Sykes Enterprises, Incorporated reports 17.0% EBITDA decline in 2018 while 2.5% Revenue growth
02/25/2019 • About Sykes Enterprises, Incorporated (
$SYKE) • By InTwits
Sykes Enterprises, Incorporated reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is declining: 8.4% in 2018 vs. 10.4% in 2017 vs. 10.5% in 2014
- Sykes Enterprises, Incorporated has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.9%. At the same time it's in pair with industry average of 3.1%
- CAPEX is quite volatile: $1m in 2018, $1m in 2017, $7m in 2016, $7m in 2015, $7m in 2014
- The company has potentially unprofitable business model: ROIC is 6.3%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Sykes Enterprises, Incorporated's Revenue increased on 2.5%. Revenue growth showed slowdown in 18Q4 - it was -1.0% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.71 pp from 2.2% to 2.9% in 2018. During 2014-2018 EBITDA Margin topped in 2015 at 11.9% and was declining since that time.
Gross Margin showed almost no change in 2018. During the last 5 years Gross Margin topped in 2016 at 35.1% and was declining since that time. SG&A as a % of Revenue increased slightly on 1.3 pp from 23.8% to 25.1% in 2018. SG&A as a % of Revenue grew at 0.59 pp per annum in 2014-2018.
Net Income margin increased slightly on 0.98 pp from 2.0% to 3.0% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 Sykes Enterprises, Incorporated had CAPEX/Revenue of 2.9%. Sykes Enterprises, Incorporated's CAPEX/Revenue decreased slightly on 0.98 pp from 3.9% in 2015 to 2.9% in 2018. It's average CAPEX/Revenue for the last three years was 4.1%. During 2014-2018 CAPEX as a % of Revenue topped in 2016 at 5.4% and was declining since that time.
Return on investment
The company operates at low ROIC (6.3%) and ROE (6.0%). ROIC decreased on 2.1 pp from 8.4% to 6.3% in 2018. ROE increased slightly on 1.8 pp from 4.2% to 6.0% in 2018. During 2014-2018 ROIC topped in 2015 at 12.6% and was declining since that time.
Leverage (Debt)
Debt level is -0.2x Net Debt / EBITDA and 0.7x Debt / EBITDA. Debt dropped on 62.9% while cash dropped on 62.6%.
The company has no short term refinancing risk: short term debt is zero.
Valuation and dividends
The company's trades at EV/EBITDA 9.0x and P/E 25.6x.
Management team
Sykes Enterprises, Incorporated's CEO is Charles E Sykes "Chuck". Charles E Sykes "Chuck" is a founder and has 15 years tenure with the company. The company's CFO John Chapman has spent 7 years with the company.
Financial and operational results
FY ended 12/31/2018
Sykes Enterprises, Incorporated ($SYKE) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,328 | 1,286 | 1,460 | 1,586 | 1,626 | 2.5% |
| Gross Profit | 435 | 450 | 512 | 546 | 553 | 1.2% |
| SG&A | 298 | 297 | 351 | 377 | 407 | 8.1% |
| EBITDA | 139 | 153 | 161 | 164 | 137 | -17.0% |
| Net Income | 58 | 69 | 62 | 32 | 49 | 51.9% |
Balance Sheet
|
|---|
| Cash | 215 | 235 | 267 | 344 | 129 | -62.6% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 75 | 70 | 267 | 275 | 102 | -62.9% |
Cash flow
|
|---|
| Capex | 45 | 50 | 78 | 63 | 47 | -26.0% |
Ratios
|
|---|
| Revenue growth | 5.1% | -3.1% | 13.5% | 8.6% | 2.5% | |
| EBITDA growth | 25.7% | 10.1% | 5.4% | 2.0% | -17.0% | |
|
|---|
| Gross Margin | 32.8% | 35.0% | 35.1% | 34.4% | 34.0% | -0.4% |
| EBITDA Margin | 10.5% | 11.9% | 11.0% | 10.4% | 8.4% | -2.0% |
| SG&A, % of revenue | 22.5% | 23.1% | 24.1% | 23.8% | 25.1% | 1.3% |
| Net Income Margin | 4.4% | 5.3% | 4.3% | 2.0% | 3.0% | 1.0% |
| CAPEX, % of revenue | 3.4% | 3.9% | 5.4% | 4.0% | 2.9% | -1.1% |
|
|---|
| ROIC | 10.7% | 12.6% | 10.5% | 8.4% | 6.3% | -2.1% |
| ROE | 8.9% | 10.3% | 8.9% | 4.2% | 6.0% | 1.8% |
| Net Debt/EBITDA | -1.0x | -1.1x | 0.0x | -0.4x | -0.2x | 0.2x |
Sykes Enterprises, Incorporated ($SYKE) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 414 | 397 | 399 | 415 | | 7.9% | 5.7% | -2.0% | -1.0% |
| EBITDA | 33 | 25 | 32 | 46 | | -25.2% | -18.8% | -29.7% | 6.2% |
| Net Income | 11 | 7 | 14 | 17 | | -41.5% | -18.8% | -36.6% | |
Balance Sheet
|
|---|
| Cash | 173 | 162 | 157 | 129 | | -39.8% | -46.1% | -52.1% | -62.6% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 100 | 90 | 82 | 102 | | -62.5% | -66.3% | -69.3% | -62.9% |
Ratios
|
|---|
| Gross Margin | 33.6% | 33.2% | 34.5% | 34.6% | | -2.0% | -0.5% | 0.2% | 0.6% |
| EBITDA Margin | 8.1% | 6.2% | 8.1% | 11.1% | | -3.6% | -1.9% | -3.2% | 0.7% |
| Net Income Margin | 2.6% | 1.8% | 3.4% | 4.1% | | -2.2% | -0.5% | -1.9% | 8.2% |
Peers in Data Processing & Outsourced S
Below you can find Sykes Enterprises, Incorporated benchmarking vs. other companies in Data Processing & Outsourced S 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 |
|---|
| Verra Mobility Corp ($VRRM) | | | | | 167.8% |
| StoneCo Ltd ($STNE) | | | | 74.3% | 106.0% |
| PagSeguro Digital Ltd. ($PAGS) | | 107.1% | 68.7% | 121.7% | 71.8% |
| Payment Data Systems, Inc. ($PYDS) | | 7.4% | -16.0% | 20.7% | 71.7% |
| StarTek, Inc. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.1% | 7.6% | 11.8% | 7.5% |
|---|
| Sykes Enterprises, Incorporated ($SYKE) | | -3.1% | 13.5% | 8.6% | 2.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Verra Mobility Corp ($VRRM) | | | | 97.4% | 97.5% |
| Everi Holdings Inc. ($EVRI) | 25.8% | 38.3% | 36.1% | 34.5% | 79.9% |
| StoneCo Ltd ($STNE) | | | 69.7% | 70.8% | 79.5% |
| Paychex, Inc. ($PAYX) | 70.9% | 70.5% | 71.0% | 70.8% | 69.9% |
| Global Payments Inc. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 39.3% | 39.6% | 39.5% | 39.5% | 41.0% |
|---|
| Sykes Enterprises, Incorporated ($SYKE) | 32.8% | 35.0% | 35.1% | 34.4% | 34.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Visa Inc. ($V) | 64.0% | 68.9% | 55.6% | 69.2% | 65.8% |
| FleetCor Technologies, Inc. ($FLT) | 56.1% | 50.4% | 52.0% | 50.8% | 55.9% |
| StoneCo Ltd ($STNE) | | | 31.4% | 26.0% | 53.0% |
| Mastercard Incorporated ($MA) | 57.5% | 56.3% | 56.9% | 56.5% | 51.8% |
| Everi Holdings Inc. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.6% | 21.2% | 21.3% | 21.1% | 19.4% |
|---|
| Sykes Enterprises, Incorporated ($SYKE) | 10.5% | 11.9% | 11.0% | 10.4% | 8.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crypto Co/The ($CRCW) | 0.0% | 0.0% | | 1,216.6% | 853.5% |
| Steel Connect, Inc. ($STCN) | 0.6% | 1.5% | 1.7% | 1.1% | 75.6% |
| Everi Holdings Inc. ($EVRI) | 3.0% | 9.3% | 9.4% | 9.9% | 21.9% |
| StoneCo Ltd ($STNE) | | | 7.2% | 18.4% | 8.9% |
| Cardtronics plc ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.2% |
|---|
| Sykes Enterprises, Incorporated ($SYKE) | 3.4% | 3.9% | 5.4% | 4.0% | 2.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GreenSky, Inc. ($GSKY) | | | | 156.4% | 93.7% |
| Mastercard Incorporated ($MA) | 63.5% | 57.5% | 57.5% | 60.6% | 64.7% |
| Paychex, Inc. ($PAYX) | 54.5% | 58.7% | 61.9% | 63.9% | 64.5% |
| NIC Inc. ($EGOV) | 64.6% | 61.2% | 63.1% | 52.1% | 39.3% |
| Automatic Data Processing, Inc. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 14.1% | 13.1% | 11.7% | 10.7% | 12.1% |
|---|
| Sykes Enterprises, Incorporated ($SYKE) | 10.7% | 12.6% | 10.5% | 8.4% | 6.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StarTek, Inc. ($SRT) | -0.1x | | 2.2x | 2.3x | 18.4x |
| Square, Inc. ($SQ) | | | | | 13.3x |
| Steel Connect, Inc. ($STCN) | -12.5x | | | | 12.6x |
| Exela Technologies Inc ($XELAU) | | | 8.1x | | 9.7x |
| Alliance Data Systems Corporation ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.7x | 1.6x | 2.3x | 2.2x |
|---|
| Sykes Enterprises, Incorporated ($SYKE) | -1.0x | -1.1x | 0.0x | -0.4x | -0.2x |
