Communications Systems, Inc. revenue decline accelerated from 17.1% in 2017 to 20.1% in 2018
03/06/2019 • About Communications Systems, Inc. (
$JCS) • By InTwits
Communications Systems, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Communications Systems, Inc. is a company in decline: 2018 revenue growth was -20.1%, 5 years revenue CAGR was -12.9%
- The company operates at negative EBITDA Margin: -6.6%
- Communications Systems, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 0.0% while average EBITDA Margin was -3.2% for the sames years
- Communications Systems, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.3%. At the same time it's in pair with industry average of 5.2%
- CAPEX is quite volatile: $1m in 2018, $1m in 2017, $2m in 2016, $2m in 2015, $6m in 2014
- The company has unprofitable business model: ROIC is -14.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Communications Systems, Inc.'s Revenue dropped on 20.1%. Annual revenue decline showed slowdown in 18Q4 - revenue decreased on 2.0%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 3.8 pp from -10.4% to -6.6% in 2018.
Gross Margin increased on 7.1 pp from 25.3% to 32.4% in 2018. During 2014-2018 Gross Margin bottomed in 2017 at 25.3%. SG&A as a % of Revenue increased on 7.0 pp from 34.9% to 41.8% in 2018.
Net Income margin increased on 4.0 pp from -14.4% to -10.3% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 1.2% in 2018. CAPEX/Revenue decreased slightly on 1.1 pp from 2.2% in 2015 to 1.2% in 2018. Average CAPEX/Revenue for the last three years was 1.5%. CAPEX as a % of Revenue stuck to a declining trend at -0.83 pp per annum in the last 5 years.
Return on investment
The company operates at negative ROIC (-14.4%) and ROE (-15.0%). ROIC increased on 6.8 pp from -21.2% to -14.4% in 2018. ROE increased on 6.4 pp from -21.3% to -15.0% in 2018.
Leverage (Debt)
The company has no debt. Cash dropped on 11.2%.
Management team
Communications Systems, Inc.'s CEO Roger H D Lacey is a founder and has spent 0 years with the company.
Financial and operational results
FY ended 12/31/2018
Communications Systems, Inc. ($JCS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 119.1 | 107.7 | 99.4 | 82.3 | 65.8 | -20.1% |
| Gross Profit | 42.2 | 31.5 | 26.6 | 20.8 | 21.3 | 2.3% |
| SG&A | 38.6 | 40.8 | 35.2 | 28.7 | 27.5 | -4.2% |
| EBITDA | 5.8 | -7.2 | -0.8 | -8.6 | -4.3 | |
| Net Income | 2.0 | -9.6 | -8.1 | -11.8 | -6.8 | |
Balance Sheet
|
|---|
| Cash | 13.7 | 9.8 | 10.4 | 12.5 | 11.1 | -11.2% |
| Short Term Debt | 0.5 | 0.1 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 5.6 | 2.4 | 2.3 | 0.8 | 0.8 | -1.3% |
Ratios
|
|---|
| Revenue growth | -9.3% | -9.6% | -7.7% | -17.1% | -20.1% | |
| EBITDA growth | 72.8% | -224.6% | -89.2% | 1,009.0% | -49.4% | |
|
|---|
| Gross Margin | 35.4% | 29.3% | 26.8% | 25.3% | 32.4% | 7.1% |
| EBITDA Margin | 4.9% | -6.7% | -0.8% | -10.4% | -6.6% | 3.8% |
| SG&A, % of revenue | 32.4% | 37.9% | 35.4% | 34.9% | 41.8% | 7.0% |
| Net Income Margin | 1.6% | -9.0% | -8.2% | -14.4% | -10.3% | 4.0% |
| CAPEX, % of revenue | 4.7% | 2.2% | 2.3% | 0.9% | 1.2% | 0.2% |
|
|---|
| ROIC | 3.7% | -13.2% | -6.6% | -21.2% | -14.4% | 6.8% |
| ROE | 2.2% | -12.2% | -12.1% | -21.3% | -15.0% | 6.4% |
| Net Debt/EBITDA | -2.3x | | | | |
Communications Systems, Inc. ($JCS) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 17 | 15 | 15 | 19 | | -19.4% | -31.9% | -25.1% | -2.0% |
| EBITDA | -1 | -2 | -1 | 0 | | | | | |
| Net Income | -2 | -3 | -2 | -1 | | | | | |
Balance Sheet
|
|---|
| Cash | 12 | 8 | 9 | 11 | | -23.6% | -57.8% | -49.4% | -11.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 30.9% | 26.5% | 34.3% | 37.0% | | 2.2% | -0.7% | 18.1% | 7.8% |
| EBITDA Margin | -8.0% | -14.5% | -7.1% | 1.4% | | -5.2% | 0.1% | 12.0% | 6.1% |
| Net Income Margin | -11.1% | -17.6% | -10.1% | -4.0% | | -3.8% | 1.0% | 12.1% | 4.9% |
Peers in Communications Equipment
Below you can find Communications Systems, 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. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.6% | 3.5% |
|---|
| Communications Systems, Inc. ($JCS) | | -9.6% | -7.7% | -17.1% | -20.1% |
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. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| Communications Systems, Inc. ($JCS) | 35.4% | 29.3% | 26.8% | 25.3% | 32.4% |
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. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 6.1% | 5.9% | 6.5% | 5.4% |
|---|
| Communications Systems, Inc. ($JCS) | 4.9% | -6.7% | -0.8% | -10.4% | -6.6% |
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 ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.2% | 2.3% | 1.9% | 1.9% | 1.7% |
|---|
| Communications Systems, Inc. ($JCS) | 4.7% | 2.2% | 2.3% | 0.9% | 1.2% |
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. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.3% | 2.4% | 2.2% | 0.7% |
|---|
| Communications Systems, Inc. ($JCS) | 3.7% | -13.2% | -6.6% | -21.2% | -14.4% |
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 (46 companies) | -0.7x | -0.7x | -0.9x | -0.7x | -0.1x |
|---|
