DASAN Zhone Solutions, Inc. reports 118% EBITDA growth in 2018 and 14.3% Revenue growth
02/28/2019 • About DASAN Zhone Solutions, Inc. (
$DZSI) • By InTwits
DASAN Zhone Solutions, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- DASAN Zhone Solutions, Inc. is a fast growth stock: 2018 revenue growth was 14.3%, 5 year revenue CAGR was 18.2% at 2018 ROIC 6.3%
- DASAN Zhone Solutions, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 0.0%. Average EBITDA Margin for the same period was -0.1%
- DASAN Zhone Solutions, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.6%.
- The company has potentially unprofitable business model: ROIC is 6.3%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.8x 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 jumped on 14.3%. Revenue growth showed slowdown in 18Q4 - it was 8.8% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.7 pp from 1.8% to 3.5% in 2018.
Gross Margin decreased slightly on 1.1 pp from 33.5% to 32.3% in 2018. SG&A as a % of Revenue decreased slightly on 0.95 pp from 18.1% to 17.1% in 2018.
Net Income margin increased slightly on 0.55 pp from 0.43% to 0.98% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 DASAN Zhone Solutions, Inc. had CAPEX/Revenue of 0.42%. CAPEX/Revenue showed almost no change from 2015 to 2018. For the last three years the average CAPEX/Revenue was 0.57%.
Return on investment
The company operates at low ROIC (6.3%) and ROE (3.7%). ROIC increased on 5.6 pp from 0.73% to 6.3% in 2018. ROE increased on 2.1 pp from 1.5% to 3.7% in 2018.
Leverage (Debt)
Debt level is 1.8x Net Debt / EBITDA and 4.6x Debt / EBITDA. Net Debt / EBITDA dropped on 0.8x from 2.7x to 1.8x in 2018. Debt surged on 55.2% while cash jumped on 58.6%.
DASAN Zhone Solutions, Inc. has short term refinancing risk: cash is only 87.2% of short term debt.
Valuation and dividends
DASAN Zhone Solutions, Inc.'s trades at EV/EBITDA 18.0x and P/E 57.8x.
Financial and operational results
FY ended 12/31/2018
DASAN Zhone Solutions, Inc. ($DZSI) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 120.6 | 139.2 | 150.3 | 247.1 | 282.3 | 14.3% |
| Gross Profit | 41.8 | 35.9 | 40.9 | 82.8 | 91.3 | 10.3% |
| SG&A | 28.5 | 17.5 | 27.3 | 44.6 | 48.3 | 8.2% |
| EBITDA | -3.6 | -1.6 | -9.9 | 4.5 | 9.9 | 117.7% |
| Net Income | -4.1 | -3.3 | -15.3 | 1.1 | 2.8 | 158.4% |
Balance Sheet
|
|---|
| Cash | 11.5 | 9.1 | 17.9 | 17.5 | 27.7 | 58.6% |
| Short Term Debt | 10.0 | 21.8 | 17.6 | 19.8 | 31.8 | 60.5% |
| Long Term Debt | 0.0 | 0.0 | 6.8 | 9.8 | 14.1 | 44.5% |
Cash flow
|
|---|
| Capex | 0.9 | 0.8 | 1.3 | 1.1 | 1.2 | 10.3% |
Ratios
|
|---|
| Revenue growth | -1.4% | 15.4% | 8.0% | 64.4% | 14.3% | |
| EBITDA growth | -174.6% | -56.2% | 527.8% | -146.0% | 117.7% | |
|
|---|
| Gross Margin | 34.7% | 25.8% | 27.2% | 33.5% | 32.3% | -1.1% |
| EBITDA Margin | -3.0% | -1.1% | -6.6% | 1.8% | 3.5% | 1.7% |
| SG&A, % of revenue | 23.6% | 12.6% | 18.2% | 18.1% | 17.1% | -1.0% |
| Net Income Margin | -3.4% | -2.4% | -10.2% | 0.4% | 1.0% | 0.5% |
| CAPEX, % of revenue | 0.7% | 0.6% | 0.9% | 0.4% | 0.4% | -0.0% |
|
|---|
| ROIC | -8.5% | -5.4% | -16.7% | 0.7% | 6.3% | 5.6% |
| ROE | -11.5% | -8.8% | -28.4% | 1.5% | 3.7% | 2.1% |
| Net Debt/EBITDA | | | | 2.7x | 1.8x | -0.8x |
DASAN Zhone Solutions, Inc. ($DZSI) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 60 | 76 | 72 | 75 | | 14.2% | 27.2% | 8.2% | 8.8% |
| EBITDA | 1 | 3 | 4 | 1 | | | 791.6% | 73.7% | -52.7% |
| Net Income | 0 | 1 | 2 | -1 | | | | 28.5% | -113.1% |
Balance Sheet
|
|---|
| Cash | 23 | 27 | 20 | 28 | | 34.0% | 175.8% | 97.4% | 58.6% |
| Short Term Debt | 34 | 46 | 34 | 32 | | 26.6% | 107.6% | 55.8% | 60.5% |
| Long Term Debt | 13 | 7 | 5 | 14 | | 157.9% | 36.0% | 0.0% | 44.5% |
Ratios
|
|---|
| Gross Margin | 36.5% | 30.4% | 32.6% | 30.8% | | 1.5% | -2.0% | -0.6% | -2.8% |
| EBITDA Margin | 1.6% | 4.3% | 5.8% | 2.0% | | 4.2% | 3.7% | 2.2% | -2.6% |
| Net Income Margin | 0.2% | 1.9% | 2.5% | -0.7% | | 7.4% | 3.2% | 0.4% | -6.9% |
Peers in Communications Equipment
Below you can find DASAN Zhone Solutions, 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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.3% | 5.1% | 2.8% |
|---|
| DASAN Zhone Solutions, Inc. ($DZSI) | | 15.4% | 8.0% | 64.4% | 14.3% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| DASAN Zhone Solutions, Inc. ($DZSI) | 34.7% | 25.8% | 27.2% | 33.5% | 32.3% |
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. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 6.1% | 5.9% | 6.5% | 5.4% |
|---|
| DASAN Zhone Solutions, Inc. ($DZSI) | -3.0% | -1.1% | -6.6% | 1.8% | 3.5% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| DASAN Zhone Solutions, Inc. ($DZSI) | 0.7% | 0.6% | 0.9% | 0.4% | 0.4% |
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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 2.1% | 2.3% | 2.4% | 2.2% | 0.3% |
|---|
| DASAN Zhone Solutions, Inc. ($DZSI) | -8.5% | -5.4% | -16.7% | 0.7% | 6.3% |
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 ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.7x | -0.9x | -0.8x | -0.3x |
|---|
| DASAN Zhone Solutions, Inc. ($DZSI) | | | | 2.7x | 1.8x |
