EchoStar Corporation Net Income dropped on 110% and EBITDA Margin decreased slightly on 0.74 pp from 38.1% to 37.4%
02/21/2019 • About EchoStar Corporation (
$SATS) • By InTwits
EchoStar Corporation reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EchoStar Corporation has high CAPEX intensity: 5 year average CAPEX/Revenue was 32.2%. At the same time it's a lot of higher than industry average of 7.4%.
- CAPEX is quite volatile: $63m in 2018, $31m in 2017, $19m in 2016, $12m in 2015, $13m in 2014
- The company has potentially unprofitable business model: ROIC is 2.4%
- It operates with high leverage: Net Debt/EBITDA is 3.3x 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
EchoStar Corporation's Revenue jumped on 10.9%. Revenue growth showed slowdown in 18Q4 - it was 4.9% YoY. During the last 5 years Revenue growth bottomed in 2015 at -46.3% and was accelerating since that time. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 0.74 pp from 38.1% to 37.4% in 2018. During the last 5 years EBITDA Margin topped in 2016 at 40.3% and was declining since that time.
Gross Margin increased on 2.9 pp from 59.8% to 62.7% in 2018. SG&A as a % of Revenue increased slightly on 1.4 pp from 19.4% to 20.9% in 2018. SG&A as a % of Revenue stuck to a growing trend at 2.2 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During the last 5 years SBC as a % of Revenue topped in 2015 at 1.2% and was declining since that time.
Net Income margin dropped on 22.8 pp from 20.8% to -1.9% in 2018. During 2014-2018 Net Income margin topped in 2017 at 20.8%.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 26.5%. CAPEX/Revenue dropped on 17.2 pp from 43.8% in 2015 to 26.5% in 2018. It's average CAPEX/Revenue for the last three years was 32.5%. To maintain its fast growth EchoStar Corporation invested a large share of EBITDA (71.0%) to CAPEX. During the last 5 years CAPEX as a % of Revenue topped in 2015 at 43.8% and was declining since that time.
Accounts receivable as a % of Revenue decreased on 2.4 pp from 12.7% to 10.3% in 2018. Inventories as a % of Revenue decreased slightly on 0.83 pp from 4.4% to 3.6% in 2018. Accounts payable as a % of Revenue increased slightly on 0.85 pp from 14.9% to 15.8% in 2018.
Return on investment
The company operates at low but positive ROIC (2.4%) and negative ROE (-1.0%). ROIC showed almost no change in 2018. ROE dropped on 10.9 pp from 9.9% to -0.97% in 2018. ROIC followed a declining trend at -0.80 pp per annum in 2014-2018.
Leverage (Debt)
Debt level is 3.3x Net Debt / EBITDA and 4.5x Debt / EBITDA. Net Debt / EBITDA jumped on 1.7x from 1.7x to 3.3x in 2018. Debt decreased on 2.8% while cash dropped on 61.8%. During the last 5 years Net Debt/EBITDA bottomed in 2016 at 1.5x and was growing since that time.
EchoStar Corporation has questionable short term financial stability: Interest coverage ratio (ICR) is only 0.7x. EchoStar Corporation has short term refinancing risk: cash is only 96.7% of short term debt.
Average interest expence paid by the company was 7.0% in 2018.
Management team
The company's CEO is Michael T Dugan. Michael T Dugan is a founder and has 9 years tenure with the company. CEO total compensation was
$2,026,060 in 2018 which included
$1,000,002 salary. David J Rayner "Dave" is a EchoStar Corporation's CFO. David J Rayner "Dave" has spent 7 years at the company.
At the end of financial year the company had 4.7% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 2,200 employees. The number of employees increased on 4.8%. Average revenue per employee in 2018 was
$950,620 and it increased on 5.9%.
Financial and operational results
FY ended 12/31/2018
EchoStar Corporation ($SATS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 3,446 | 1,849 | 1,810 | 1,886 | 2,091 | 10.9% |
| Gross Profit | 1,318 | 1,079 | 1,085 | 1,127 | 1,310 | 16.3% |
| SG&A | 372 | 318 | 325 | 366 | 436 | 19.2% |
| EBITDA | 885 | 735 | 729 | 718 | 781 | 8.8% |
| EBIT | 328 | 274 | 296 | 196 | 183 | -6.7% |
| Interest expence | -171 | 122 | 123 | 217 | 249 | 14.4% |
| Tax | 31 | 51 | 80 | -284 | 31 | |
| Net Income | 165 | 153 | 180 | 393 | -40 | -110.3% |
| Stock Based Compensation | 15 | 22 | 15 | 10 | 10 | -1.1% |
Balance Sheet
|
|---|
| Cash | 549 | 924 | 2,570 | 2,431 | 928 | -61.8% |
| Accounts Receivable | 415 | 456 | 202 | 240 | 215 | -10.3% |
| Inventory | 63 | 67 | 63 | 84 | 75 | -9.8% |
| Accounts Payable | 221 | 238 | 171 | 113 | 123 | 8.8% |
| Short Term Debt | 42 | 36 | 33 | 41 | 960 | 2,261.7% |
| Long Term Debt | 2,326 | 2,157 | 3,622 | 3,594 | 2,573 | -28.4% |
Cash flow
|
|---|
| Capex | 680 | 809 | 722 | 583 | 555 | -4.8% |
Ratios
|
|---|
| Revenue growth | 5.0% | -46.3% | -2.1% | 4.1% | 10.9% | |
| EBITDA growth | 44.9% | -17.0% | -0.8% | -1.4% | 8.8% | |
|
|---|
| Gross Margin | 38.2% | 58.4% | 59.9% | 59.8% | 62.7% | 2.9% |
| EBITDA Margin | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% | -0.7% |
| EBIT Margin | 9.5% | 14.8% | 16.4% | 10.4% | 8.8% | -1.6% |
| SG&A, % of revenue | 10.8% | 17.2% | 18.0% | 19.4% | 20.9% | 1.4% |
| SBC, % of revenue | 0.4% | 1.2% | 0.8% | 0.5% | 0.5% | -0.1% |
| Net Income Margin | 4.8% | 8.3% | 9.9% | 20.8% | -1.9% | -22.8% |
| CAPEX, % of revenue | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% | -4.4% |
|
|---|
| ROIC | 5.4% | 4.4% | 4.3% | 2.5% | 2.4% | -0.2% |
| ROE | 4.9% | 4.5% | 4.9% | 9.9% | -1.0% | -10.9% |
| Net Debt/EBITDA | 2.1x | 1.7x | 1.5x | 1.7x | 3.3x | 1.7x |
| Interest coverage ratio (ICR) | -1.9x | 2.2x | 2.4x | 0.9x | 0.7x | -0.2x |
| Interest expence / Average debt | -7.2% | 5.4% | 4.2% | 6.0% | 7.0% | 1.1% |
People
|
|---|
| Insider ownership | 4.7% | 4.7% | 4.7% | 4.7% | 4.7% | 0.0% |
| Employees | 4,400 | 4,400 | 4,000 | 2,100 | 2,200 | 4.8% |
| Revenue/Employee, th. $ | 783 | 420 | 453 | 898 | 951 | 5.9% |
EchoStar Corporation ($SATS) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 502 | 526 | 533 | 531 | | 15.8% | 13.1% | 10.7% | 4.9% |
| EBITDA | 204 | 223 | 221 | 134 | | 14.1% | 26.9% | 15.3% | -27.4% |
| Net Income | -22 | 77 | 16 | -112 | | -157.1% | 1,012.7% | -53.7% | -135.8% |
Balance Sheet
|
|---|
| Cash | 2,240 | 1,793 | 1,597 | 928 | | -20.0% | -39.9% | -42.9% | -61.8% |
| Short Term Debt | 41 | 1,028 | 1,030 | 960 | | 11.1% | 2,520.8% | 2,582.0% | 2,261.7% |
| Long Term Debt | 3,586 | 2,592 | 2,583 | 2,573 | | -0.9% | -28.2% | -28.4% | -28.4% |
Ratios
|
|---|
| Gross Margin | 62.6% | 63.3% | 62.8% | 62.0% | | 3.1% | 4.6% | 2.4% | 1.5% |
| EBITDA Margin | 40.6% | 42.4% | 41.4% | 25.3% | | -0.6% | 4.6% | 1.7% | -11.2% |
| Net Income Margin | -4.3% | 14.7% | 3.0% | -21.1% | | -13.0% | 13.2% | -4.2% | -83.0% |
Peers in Communications Equipment
Below you can find EchoStar Corporation 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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.6% | 2.8% |
|---|
| EchoStar Corporation ($SATS) | | -46.3% | -2.1% | 4.1% | 10.9% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 41.3% | 43.7% | 41.0% | 40.5% |
|---|
| EchoStar Corporation ($SATS) | 38.2% | 58.4% | 59.9% | 59.8% | 62.7% |
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% |
| 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% |
| F5 Networks, Inc. ($FFIV) | 31.2% | 31.5% | 30.3% | 29.9% | 30.1% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
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. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| Oclaro, Inc. ($OCLR) | 2.2% | 5.3% | 7.3% | 11.7% | 10.6% |
| |
|---|
| Median (65 companies) | 2.2% | 2.2% | 1.9% | 1.8% | 1.6% |
|---|
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| EchoStar Corporation ($SATS) | 5.4% | 4.4% | 4.3% | 2.5% | 2.4% |
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 ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.8x | -0.8x | -0.9x | -0.8x | -0.3x |
|---|
| EchoStar Corporation ($SATS) | 2.1x | 1.7x | 1.5x | 1.7x | 3.3x |
