Innodata Inc. reports 11.4 pp EBITDA Margin growth from -2.3% to 9.1% in 2018 in 2018 while 5.8% Revenue decline
03/14/2019 • About Innodata Inc. (
$INOD) • By InTwits
Innodata Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Innodata Inc. is a company in decline: 2018 revenue growth was -5.8%, 5 years revenue CAGR was -2.2%
- EBITDA Margin is quite volatile: 9.1% in 2018, -2.3% in 2017, -2.4% in 2016, 1.0% in 2015, 2.4% in 2014
- Innodata Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.6%. At the same time it's a lot of higher than industry average of 3.6%.
- CAPEX is quite volatile: $2m in 2018, $3m in 2017, $3m in 2016, $1m in 2015, $2m in 2014
- The company has potentially unprofitable business model: ROIC is 6.1%
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 decreased on 5.8%. Annual revenue decline showed slowdown in 18Q4 - revenue decreased on 4.3%. During 2014-2018 Revenue growth topped in 2016 at 7.8% and was decelerating since that time. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin jumped on 11.4 pp from -2.3% to 9.1% in 2018. During 2014-2018 EBITDA Margin bottomed in 2016 at -2.4% and was growing since that time.
Gross Margin increased on 7.2 pp from 24.8% to 32.0% in 2018. SG&A as a % of Revenue decreased on 5.6 pp from 33.2% to 27.6% in 2018. During 2014-2018 SG&A as a % of Revenue topped in 2017 at 33.2%.
Net Income margin increased on 8.3 pp from -8.3% to 0.0070% in 2018. During the last 5 years Net Income margin bottomed in 2016 at -8.8% and was growing since that time.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 3.5%. CAPEX/Revenue increased on 2.3 pp from 1.2% in 2015 to 3.5% in 2018. It's average CAPEX/Revenue for the last three years was 4.5%.
Return on investment
The company operates at low ROIC (6.1%) and ROE (0.0%). ROIC surged on 22.5 pp from -16.4% to 6.1% in 2018. ROE jumped on 15.6 pp from -15.6% to 0.013% in 2018. During 2014-2018 ROIC bottomed in 2017 at -16.4%. During 2014-2018 ROE bottomed in 2017 at -15.6%.
Leverage (Debt)
Debt level is -1.8x Net Debt / EBITDA and 0.3x Debt / EBITDA. Debt dropped on 28.3% while cash decreased on 4.7%.
Innodata Inc. has no short term refinancing risk: cash is higher than short term debt (710.9%).
Valuation and dividends
The company's trades at EV/EBITDA 4.9x and P/E 8,687.5x.
Management team
Innodata Inc.'s CEO is Jack S Abuhoff. Jack S Abuhoff is a founder and has 15 years tenure with the company.
Financial and operational results
FY ended 12/31/2018
Innodata Inc. ($INOD) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 59.076 | 58.523 | 63.074 | 60.929 | 57.418 | -5.8% |
| Gross Profit | 15.171 | 14.584 | 15.855 | 15.103 | 18.373 | 21.7% |
| SG&A | 16.412 | 16.796 | 19.539 | 20.200 | 15.846 | -21.6% |
| EBITDA | 1.431 | 0.561 | -1.527 | -1.423 | 5.226 | |
| Net Income | -0.974 | -2.826 | -5.524 | -5.055 | 0.004 | |
Balance Sheet
|
|---|
| Cash | 24.216 | 24.908 | 14.172 | 11.407 | 10.869 | -4.7% |
| Short Term Debt | 0.000 | 1.582 | 1.120 | 2.133 | 1.529 | -28.3% |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |
Cash flow
|
|---|
| Capex | 2.033 | 0.697 | 2.740 | 3.410 | 2.033 | -40.4% |
Ratios
|
|---|
| Revenue growth | -8.1% | -0.9% | 7.8% | -3.4% | -5.8% | |
| EBITDA growth | -135.4% | -60.8% | -372.2% | -6.8% | -467.3% | |
|
|---|
| Gross Margin | 25.7% | 24.9% | 25.1% | 24.8% | 32.0% | 7.2% |
| EBITDA Margin | 2.4% | 1.0% | -2.4% | -2.3% | 9.1% | 11.4% |
| SG&A, % of revenue | 27.8% | 28.7% | 31.0% | 33.2% | 27.6% | -5.6% |
| Net Income Margin | -1.6% | -4.8% | -8.8% | -8.3% | 0.0% | 8.3% |
| CAPEX, % of revenue | 3.4% | 1.2% | 4.3% | 5.6% | 3.5% | -2.1% |
|
|---|
| ROIC | -3.9% | -5.2% | -13.5% | -16.4% | 6.1% | 22.5% |
| ROE | -2.5% | -7.3% | -15.3% | -15.6% | 0.0% | 15.6% |
| Net Debt/EBITDA | -16.9x | -41.6x | | | -1.8x |
Innodata Inc. ($INOD) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 14 | 14 | 14 | 15 | | -5.6% | -6.7% | -6.5% | -4.3% |
| EBITDA | 1 | 1 | 2 | 1 | | | 9.4% | 5,472.2% | |
| Net Income | -0 | -0 | 1 | 0 | | | | | |
Balance Sheet
|
|---|
| Cash | 12 | 12 | 12 | 11 | | -14.2% | -23.4% | -4.6% | -4.7% |
| Short Term Debt | 2 | 1 | 1 | 2 | | 13.5% | -32.2% | -39.6% | -28.3% |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 29.9% | 30.4% | 34.3% | 33.3% | | 8.3% | 4.9% | 10.6% | 5.1% |
| EBITDA Margin | 8.5% | 5.9% | 14.3% | 7.9% | | 11.5% | 0.9% | 14.0% | 19.3% |
| Net Income Margin | -1.9% | -3.3% | 4.9% | 0.3% | | 9.7% | -2.2% | 12.0% | 13.7% |
Peers in Data Processing & Outsourced S
Below we provide Innodata Inc. benchmarking against other companies in Data Processing & Outsourced S 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 |
|---|
| 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. ($SRT) | | 12.8% | 8.9% | -4.8% | 66.4% |
| |
|---|
| Median (55 companies) | | 7.1% | 7.6% | 11.8% | 7.5% |
|---|
| Innodata Inc. ($INOD) | | -0.9% | 7.8% | -3.4% | -5.8% |
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. ($GPN) | 62.7% | 63.2% | 60.4% | 51.5% | 67.5% |
| |
|---|
| Median (44 companies) | 39.3% | 39.6% | 39.5% | 39.5% | 41.0% |
|---|
| Innodata Inc. ($INOD) | 25.7% | 24.9% | 25.1% | 24.8% | 32.0% |
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. ($EVRI) | 9.6% | 14.7% | 3.0% | 20.4% | 45.2% |
| |
|---|
| Median (56 companies) | 20.6% | 21.2% | 21.3% | 21.1% | 19.4% |
|---|
| Innodata Inc. ($INOD) | 2.4% | 1.0% | -2.4% | -2.3% | 9.1% |
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 ($CATM) | 10.2% | 11.9% | 9.9% | 9.6% | 8.0% |
| |
|---|
| Median (56 companies) | 3.1% | 3.0% | 3.2% | 2.9% | 3.0% |
|---|
| Innodata Inc. ($INOD) | 3.4% | 1.2% | 4.3% | 5.6% | 3.5% |
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. ($ADP) | 23.9% | 28.9% | 37.9% | 36.6% | 37.5% |
| |
|---|
| Median (62 companies) | 14.1% | 13.1% | 11.7% | 10.7% | 12.1% |
|---|
| Innodata Inc. ($INOD) | -3.9% | -5.2% | -13.5% | -16.4% | 6.1% |
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 ($ADS) | 9.3x | 9.1x | 10.7x | 10.1x | 9.0x |
| |
|---|
| Median (54 companies) | 0.6x | 0.7x | 1.4x | 2.3x | 2.2x |
|---|
| Innodata Inc. ($INOD) | -16.9x | -41.6x | | | -1.8x |
