CommScope Holding Company, Inc. reports 5.0% EBITDA decline in 2018 and almost no change in Revenue of 4,569
02/21/2019 • About CommScope Holding Company, Inc. (
$COMM) • By InTwits
CommScope Holding Company, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- CommScope Holding Company, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.4%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $23m in 2018, $66m in 2017, $37m in 2016, $16m in 2015, $10m in 2014
- In the last 5 years the company invested considerably less than D&A: $313m vs. $1,698m. In 2018 this situation was still the same: CAPEX was 82 while D&A was 357
- The company has business model with low profitability: ROIC is 7.6%
- It operates with high leverage: Net Debt/EBITDA is 4.4x 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 showed almost no change in 2018. Revenue growth showed slowdown in 18Q4 - it was -5.6% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.6 pp from 20.0% to 21.7% in 2018.
Gross Margin decreased slightly on 1.8 pp from 38.8% to 37.0% in 2018. SG&A as a % of Revenue decreased slightly on 1.5 pp from 17.4% to 16.0% in 2018. During 2014-2018 SG&A as a % of Revenue topped in 2015 at 18.1% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue followed a growing trend at 0.23 pp per annum in the last 5 years.
Net Income margin decreased slightly on 1.2 pp from 4.2% to 3.1% in 2018. The efficient tax rate was 17.9% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 1.8%. CAPEX/Revenue showed almost no change from 2015 to 2018. It's average CAPEX/Revenue for the last three years was 1.6%. CAPEX as a % of Revenue stuck to a growing trend at 0.17 pp per annum in 2014-2018.
Accounts receivable as a % of Revenue decreased slightly on 2.0 pp from 19.7% to 17.7% in 2018. Inventories as a % of Revenue increased slightly on 0.60 pp from 9.8% to 10.4% in 2018. Accounts payable as a % of Revenue decreased slightly on 1.8 pp from 15.6% to 13.9% in 2018.
Return on investment
The company operates at low ROIC (7.6%) and ROE (8.2%). ROIC showed almost no change in 2018. ROE decreased on 4.5 pp from 12.7% to 8.2% in 2018.
Leverage (Debt)
Debt level is 4.4x Net Debt / EBITDA and 4.9x Debt / EBITDA. Net Debt / EBITDA dropped on 0.2x from 4.6x to 4.4x in 2018. Debt decreased on 8.8% while cash increased slightly on 0.93%.
The company has no short term refinancing risk: short term debt is zero.
Valuation and dividends
The company's trades at EV/EBITDA 9.9x and P/E 31.9x.
Management team
CommScope Holding Company, Inc.'s CEO is Marvin S Edwards Jr "Eddie". Marvin S Edwards Jr "Eddie" is a founder and has 8 years tenure with the company. CEO total compensation was
$8,893,345 in 2018 which included
$1,091,250 salary. CommScope Holding Company, Inc.'s CFO Alexander W Pease "Alex" has spent 1 year with the company.
Insider ownership is 1.9%. Insider ownership didn't change in 2018.
The company has 20,000 employees. The number of employees didn't change in 2018. Average revenue per employee in 2018 was
$228,425 and it showed almost no change in 2018.
Financial and operational results
FY ended 12/31/2018
CommScope Holding Company, Inc. ($COMM) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 3,830 | 3,808 | 4,924 | 4,561 | 4,569 | 0.2% |
| Gross Profit | 1,397 | 1,346 | 2,029 | 1,768 | 1,688 | -4.5% |
| SG&A | 485 | 687 | 882 | 795 | 729 | -8.3% |
| EBITDA | 837 | 485 | 967 | 850 | 807 | -5.0% |
| EBIT | 577 | 182 | 568 | 472 | 450 | -4.7% |
| Tax | 80 | 9 | 50 | 16 | 30 | 91.0% |
| Net Income | 237 | -71 | 223 | 194 | 140 | -27.6% |
| Stock Based Compensation | 10 | 4 | 35 | 42 | 45 | 7.3% |
Balance Sheet
|
|---|
| Cash | 729 | 563 | 428 | 454 | 458 | 0.9% |
| Accounts Receivable | 612 | 833 | 952 | 899 | 810 | -9.8% |
| Inventory | 367 | 442 | 473 | 445 | 473 | 6.4% |
| Accounts Payable | 178 | 301 | 416 | 437 | 399 | -8.6% |
| Short Term Debt | 9 | 13 | 13 | 0 | 0 | |
| Long Term Debt | 2,660 | 5,231 | 4,550 | 4,369 | 3,986 | -8.8% |
Cash flow
|
|---|
| Capex | 37 | 57 | 68 | 69 | 82 | 19.8% |
| Acquisitions | 42 | 3,001 | | 105 | | |
Ratios
|
|---|
| Revenue growth | 10.0% | -0.6% | 29.3% | -7.4% | 0.2% | |
| EBITDA growth | 42.7% | -42.0% | 99.3% | -12.1% | -5.0% | |
|
|---|
| Gross Margin | 36.5% | 35.3% | 41.2% | 38.8% | 37.0% | -1.8% |
| EBITDA Margin | 21.9% | 12.7% | 19.6% | 18.6% | 17.7% | -1.0% |
| EBIT Margin | 15.1% | 4.8% | 11.5% | 10.4% | 9.8% | -0.5% |
| SG&A, % of revenue | 12.7% | 18.1% | 17.9% | 17.4% | 16.0% | -1.5% |
| SBC, % of revenue | 0.3% | 0.1% | 0.7% | 0.9% | 1.0% | 0.1% |
| Net Income Margin | 6.2% | -1.9% | 4.5% | 4.2% | 3.1% | -1.2% |
| CAPEX, % of revenue | 1.0% | 1.5% | 1.4% | 1.5% | 1.8% | 0.3% |
|
|---|
| ROIC | 14.6% | 3.5% | 9.2% | 7.8% | 7.6% | -0.2% |
| ROE | 19.8% | -5.6% | 17.0% | 12.7% | 8.2% | -4.5% |
| Net Debt/EBITDA | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x | -0.2x |
People
|
|---|
| Insider ownership | 1.9% | 1.9% | 1.9% | 1.9% | 1.9% | 0.0% |
| Employees | 13,000 | 23,000 | 25,000 | 20,000 | 20,000 | 0.0% |
| Revenue/Employee, th. $ | 295 | 166 | 197 | 228 | 228 | 0.2% |
CommScope Holding Company, Inc. ($COMM) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,121 | 1,240 | 1,150 | 1,058 | | -1.5% | 5.6% | 1.9% | -5.6% |
| EBITDA | 193 | 254 | 227 | 134 | | -12.4% | 12.0% | 4.1% | -27.8% |
| Net Income | 34 | 66 | 64 | -23 | | 0.5% | 18.9% | 24.8% | -143.5% |
Balance Sheet
|
|---|
| Cash | 473 | 546 | 352 | 458 | | 8.0% | 12.6% | -14.3% | 0.9% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 4,372 | 4,374 | 3,984 | 3,986 | | -4.3% | -4.3% | -12.4% | -8.8% |
Ratios
|
|---|
| Gross Margin | 36.7% | 38.0% | 36.8% | 36.1% | | -3.2% | -2.2% | -1.1% | -0.8% |
| EBITDA Margin | 17.2% | 20.5% | 19.7% | 12.7% | | -2.1% | 1.2% | 0.4% | -3.9% |
| Net Income Margin | 3.0% | 5.3% | 5.5% | -2.2% | | 0.1% | 0.6% | 1.0% | -7.0% |
Peers in Communications Equipment
Below you can find CommScope Holding Company, Inc. benchmarking vs. other companies in Communications Equipment 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 |
|---|
| 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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.3% | 5.6% | 3.5% |
|---|
| CommScope Holding Company, Inc. ($COMM) | | -0.6% | 29.3% | -7.4% | 0.2% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| CommScope Holding Company, Inc. ($COMM) | 36.5% | 35.3% | 41.2% | 38.8% | 37.0% |
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. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| CommScope Holding Company, Inc. ($COMM) | 21.9% | 12.7% | 19.6% | 18.6% | 17.7% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.6% |
|---|
| CommScope Holding Company, Inc. ($COMM) | 1.0% | 1.5% | 1.4% | 1.5% | 1.8% |
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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| CommScope Holding Company, Inc. ($COMM) | 14.6% | 3.5% | 9.2% | 7.8% | 7.6% |
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 |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| Harmonic Inc. ($HLIT) | -4.7x | -4.1x | | | 3.4x |
| |
|---|
| Median (45 companies) | -0.8x | -0.8x | -0.9x | -0.8x | -0.3x |
|---|
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
