InterDigital, Inc. reports 64.1% EBITDA decline in 2018 and 25.4 pp EBITDA Margin decline from 67.3% to 41.9%
02/21/2019 • About InterDigital, Inc. (
$IDCC) • By InTwits
InterDigital, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- InterDigital, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.9%.
- In the last 5 years the company invested considerably less than D&A: $21m vs. $266m. In 2018 this situation was still the same: CAPEX was 3 while D&A was 66
- The company has potentially unprofitable business model: ROIC is 5.1%
- It operates with medium-size leverage: Net Debt/EBITDA is -1.2x 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
InterDigital, Inc.'s Revenue dropped on 42.3%. Revenue decline showed acceleration in 18Q4 - it was 63.3% YoY. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin dropped on 25.4 pp from 67.3% to 41.9% in 2018. During the last 5 years EBITDA Margin topped in 2016 at 73.6% and was declining since that time.
Gross Margin dropped on 19.5 pp from 79.1% to 59.6% in 2018. During the last 5 years Gross Margin topped in 2016 at 82.9% and was declining since that time. SG&A as a % of Revenue increased on 7.3 pp from 9.3% to 16.6% in 2018. During the last 5 years SG&A as a % of Revenue bottomed in 2016 at 6.9% and was growing since that time. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 1.1 pp from 3.4% to 2.3% in 2018. SBC as a % of Revenue declined at -0.38 pp per annum in 2014-2018.
Net Income margin dropped on 11.9 pp from 32.7% to 20.8% in 2018. During the last 5 years Net Income margin topped in 2016 at 46.4% and was declining since that time.
Investments (CAPEX, working capital and M&A)
InterDigital, Inc.'s CAPEX/Revenue was 0.84% in 2018. CAPEX/Revenue showed almost no change from 2015 to 2018. It's average level of CAPEX/Revenue for the last three years was 0.70%.
Accounts receivable as a % of Revenue dropped on 29.2 pp from 40.6% to 11.4% in 2018. Accounts payable as a % of Revenue increased on 6.4 pp from 9.2% to 15.6% in 2018.
InterDigital, Inc. has spent
$143m on M&A in 2018 which accounts for 46.5% of revenue.
Return on investment
The company operates at low ROIC (5.1%) and ROE (7.2%). ROIC dropped on 22.1 pp from 27.3% to 5.1% in 2018. ROE dropped on 14.7 pp from 21.9% to 7.2% in 2018. During 2014-2018 ROIC topped in 2016 at 42.7% and was declining since that time. During 2014-2018 ROE topped in 2016 at 49.4% and was declining since that time.
Leverage (Debt)
Debt level is -1.2x Net Debt / EBITDA and 2.5x Debt / EBITDA. Debt surged on 11.3% while cash increased on 9.7%.
InterDigital, Inc. has questionable short term financial stability: Interest coverage ratio (ICR) is only 1.7x. The company has no short term refinancing risk: short term debt is zero.
Average interest expence charged on company's debt was 11.3% in 2018.
Valuation and dividends
The company's trades at EV/EBITDA 16.1x and P/E 34.9x.
The company paid 75.2% of Net Income as dividends in 2018. Dividends grew on average at 14.9% per annum in the last 5 years).
Management team
CEO total compensation was
$3,009,287 in 2018 which included
$640,000 salary.
The company has 1.3% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 390 employees. The number of employees jumped on 11.4%. Average revenue per employee in 2018 was
$788,215 and it dropped on 48.2%.
Financial and operational results
FY ended 12/31/2018
InterDigital, Inc. ($IDCC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 415.8 | 441.4 | 665.9 | 532.9 | 307.4 | -42.3% |
| Gross Profit | 282.0 | 321.0 | 552.3 | 421.8 | 183.3 | -56.5% |
| SG&A | 37.8 | 39.8 | 46.3 | 49.6 | 51.0 | 2.9% |
| EBITDA | 211.2 | 256.3 | 490.1 | 358.5 | 128.7 | -64.1% |
| EBIT | 169.0 | 208.5 | 437.3 | 301.5 | 62.6 | -79.2% |
| Interest expence | 16.1 | 30.4 | 21.1 | 17.8 | 36.0 | 101.5% |
| Tax | 52.1 | 64.6 | 116.8 | 121.7 | -27.4 | -122.5% |
| Net Income | 104.3 | 119.2 | 309.0 | 174.3 | 63.9 | -63.4% |
| Stock Based Compensation | 17.3 | 15.1 | 21.8 | 18.1 | 7.1 | -60.8% |
Balance Sheet
|
|---|
| Cash | 428.6 | 510.2 | 404.1 | 433.0 | 475.1 | 9.7% |
| Accounts Receivable | 51.7 | 53.9 | 228.5 | 216.3 | 35.0 | -83.8% |
| Accounts Payable | 34.7 | 19.0 | 14.1 | 10.3 | 19.4 | 88.8% |
| Short Term Debt | 0.0 | 227.2 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 217.8 | 259.6 | 272.0 | 285.1 | 317.4 | 11.3% |
Cash flow
|
|---|
| Capex | 7.1 | 3.7 | 5.9 | 2.1 | 2.6 | 24.4% |
| Dividends | 24.0 | 29.0 | 31.0 | 43.0 | 48.0 | 11.6% |
| Acquisitions | | | 48.0 | | 143.0 | |
Ratios
|
|---|
| Revenue growth | 27.8% | 6.2% | 50.8% | -20.0% | -42.3% | |
| EBITDA growth | 78.8% | 21.4% | 91.2% | -26.8% | -64.1% | |
|
|---|
| Gross Margin | 67.8% | 72.7% | 82.9% | 79.1% | 59.6% | -19.5% |
| EBITDA Margin | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% | -25.4% |
| EBIT Margin | 40.6% | 47.2% | 65.7% | 56.6% | 20.4% | -36.2% |
| SG&A, % of revenue | 9.1% | 9.0% | 6.9% | 9.3% | 16.6% | 7.3% |
| SBC, % of revenue | 4.2% | 3.4% | 3.3% | 3.4% | 2.3% | -1.1% |
| Net Income Margin | 25.1% | 27.0% | 46.4% | 32.7% | 20.8% | -11.9% |
| CAPEX, % of revenue | 1.7% | 0.8% | 0.9% | 0.4% | 0.8% | 0.4% |
|
|---|
| ROIC | 23.4% | 24.5% | 42.7% | 27.3% | 5.1% | -22.1% |
| ROE | 20.9% | 24.4% | 49.4% | 21.9% | 7.2% | -14.7% |
| Net Debt/EBITDA | -1.0x | -0.1x | -0.3x | -0.4x | -1.2x | -0.8x |
| Interest expence / Average debt | 7.4% | 8.6% | 5.6% | 6.4% | 11.3% | 4.9% |
People
|
|---|
| Insider ownership | 1.3% | 1.3% | 1.3% | 1.3% | 1.3% | 0.0% |
| Employees | 320 | 330 | 360 | 350 | 390 | 11.4% |
| Revenue/Employee, th. $ | 1,299 | 1,338 | 1,850 | 1,523 | 788 | -48.2% |
InterDigital, Inc. ($IDCC) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 87 | 70 | 75 | 75 | | -7.5% | -48.8% | -22.9% | -63.3% |
| EBITDA | 45 | 30 | 31 | 23 | | -7.5% | -68.0% | -44.8% | -85.7% |
| Net Income | 30 | 11 | 21 | 2 | | -11.3% | -79.6% | -39.8% | -96.5% |
Balance Sheet
|
|---|
| Cash | 417 | 524 | 509 | 475 | | 200.2% | 189.5% | 79.4% | 9.7% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 289 | 292 | 314 | 317 | | 4.8% | 4.8% | 11.3% | 11.3% |
Ratios
|
|---|
| Gross Margin | 69.2% | 61.9% | 57.3% | 48.8% | | -2.3% | -21.0% | -13.3% | -37.8% |
| EBITDA Margin | 51.3% | 43.6% | 40.8% | 30.4% | | -0.0% | -26.1% | -16.2% | -47.5% |
| Net Income Margin | 34.2% | 15.4% | 28.5% | 2.4% | | -1.5% | -23.3% | -8.0% | -23.1% |
Peers in Communications Equipment
Below we provide InterDigital, Inc. 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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.3% | 5.6% | 3.5% |
|---|
| InterDigital, Inc. ($IDCC) | | 6.2% | 50.8% | -20.0% | -42.3% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.7% | 41.0% | 40.5% |
|---|
| InterDigital, Inc. ($IDCC) | 67.8% | 72.7% | 82.9% | 79.1% | 59.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| EchoStar Corporation ($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% |
| F5 Networks, Inc. ($FFIV) | 31.2% | 31.5% | 30.3% | 29.9% | 30.1% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| InterDigital, Inc. ($IDCC) | 1.7% | 0.8% | 0.9% | 0.4% | 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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| InterDigital, Inc. ($IDCC) | 23.4% | 24.5% | 42.7% | 27.3% | 5.1% |
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 ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.8x | -0.9x | -0.8x | 0.2x |
|---|
| InterDigital, Inc. ($IDCC) | -1.0x | -0.1x | -0.3x | -0.4x | -1.2x |
