FalconStor Software Inc reports 70.9% EBITDA decline in 2018 and 4.8 pp EBITDA Margin decline from 8.2% to 3.3%
03/25/2019 • About FalconStor Software Inc (
$FALC) • By InTwits
FalconStor Software Inc reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- FalconStor Software Inc is a company in decline: 2018 revenue growth was -29.1%, 5 years revenue CAGR was -21.2%
- FalconStor Software 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 -5.5%
- FalconStor Software Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.0%. At the same time it's a lot of higher than industry average of 3.6%.
- CAPEX is quite volatile: $0m in 2018, $0m in 2017, $0m in 2016, $1m in 2015, $1m in 2014
- It operates with medium-size leverage: Net Debt/EBITDA is 0.1x while industry average is -1.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
FalconStor Software Inc's Revenue dropped on 29.1%. Annual revenue decline showed slowdown in 18Q4 - revenue dropped on 24.0%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 4.8 pp from 8.2% to 3.3% in 2018.
Gross Margin increased on 5.3 pp from 78.0% to 83.3% in 2018. SG&A as a % of Revenue increased on 5.9 pp from 48.6% to 54.6% in 2018.
Net Income margin decreased on 9.3 pp from 4.2% to -5.1% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 0.54%. FalconStor Software Inc's CAPEX/Revenue decreased slightly on 1.1 pp from 1.6% in 2015 to 0.54% in 2018. It's average level of CAPEX/Revenue for the last three years was 0.63%. CAPEX as a % of Revenue followed a declining trend at -0.35 pp per annum in 2014-2018.
Leverage (Debt)
Debt level is 0.1x Net Debt / EBITDA and 5.2x Debt / EBITDA. Net Debt / EBITDA jumped on 0.4x from -0.3x to 0.1x in 2018. Debt jumped on 744% while cash surged on 202%.
The company has no short term refinancing risk: short term debt is zero.
Management team
The company's CEO Todd Brooks is a founder and has spent 2 years with the company. The company's CFO is Charles Bradford Wolfe. Charles Bradford Wolfe has 1 year tenure at the company.
Financial and operational results
FY ended 12/31/2018
FalconStor Software Inc ($FALC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 46.274 | 48.571 | 30.263 | 25.161 | 17.838 | -29.1% |
| Gross Profit | 35.643 | 38.889 | 21.979 | 19.620 | 14.860 | -24.3% |
| SG&A | 33.532 | 27.203 | 20.389 | 12.240 | 9.732 | -20.5% |
| EBITDA | -3.555 | 0.705 | -8.965 | 2.051 | 0.596 | -70.9% |
| Net Income | -7.212 | -1.929 | -10.999 | 1.052 | -0.907 | -186.2% |
Balance Sheet
|
|---|
| Cash | 10.874 | 6.013 | 3.392 | 1.011 | 3.060 | 202.5% |
| Short Term Debt | 0.000 | 0.000 | 0.000 | 0.370 | 0.000 | -100.0% |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.000 | 3.125 | |
Cash flow
|
|---|
| Capex | 0.759 | 0.797 | 0.294 | 0.095 | 0.096 | 1.1% |
Ratios
|
|---|
| Revenue growth | -21.1% | 5.0% | -37.7% | -16.9% | -29.1% | |
| EBITDA growth | -67.5% | -119.8% | -1,371.5% | -122.9% | -70.9% | |
|
|---|
| Gross Margin | 77.0% | 80.1% | 72.6% | 78.0% | 83.3% | 5.3% |
| EBITDA Margin | -7.7% | 1.5% | -29.6% | 8.2% | 3.3% | -4.8% |
| SG&A, % of revenue | 72.5% | 56.0% | 67.4% | 48.6% | 54.6% | 5.9% |
| Net Income Margin | -15.6% | -4.0% | -36.3% | 4.2% | -5.1% | -9.3% |
| CAPEX, % of revenue | 1.6% | 1.6% | 1.0% | 0.4% | 0.5% | 0.2% |
|
|---|
| ROIC | -115.2% | | | | | |
| Net Debt/EBITDA | | -8.5x | | -0.3x | 0.1x | 0.4x |
FalconStor Software Inc ($FALC) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 5 | 4 | 4 | 5 | | -17.3% | -40.4% | -33.5% | -24.0% |
| EBITDA | 1 | -1 | -0 | 0 | | | | -105.1% | -73.2% |
| Net Income | 1 | -1 | -0 | -0 | | | | -123.3% | -105.6% |
Balance Sheet
|
|---|
| Cash | 5 | 4 | 3 | 3 | | 33.0% | 145.4% | 61.4% | 202.5% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | -100.0% |
| Long Term Debt | 2 | 3 | 3 | 3 | | | | | |
Ratios
|
|---|
| Gross Margin | 84.9% | 84.3% | 82.6% | 81.5% | | 8.9% | 10.6% | 2.8% | -1.3% |
| EBITDA Margin | 14.8% | -12.8% | -1.9% | 9.4% | | 28.5% | -8.6% | -26.3% | -17.2% |
| Net Income Margin | 10.1% | -25.0% | -8.2% | -1.6% | | 28.6% | -15.5% | -31.6% | -23.5% |
Peers in Systems Software
Below we provide FalconStor Software Inc benchmarking against other companies in Systems Software 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 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 20.6% | 14.7% | 16.6% | 20.4% |
|---|
| FalconStor Software Inc ($FALC) | | 5.0% | -37.7% | -16.9% | -29.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| |
|---|
| Median (53 companies) | 76.1% | 74.5% | 73.6% | 73.9% | 73.5% |
|---|
| FalconStor Software Inc ($FALC) | 77.0% | 80.1% | 72.6% | 78.0% | 83.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
| |
|---|
| Median (47 companies) | 1.0% | -6.6% | -8.0% | -5.4% | -4.7% |
|---|
| FalconStor Software Inc ($FALC) | -7.7% | 1.5% | -29.6% | 8.2% | 3.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| |
|---|
| Median (48 companies) | 2.9% | 2.2% | 2.1% | 2.4% | 2.6% |
|---|
| FalconStor Software Inc ($FALC) | 1.6% | 1.6% | 1.0% | 0.4% | 0.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | -2.1% | -4.4% | -1.6% |
|---|
| FalconStor Software Inc ($FALC) | -115.2% | | | | |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
| |
|---|
| Median (22 companies) | -2.4x | -1.4x | -1.2x | -0.8x | -0.5x |
|---|
| FalconStor Software Inc ($FALC) | | -8.5x | | -0.3x | 0.1x |
