9% | -1.6% | -6.9% |
| EBITDA | -2 | -1 | -2 | 5 | | | | -218.3% | -8.6% |
| Net Income | -12 | -9 | -7 | 2 | | | | | 2,979.7% |
Balance Sheet
|
|---|
| Cash | 52 | 184 | 64 | 27 | | 2.8% | 364.7% | 60.5% | -48.4% |
| Short Term Debt | 147 | 149 | 0 | 5 | | | | -100.0% | -96.6% |
| Long Term Debt | 0 | 0 | 32 | 0 | | -100.0% | -100.0% | | |
Ratios
|
|---|
| Gross Margin | 28.8% | 30.5% | 30.1% | 34.0% | | 1.8% | -1.7% | 0.3% | -2.4% |
| EBITDA Margin | -3.5% | -1.2% | -3.6% | 8.9% | | 4.5% | 6.1% | -6.6% | -0.2% |
| Net Income Margin | -19.9% | -14.5% | -11.6% | 3.7% | | 0.6% | 7.9% | -2.7% | 3.6% |
Peers in IT Consulting & Other Services
Below you can find ServiceSource International, Inc. benchmarking vs. other companies in IT Consulting & Other Services 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 |
|---|
| Gopher Protocol Inc ($GOPH) | | -25.0% | 83.3% | 5,471.1% | 461.0% |
| CLPS Incorporation ($CLPS) | | | | 8.1% | 56.0% |
| EPAM Systems, Inc. ($EPAM) | | 25.2% | 26.9% | 25.0% | 27.1% |
| Gartner, Inc. ($IT) | | 7.0% | 13.0% | 35.5% | 20.1% |
| Computer Task Group, Incorporated ($CTG) | | -6.0% | -12.1% | -7.3% | 19.1% |
| |
|---|
| Median (35 companies) | | 3.5% | 8.3% | 4.0% | 3.9% |
|---|
| ServiceSource International, Inc. ($SREV) | | -7.3% | 0.3% | -5.4% | -0.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Inpixon ($INPX) | 29.8% | 28.9% | 28.1% | 68.7% | 71.4% |
| Gartner, Inc. ($IT) | 60.5% | 61.2% | 61.3% | 60.1% | 63.1% |
| InterXion Holding N.V. ($INXN) | 59.2% | 60.8% | 61.5% | 61.1% | 60.9% |
| LiveRamp Holdings, Inc. ($RAMP) | 25.1% | 38.6% | 42.5% | 45.7% | 56.2% |
| Booz Allen Hamilton Holding Corporation ($BAH) | 50.4% | 50.8% | 52.3% | 53.6% | 53.5% |
| |
|---|
| Median (37 companies) | 25.8% | 31.3% | 28.1% | 27.7% | 28.9% |
|---|
| ServiceSource International, Inc. ($SREV) | 28.7% | 32.1% | 34.7% | 31.5% | 30.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InterXion Holding N.V. ($INXN) | 41.3% | 44.9% | 43.3% | 42.2% | 42.8% |
| Switch, Inc. ($SWCH) | | 50.7% | 37.0% | 28.5% | 39.8% |
| Cognizant Technology Solutions Corporation ($CTSH) | 20.4% | 19.9% | 19.8% | 19.7% | 20.5% |
| Taoping Inc. ($TAOP) | -54.0% | -237.5% | -117.7% | 13.2% | 18.7% |
| DXC Technology Company ($DXC) | | | | 8.0% | 16.3% |
| |
|---|
| Median (36 companies) | 5.1% | 3.5% | 6.7% | 7.0% | 7.6% |
|---|
| ServiceSource International, Inc. ($SREV) | -25.9% | -6.3% | 0.2% | -0.5% | 0.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InterXion Holding N.V. ($INXN) | 62.5% | 48.1% | 57.4% | 50.5% | 78.3% |
| Switch, Inc. ($SWCH) | | 71.5% | 90.2% | 106.4% | 67.9% |
| Taoping Inc. ($TAOP) | 1.4% | 29.2% | 34.0% | 20.8% | 8.7% |
| Teradata Corporation ($TDC) | 2.0% | 2.1% | 2.3% | 3.6% | 7.1% |
| Amdocs Limited ($DOX) | 3.1% | 3.3% | 3.5% | 3.4% | 5.8% |
| |
|---|
| Median (35 companies) | 0.9% | 0.8% | 1.1% | 1.2% | 1.5% |
|---|
| ServiceSource International, Inc. ($SREV) | 3.4% | 4.7% | 10.4% | 7.2% | 6.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Accenture plc ($ACN) | 80.5% | 81.0% | 81.3% | 61.7% | 66.1% |
| The Hackett Group, Inc. ($HCKT) | 11.2% | 19.5% | 31.7% | 23.8% | 24.6% |
| Cognizant Technology Solutions Corporation ($CTSH) | 24.7% | 22.0% | 21.3% | 21.9% | 23.8% |
| Booz Allen Hamilton Holding Corporation ($BAH) | 25.3% | 26.5% | 23.1% | 22.6% | 22.5% |
| EPAM Systems, Inc. ($EPAM) | 19.7% | 18.4% | 18.2% | 18.9% | 21.2% |
| |
|---|
| Median (44 companies) | 7.5% | 6.9% | 7.7% | 5.6% | 6.9% |
|---|
| ServiceSource International, Inc. ($SREV) | -27.6% | -10.4% | -5.8% | -9.1% | -8.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Infinite Group Inc ($IMCI) | | | 169.6x | | 10.5x |
| InterXion Holding N.V. ($INXN) | 3.3x | 2.9x | 3.4x | 3.8x | 4.6x |
| Gartner, Inc. ($IT) | 0.1x | 1.3x | 0.6x | 11.7x | 4.1x |
| Switch, Inc. ($SWCH) | | 2.2x | 4.0x | 3.2x | 3.3x |
| Presidio, Inc. ($PSDO) | 0.0x | | 5.6x | 3.6x | 3.1x |
| |
|---|
| Median (28 companies) | -0.2x | -0.3x | 0.0x | 0.6x | 1.0x |
|---|
| ServiceSource International, Inc. ($SREV) | | | 156.0x | | -35.5x |
