Taoping Inc. reports 97.1% Net Income growth in 2018 and 5.4 pp EBITDA Margin growth from 13.2% to 18.7%
04/22/2019 • About Taoping Inc. (
$TAOP) • By InTwits
Taoping Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is expanding: 18.7% in 2018 vs. 13.2% in 2017 vs. -54.0% in 2014
- Taoping 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 -52.1%
- Taoping Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 18.8%. At the same time it's a lot of higher than industry average of 6.1%.
- CAPEX is quite volatile: $2m in 2018, $4m in 2017, $3m in 2016, $3m in 2015, $1m in 2014
- The company has potentially unprofitable business model: ROIC is 0.6%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.2x while industry average is -0.4x
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 13.1%. Revenue growth showed slowdown in 18Q4 - it was -31.3% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 11.3 pp from -10.2% to 1.1% in 2018. During 2014-2018 EBITDA Margin bottomed in 2015 at -237% and was growing since that time.
Gross Margin increased slightly on 1.2 pp from 45.8% to 46.9% in 2018. SG&A as a % of Revenue decreased on 3.1 pp from 26.1% to 23.0% in 2018. During 2014-2018 SG&A as a % of Revenue topped in 2015 at 135% and was declining since that time.
Net Income margin increased on 3.5 pp from 4.7% to 8.2% in 2018.
Investments (CAPEX, working capital and M&A)
Taoping Inc.'s CAPEX/Revenue was 8.7% in 2018. CAPEX/Revenue dropped on 20.5 pp from 29.2% in 2015 to 8.7% in 2018. It's average CAPEX/Revenue for the last three years was 21.2%. During 2014-2018 CAPEX as a % of Revenue topped in 2016 at 34.0% and was declining since that time.
Return on investment
The company operates at good ROE (24.8%) while ROIC is low (0.6%). ROIC increased on 2.3 pp from -1.7% to 0.62% in 2018. ROE increased on 5.9 pp from 18.9% to 24.8% in 2018. During the last 5 years ROIC bottomed in 2016 at -36.8% and was growing since that time.
Leverage (Debt)
Debt level is 1.2x Net Debt / EBITDA and 1.6x Debt / EBITDA. Net Debt / EBITDA dropped on 0.7x from 1.9x to 1.2x in 2018. Debt dropped on 22.2% while cash dropped on 49.3%.
Taoping Inc. has short term refinancing risk: cash is only 27.2% of short term debt.
Valuation and dividends
The company's trades at EV/EBITDA 12.1x and P/E 24.8x.
Management team
Jianghuai Lin is a the company's CEO. Jianghuai Lin is a founder and has spent 12 years with the company.
Financial and operational results
FY ended 12/31/2018
Taoping Inc. ($TAOP) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 38.635 | 10.285 | 10.194 | 18.189 | 20.578 | 13.1% |
| Gross Profit | 10.488 | 3.904 | 2.586 | 8.322 | 9.654 | 16.0% |
| SG&A | 25.077 | 13.885 | 9.677 | 4.741 | 4.729 | -0.3% |
| EBITDA | -20.856 | -24.422 | -11.996 | 2.406 | 3.843 | 59.7% |
| Net Income | -29.231 | -7.504 | -18.171 | 0.859 | 1.692 | 97.1% |
Balance Sheet
|
|---|
| Cash | 6.690 | 3.787 | 3.752 | 3.261 | 1.653 | -49.3% |
| Short Term Debt | 51.824 | 15.273 | 7.800 | 7.818 | 6.083 | -22.2% |
| Long Term Debt | 0.215 | 0.000 | 0.000 | 0.000 | 0.000 | |
Cash flow
|
|---|
| Capex | 0.529 | 3.004 | 3.464 | 3.783 | 1.798 | -52.5% |
Ratios
|
|---|
| Revenue growth | -49.3% | -73.4% | -0.9% | 78.4% | 13.1% | |
| EBITDA growth | -80.8% | 17.1% | -50.9% | -120.1% | 59.7% | |
|
|---|
| Gross Margin | 27.1% | 38.0% | 25.4% | 45.8% | 46.9% | 1.2% |
| EBITDA Margin | -54.0% | -237.5% | -117.7% | 13.2% | 18.7% | 5.4% |
| SG&A, % of revenue | 64.9% | 135.0% | 94.9% | 26.1% | 23.0% | -3.1% |
| Net Income Margin | -75.7% | -73.0% | -178.3% | 4.7% | 8.2% | 3.5% |
| CAPEX, % of revenue | 1.4% | 29.2% | 34.0% | 20.8% | 8.7% | -12.1% |
|
|---|
| ROIC | -17.2% | -36.5% | -36.8% | -1.7% | 0.6% | 2.3% |
| ROE | -96.7% | -35.8% | -146.8% | 18.9% | 24.8% | 5.9% |
| Net Debt/EBITDA | | | | 1.9x | 1.2x | -0.7x |
Taoping Inc. ($TAOP) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 4 | 7 | 5 | 4 | | | | -21.2% | -31.3% |
| EBITDA | 1 | 2 | 1 | 0 | | | | -55.4% | -52.9% |
| Net Income | 0 | 2 | -0 | -0 | | | | -113.2% | |
Balance Sheet
|
|---|
| Cash | 2 | 3 | 2 | 2 | | | | | -49.3% |
| Short Term Debt | 7 | 7 | 7 | 6 | | | | | -22.2% |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 43.1% | 48.1% | 45.5% | 50.3% | | | | -2.4% | 3.8% |
| EBITDA Margin | 20.8% | 26.0% | 16.2% | 6.7% | | | | -12.4% | -3.1% |
| Net Income Margin | 2.1% | 26.1% | -2.8% | -4.2% | | | | -19.4% | 0.1% |
Peers in IT Consulting & Other Services
Below you can find Taoping Inc. benchmarking vs. other companies in IT Consulting & Other Services 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 |
|---|
| Gopher Protocol Inc ($GOPH) | | -25.0% | 83.3% | 5,471.1% | 461.0% |
| CLPS Incorporation ($CLPS) | | | | 8.1% | 56.0% |
| EPAM Systems, Inc. ($EPAM) | | 25.2% | 26.9% | 25.0% | 27.1% |
| Gartner, Inc. ($IT) | | 7.0% | 13.0% | 35.5% | 20.1% |
| Computer Task Group, Incorporated ($CTG) | | -6.0% | -12.1% | -7.3% | 19.1% |
| |
|---|
| Median (35 companies) | | 3.5% | 8.3% | 3.8% | 3.4% |
|---|
| Taoping Inc. ($TAOP) | | -73.4% | -0.9% | 78.4% | 13.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Inpixon ($INPX) | 29.8% | 28.9% | 28.1% | 68.7% | 71.4% |
| Gartner, Inc. ($IT) | 60.5% | 61.2% | 61.3% | 60.1% | 63.1% |
| InterXion Holding N.V. ($INXN) | 59.2% | 60.8% | 61.5% | 61.1% | 60.9% |
| LiveRamp Holdings, Inc. ($RAMP) | 25.1% | 38.6% | 42.5% | 45.7% | 56.2% |
| Booz Allen Hamilton Holding Corporation ($BAH) | 50.4% | 50.8% | 52.3% | 53.6% | 53.5% |
| |
|---|
| Median (37 companies) | 25.8% | 30.9% | 29.5% | 27.7% | 28.9% |
|---|
| Taoping Inc. ($TAOP) | 27.1% | 38.0% | 25.4% | 45.8% | 46.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InterXion Holding N.V. ($INXN) | 41.3% | 44.9% | 43.3% | 42.2% | 42.8% |
| Switch, Inc. ($SWCH) | | 50.7% | 37.0% | 28.5% | 39.8% |
| Cognizant Technology Solutions Corporation ($CTSH) | 20.4% | 19.9% | 19.8% | 19.7% | 20.5% |
| DXC Technology Company ($DXC) | | | | 8.0% | 16.3% |
| Accenture plc ($ACN) | 15.4% | 15.4% | 15.9% | 14.8% | 16.3% |
| |
|---|
| Median (36 companies) | 5.1% | 3.5% | 6.7% | 6.3% | 7.2% |
|---|
| Taoping Inc. ($TAOP) | -54.0% | -237.5% | -117.7% | 13.2% | 18.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InterXion Holding N.V. ($INXN) | 62.5% | 48.1% | 57.4% | 50.5% | 78.3% |
| Switch, Inc. ($SWCH) | | 71.5% | 90.2% | 106.4% | 67.9% |
| Teradata Corporation ($TDC) | 2.0% | 2.1% | 2.3% | 3.6% | 7.1% |
| ServiceSource International, Inc. ($SREV) | 3.4% | 4.7% | 10.4% | 7.2% | 6.5% |
| Amdocs Limited ($DOX) | 3.1% | 3.3% | 3.5% | 3.4% | 5.8% |
| |
|---|
| Median (35 companies) | 0.9% | 0.8% | 1.1% | 1.2% | 1.5% |
|---|
| Taoping Inc. ($TAOP) | 1.4% | 29.2% | 34.0% | 20.8% | 8.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Accenture plc ($ACN) | 80.5% | 81.0% | 81.3% | 61.7% | 66.1% |
| The Hackett Group, Inc. ($HCKT) | 11.2% | 19.5% | 31.7% | 23.8% | 24.6% |
| Cognizant Technology Solutions Corporation ($CTSH) | 24.7% | 22.0% | 21.3% | 21.9% | 23.8% |
| Booz Allen Hamilton Holding Corporation ($BAH) | 25.3% | 26.5% | 23.1% | 22.6% | 22.5% |
| EPAM Systems, Inc. ($EPAM) | 19.7% | 18.4% | 18.2% | 18.9% | 21.2% |
| |
|---|
| Median (44 companies) | 7.5% | 6.9% | 7.7% | 5.6% | 6.9% |
|---|
| Taoping Inc. ($TAOP) | -17.2% | -36.5% | -36.8% | -1.7% | 0.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Infinite Group Inc ($IMCI) | | | 169.6x | | 10.5x |
| InterXion Holding N.V. ($INXN) | 3.3x | 2.9x | 3.4x | 3.8x | 4.6x |
| Gartner, Inc. ($IT) | 0.1x | 1.3x | 0.6x | 11.7x | 4.1x |
| Switch, Inc. ($SWCH) | | 2.2x | 4.0x | 3.2x | 3.3x |
| Presidio, Inc. ($PSDO) | 0.0x | | 5.6x | 3.6x | 3.1x |
| |
|---|
| Median (28 companies) | -0.2x | -0.3x | 0.2x | 0.4x | 0.4x |
|---|
| Taoping Inc. ($TAOP) | | | | 1.9x | 1.2x |
