NetSol Technologies Inc. reports 89.1% Net Income decline in 2020 and 5.9 pp EBITDA Margin decline from 16.6% to 10.7%
09/28/2020 • About NetSol Technologies Inc. (
$NTWK) • By InTwits
NetSol Technologies Inc. reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 10.7% in FY2020, 16.6% in FY2019, 14.2% in FY2018, 8.5% in FY2017, 20.8% in FY2016
- NetSol Technologies Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.8%.
- CAPEX is quite volatile: $6m in FY2020, $9m in FY2019, $10m in FY2018, $11m in FY2017, $36m in FY2016
- The company has potentially unprofitable business model: ROIC is 1.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
NetSol Technologies Inc.'s Revenue dropped on 16.9%. Revenue decline showed acceleration in FY20Q4 - it was 20.1% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 5.9 pp from 16.6% to 10.7% in FY2020.
Gross Margin decreased on 3.0 pp from 50.8% to 47.8% in FY2020. SG&A as a % of Revenue increased on 5.4 pp from 36.5% to 41.8% in FY2020.
Net Income margin dropped on 11.0 pp from 12.7% to 1.7% in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 NetSol Technologies Inc. had CAPEX/Revenue of 2.4%. The company's CAPEX/Revenue decreased slightly on 0.93 pp from 3.4% in FY2017 to 2.4% in FY2020. Average CAPEX/Revenue for the last three years was 3.5%.
Return on investment
The company operates at low ROIC (1.5%) and ROE (1.6%). ROIC decreased on 7.0 pp from 8.4% to 1.5% in FY2020. ROE dropped on 12.6 pp from 14.2% to 1.6% in FY2020.
Leverage (Debt)
Debt level is -1.2x Net Debt / EBITDA and 2.2x Debt / EBITDA. Debt surged on 69.1% while cash jumped on 16.1%.
NetSol Technologies Inc. has no short term refinancing risk: cash is higher than short term debt (196.7%).
Valuation and dividends
NetSol Technologies Inc.'s trades at EV/EBITDA 4.1x and P/E 33.7x.
Management team
NetSol Technologies Inc.'s CEO Najeeb Ullah Ghauri has spent 14 years with the company. Roger K Almond is a the company's CFO. Roger K Almond has spent 7 years at the company.
Financial and operational results
FY ended 06/30/2020
NetSol Technologies Inc. ($NTWK) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 64.550 | 65.366 | 60.930 | 67.819 | 56.372 | -16.9% |
| Gross Profit | 30.802 | 28.408 | 29.207 | 34.446 | 26.963 | -21.7% |
| SG&A | 22.789 | 26.494 | 23.875 | 24.749 | 23.589 | -4.7% |
| EBITDA | 13.454 | 5.561 | 8.628 | 11.252 | 6.027 | -46.4% |
| Net Income | 3.403 | -4.978 | 4.307 | 8.583 | 0.937 | -89.1% |
Balance Sheet
|
|---|
| Cash | 11.558 | 14.173 | 22.089 | 17.366 | 20.167 | 16.1% |
| Short Term Debt | 4.928 | 10.584 | 8.907 | 7.270 | 10.251 | 41.0% |
| Long Term Debt | 0.478 | 0.367 | 0.331 | 0.497 | 2.880 | 479.0% |
Cash flow
|
|---|
| Capex | 3.336 | 2.203 | 2.449 | 2.727 | 1.377 | -49.5% |
Ratios
|
|---|
| Revenue growth | 26.4% | 1.3% | -6.8% | 11.3% | -16.9% | |
| EBITDA growth | 159.8% | -58.7% | 55.2% | 30.4% | -46.4% | |
|
|---|
| Gross Margin | 47.7% | 43.5% | 47.9% | 50.8% | 47.8% | -3.0% |
| EBITDA Margin | 20.8% | 8.5% | 14.2% | 16.6% | 10.7% | -5.9% |
| SG&A, % of revenue | 35.3% | 40.5% | 39.2% | 36.5% | 41.8% | 5.4% |
| Net Income Margin | 5.3% | -7.6% | 7.1% | 12.7% | 1.7% | -11.0% |
| CAPEX, % of revenue | 5.2% | 3.4% | 4.0% | 4.0% | 2.4% | -1.6% |
|
|---|
| ROIC | 7.8% | -1.2% | 3.5% | 8.4% | 1.5% | -7.0% |
| ROE | 5.5% | -7.8% | 6.8% | 14.2% | 1.6% | -12.6% |
| Net Debt/EBITDA | -0.5x | -0.6x | -1.5x | -0.9x | -1.2x | -0.3x |
NetSol Technologies Inc. ($NTWK) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 14 | 16 | 14 | 14 | | -15.2% | -7.7% | -20.4% | -20.1% |
| EBITDA | 1 | 2 | 1 | 2 | | -75.0% | -34.0% | -70.2% | 20.1% |
| Net Income | -2 | 1 | 1 | 1 | | -282.8% | -80.5% | 0.1% | -60.7% |
Balance Sheet
|
|---|
| Cash | 18 | 22 | 16 | 20 | | -11.9% | 10.4% | -7.4% | 18.6% |
| Short Term Debt | 8 | 11 | 10 | 10 | | 0.2% | 32.7% | 24.3% | 46.4% |
| Long Term Debt | 2 | 2 | 2 | 3 | | - | - | 94.2% | - |
Ratios
|
|---|
| Gross Margin | 45.0% | 49.7% | 44.5% | 51.8% | | -5.0% | -2.3% | -5.5% | 0.8% |
| EBITDA Margin | 5.5% | 12.6% | 6.6% | 17.7% | | -13.2% | -5.0% | -11.0% | 5.9% |
| Net Income Margin | -13.5% | 3.7% | 7.4% | 8.7% | | -19.7% | -13.9% | 1.5% | -9.0% |
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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 15.7% | 15.2% | 19.5% | 14.7% |
|---|
| NetSol Technologies Inc. ($NTWK) | - | 1.3% | -6.8% | 11.3% | -16.9% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 64.2% | 64.6% | 66.0% | 68.4% | 70.6% |
|---|
| NetSol Technologies Inc. ($NTWK) | 47.7% | 43.5% | 47.9% | 50.8% | 47.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 2.7% | 6.8% |
|---|
| NetSol Technologies Inc. ($NTWK) | 20.8% | 8.5% | 14.2% | 16.6% | 10.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 2.9% | 2.6% |
|---|
| NetSol Technologies Inc. ($NTWK) | 5.2% | 3.4% | 4.0% | 4.0% | 2.4% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.5% | -2.2% |
|---|
| NetSol Technologies Inc. ($NTWK) | 7.8% | -1.2% | 3.5% | 8.4% | 1.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (53 companies) | -0.9x | -0.9x | -0.6x | 0.4x | 0.3x |
|---|
| NetSol Technologies Inc. ($NTWK) | -0.5x | -0.6x | -1.5x | -0.9x | -1.2x |
