NetSol Technologies Inc. Net Income jumped on 99.3% and Revenue jumped on 11.3%
09/23/2019 • About NetSol Technologies Inc. (
$NTWK) • By InTwits
NetSol Technologies Inc. reported FY2019 financial results today. Here are the key drivers of the company's long term financial model:
- NetSol Technologies Inc. is a growth stock: FY2019 revenue growth was 11.3%, 5 year revenue CAGR was 13.3% at FY2019 ROIC 8.4%
- EBITDA Margin is quite volatile: 16.6% in FY2019, 14.2% in FY2018, 8.5% in FY2017, 20.8% in FY2016, 10.1% in FY2015
- NetSol Technologies Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.7%. At the same time it's in pair with industry average of 3.5%
- CAPEX is quite volatile: $1m in FY2019, $0m in FY2018, $0m in FY2017, $1m in FY2016, $1m in FY2015
- The company has business model with low profitability: ROIC is 8.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 11.3%. Revenue growth showed slowdown in FY19Q4 - it was 2.3% YoY. During FY2015-FY2019 Revenue growth bottomed in FY2018 at -6.8%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.4 pp from 14.2% to 16.6% in FY2019.
Gross Margin increased on 2.9 pp from 47.9% to 50.8% in FY2019. SG&A as a % of Revenue decreased on 2.7 pp from 39.2% to 36.5% in FY2019.
Net Income margin increased on 5.6 pp from 7.1% to 12.7% in FY2019.
Investments (CAPEX, working capital and M&A)
In FY2019 the company had CAPEX/Revenue of 4.0%. NetSol Technologies Inc. showed small CAPEX/Revenue decline of 1.1 pp from 5.2% in FY2016 to 4.0% in FY2019. It's average level of CAPEX/Revenue for the last three years was 3.8%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2017 at 3.4% and was growing since that time.
Return on investment
The company operates at good ROE (14.2%) while ROIC is low (8.4%). ROIC increased on 5.0 pp from 3.5% to 8.4% in FY2019. ROE increased on 7.4 pp from 6.8% to 14.2% in FY2019.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.9x and Debt / EBITDA is 0.7x. Debt dropped on 15.9% while cash dropped on 21.4%.
NetSol Technologies Inc. has no short term refinancing risk: cash is higher than short term debt (238.9%).
Valuation and dividends
NetSol Technologies Inc.'s trades at EV/EBITDA 4.8x and P/E 7.4x.
Management team
The company's CEO Najeeb Ullah Ghauri has spent 14 years with the company. NetSol Technologies Inc.'s CFO is Roger K Almond. Roger K Almond has 7 years tenure at the company.
Financial and operational results
FY ended 06/30/2019
NetSol Technologies Inc. ($NTWK) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 51.049 | 64.550 | 65.366 | 60.930 | 67.819 | 11.3% |
| Gross Profit | 17.457 | 30.802 | 28.408 | 29.207 | 34.446 | 17.9% |
| SG&A | 20.301 | 22.789 | 26.494 | 23.875 | 24.749 | 3.7% |
| EBITDA | 5.178 | 13.454 | 5.561 | 8.628 | 11.252 | 30.4% |
| Net Income | -5.549 | 3.403 | -4.978 | 4.307 | 8.583 | 99.3% |
Balance Sheet
|
|---|
| Cash | 14.169 | 11.558 | 14.173 | 22.089 | 17.366 | -21.4% |
| Short Term Debt | 4.368 | 4.928 | 10.584 | 8.907 | 7.270 | -18.4% |
| Long Term Debt | 0.363 | 0.478 | 0.367 | 0.331 | 0.497 | 50.5% |
Cash flow
|
|---|
| Capex | 3.559 | 3.336 | 2.203 | 2.449 | 2.727 | 11.3% |
Ratios
|
|---|
| Revenue growth | 40.3% | 26.4% | 1.3% | -6.8% | 11.3% | |
| EBITDA growth | -218.8% | 159.8% | -58.7% | 55.2% | 30.4% | |
|
|---|
| Gross Margin | 34.2% | 47.7% | 43.5% | 47.9% | 50.8% | 2.9% |
| EBITDA Margin | 10.1% | 20.8% | 8.5% | 14.2% | 16.6% | 2.4% |
| SG&A, % of revenue | 39.8% | 35.3% | 40.5% | 39.2% | 36.5% | -2.7% |
| Net Income Margin | -10.9% | 5.3% | -7.6% | 7.1% | 12.7% | 5.6% |
| CAPEX, % of revenue | 7.0% | 5.2% | 3.4% | 4.0% | 4.0% | 0.0% |
|
|---|
| ROIC | -6.2% | 7.8% | -1.2% | 3.5% | 8.4% | 5.0% |
| ROE | -9.1% | 5.5% | -7.8% | 6.8% | 14.2% | 7.4% |
| Net Debt/EBITDA | -1.8x | -0.5x | -0.6x | -1.5x | -0.9x | 0.6x |
NetSol Technologies Inc. ($NTWK) key quoterly financial indicators
| mln. $ | FY19Q1 | FY19Q2 | FY19Q3 | FY19Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 16 | 17 | 17 | 17 | | 24.8% | 17.7% | -0.3% | 2.3% |
| EBITDA | 3 | 3 | 3 | 2 | | 896.7% | 75.7% | -27.0% | -20.3% |
| Net Income | 1 | 3 | 1 | 3 | | | 372.9% | -65.1% | 154.8% |
Balance Sheet
|
|---|
| Cash | 20 | 20 | 17 | 17 | | 133.8% | 99.9% | 33.7% | -23.0% |
| Short Term Debt | 8 | 8 | 8 | 7 | | -20.1% | -21.1% | -12.1% | -21.4% |
| Long Term Debt | 0 | 0 | 1 | 0 | | -100.0% | -100.0% | 237.6% | -100.0% |
Ratios
|
|---|
| Gross Margin | 50.0% | 52.0% | 50.0% | 51.0% | | 12.5% | 5.7% | -3.9% | -0.2% |
| EBITDA Margin | 18.8% | 17.6% | 17.6% | 11.8% | | 16.4% | 5.8% | -6.5% | -3.3% |
| Net Income Margin | 6.3% | 17.6% | 5.9% | 17.6% | | 9.1% | 13.3% | -10.9% | 10.6% |
Peers in Application Software
Below you can find NetSol Technologies Inc. benchmarking vs. other companies in Application Software 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 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| nFusz Inc ($FUSZ) | | | | 433.3% | |
| CloudCommerce Inc ($CLWD) | -38.1% | 247.6% | 40.9% | 301.1% | |
| Seven Stars Cloud Group, Inc. ($SSC) | 134.7% | 663.8% | 310.3% | 161.7% | |
| Aurora Mobile Limited ($JG) | | | 304.9% | 150.8% | |
| Intelligent Systems Corporation ($INS) | 14.2% | 71.0% | 12.2% | 119.0% | |
| |
|---|
| Median (152 companies) | 13.9% | 14.4% | 15.7% | 15.2% | 9.3% |
|---|
| NetSol Technologies Inc. ($NTWK) | | | 1.3% | -6.8% | 11.3% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 97.4% | 98.0% | 97.6% | 96.5% | |
| hopTo Inc ($HPTO) | 87.8% | 95.9% | 98.2% | 95.4% | |
| Aware, Inc. ($AWRE) | 87.2% | 90.3% | 94.6% | 92.3% | |
| Alteryx, Inc. ($AYX) | 80.5% | 81.3% | 83.4% | 91.0% | |
| Aspen Technology, Inc. ($AZPN) | 88.7% | 89.7% | 90.2% | 89.9% | |
| |
|---|
| Median (151 companies) | 63.0% | 64.2% | 64.6% | 66.0% | 49.8% |
|---|
| NetSol Technologies Inc. ($NTWK) | | 47.7% | 43.5% | 47.9% | 50.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Aspen Technology, Inc. ($AZPN) | 42.2% | 46.0% | 45.2% | 43.3% | |
| ANSYS, Inc. ($ANSS) | 45.8% | 45.1% | 41.9% | 41.4% | |
| Paycom Software, Inc. ($PAYC) | 19.5% | 35.1% | 34.4% | 35.9% | |
| j2 Global, Inc. ($JCOM) | 40.6% | 41.7% | 36.5% | 35.7% | |
| Adobe Inc. ($ADBE) | 25.9% | 31.2% | 34.2% | 35.3% | |
| |
|---|
| Median (153 companies) | -10.7% | -5.3% | -4.2% | -3.3% | 12.0% |
|---|
| NetSol Technologies Inc. ($NTWK) | | 20.8% | 8.5% | 14.2% | 16.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| TimefireVR Inc ($TFVR) | 350.5% | 4.3% | | 1,021.9% | |
| MGT Capital Investments Inc ($MGTI) | 36.5% | 221.4% | 129.8% | 344.5% | |
| Integrated Ventures Inc ($INTV) | | | | 199.9% | 15.2% |
| ShotSpotter, Inc. ($SSTI) | 18.3% | 28.9% | 27.1% | 24.3% | |
| Ellie Mae, Inc. ($ELLI) | 20.6% | 16.7% | 21.1% | 19.4% | |
| |
|---|
| Median (154 companies) | 2.8% | 2.9% | 2.3% | 2.4% | 3.0% |
|---|
| NetSol Technologies Inc. ($NTWK) | | 5.2% | 3.4% | 4.0% | 4.0% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| InsPro Technologies Corp ($ITCC) | | | | 127.4% | |
| Manhattan Associates, Inc. ($MANH) | 78.7% | 99.3% | 102.5% | 80.9% | |
| Intuit Inc. ($INTU) | 23.7% | 52.1% | 72.6% | 66.8% | |
| Aspen Technology, Inc. ($AZPN) | | | | 58.1% | |
| Paycom Software, Inc. ($PAYC) | 30.5% | 75.4% | 51.1% | 47.5% | |
| |
|---|
| Median (180 companies) | -12.2% | -9.8% | -11.8% | -10.6% | 10.4% |
|---|
| NetSol Technologies Inc. ($NTWK) | | 7.8% | -1.2% | 3.5% | 8.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Upland Software, Inc. ($UPLD) | | 16.4x | 115.6x | 16.7x | |
| Nuance Communications, Inc. ($NUAN) | 5.7x | 5.3x | 7.1x | 15.2x | |
| Asure Software Inc ($ASUR) | 4.5x | 3.6x | 9.5x | 14.5x | |
| SS&C Technologies Holdings, Inc. ($SSNC) | 7.3x | 4.6x | 3.1x | 8.5x | |
| Avaya Holdings Corp. ($AVYA) | | | | 7.4x | |
| |
|---|
| Median (69 companies) | -0.8x | -0.9x | -0.9x | -0.6x | 0.7x |
|---|
| NetSol Technologies Inc. ($NTWK) | | -0.5x | -0.6x | -1.5x | -0.9x |
