CommScope Holding Company, Inc. Net Debt / EBITDA dropped on 16.5x from 27.0x to 10.5x in 2020 while EBITDA jumped on 150%
02/17/2021 • About CommScope Holding Company, Inc. (
$COMM) • By InTwits
CommScope Holding Company, Inc. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 10.4% in 2020, 4.2% in 2019, 17.7% in 2018, 18.6% in 2017, 19.6% in 2016
- CommScope Holding Company, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's in pair with industry average of 7.3%
- CAPEX is quite volatile: $28m in 2020, $43m in 2019, $59m in 2018, $69m in 2017, $40m in 2016
- In the last 5 years the company invested considerably less than D&A: $445m vs. $1,135m
- The company has unprofitable business model: ROIC is -0.3%
- It operates with high leverage: Net Debt/EBITDA is 10.5x while industry average is 0.1x
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 increased slightly on 1.1%. Revenue growth showed slowdown in 20Q4 - it was -7.3% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.64 pp from 7.0% to 7.6% in 2020. During the last 5 years EBITDA Margin bottomed in 2019 at 4.2%.
Gross Margin increased on 3.8 pp from 28.8% to 32.6% in 2020. Gross Margin followed a declining trend at -2.7 pp per annum in the last 5 years. SG&A as a % of Revenue decreased slightly on 1.4 pp from 15.3% to 13.9% in 2020. SG&A as a % of Revenue declined at -1.0 pp per annum in the last 5 years.
Net Income margin increased on 4.3 pp from -11.1% to -6.8% in 2020. During the last 5 years Net Income margin bottomed in 2019 at -11.1%.
Investments (CAPEX, working capital and M&A)
In 2020 CommScope Holding Company, Inc. had CAPEX/Revenue of 1.4%. The company's CAPEX/Revenue showed almost no change from 2017 to 2020. Average CAPEX/Revenue for the last three years was 1.5%.
Return on investment
The company operates at negative ROIC (-0.3%) and ROE (-105.7%). ROIC increased on 5.2 pp from -5.6% to -0.32% in 2020. ROE dropped on 30.6 pp from -75.1% to -106% in 2020. During the last 5 years ROIC bottomed in 2019 at -5.6%. ROE followed a declining trend at -33.3 pp per annum in 2016-2020.
Leverage (Debt)
Debt level is 10.5x Net Debt / EBITDA and 11.1x Debt / EBITDA. Net Debt / EBITDA dropped on 16.5x from 27.0x to 10.5x in 2020. Debt decreased on 3.5% while cash dropped on 12.8%.
CommScope Holding Company, Inc. has no short term refinancing risk: cash is higher than short term debt (552.9%).
Management team
The company's CEO is Charles L Treadway "Chuck". Charles L Treadway "Chuck" has 5 months tenure with the company. CommScope Holding Company, Inc.'s CFO is Alexander W Pease "Alex". Alexander W Pease "Alex" has 2 years tenure at the company.
Financial and operational results
FY ended 12/31/2020
CommScope Holding Company, Inc. ($COMM) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 4,924 | 4,561 | 4,569 | 8,345 | 8,436 | 1.1% |
| Gross Profit | 2,029 | 1,768 | 1,688 | 2,404 | 2,748 | 14.3% |
| SG&A | 882 | 795 | 729 | 1,277 | 1,171 | -8.3% |
| EBITDA | 967 | 850 | 807 | 351 | 877 | 150.0% |
| EBIT | 568 | 472 | 450 | | | |
| Tax | 50 | 16 | 30 | | | |
| Net Income | 223 | 194 | 140 | -930 | -573 | |
| Stock Based Compensation | 35 | 42 | 45 | | | |
Balance Sheet
|
|---|
| Cash | 428 | 454 | 458 | 598 | 522 | -12.8% |
| Accounts Receivable | 952 | 899 | 810 | | | |
| Inventory | 473 | 445 | 473 | | | |
| Accounts Payable | 416 | 437 | 399 | | | |
| Short Term Debt | 13 | 0 | 0 | 94 | 94 | 0.7% |
| Long Term Debt | 4,550 | 4,369 | 3,986 | 9,961 | 9,608 | -3.5% |
Cash flow
|
|---|
| Capex | 68 | 69 | 82 | 104 | 121 | 16.4% |
| Acquisitions | | 105 | | | | |
Ratios
|
|---|
| Revenue growth | 29.3% | -7.4% | 0.2% | 82.7% | 1.1% | |
| EBITDA growth | 99.3% | -12.1% | -5.0% | -56.6% | 150.0% | |
|
|---|
| Gross Margin | 41.2% | 38.8% | 37.0% | 28.8% | 32.6% | 3.8% |
| EBITDA Margin | 19.6% | 18.6% | 17.7% | 4.2% | 10.4% | 6.2% |
| EBIT Margin | 11.5% | 10.4% | 9.8% | | |
| SG&A, % of revenue | 17.9% | 17.4% | 16.0% | 15.3% | 13.9% | -1.4% |
| SBC, % of revenue | 0.7% | 0.9% | 1.0% | | |
| Net Income Margin | 4.5% | 4.2% | 3.1% | -11.1% | -6.8% | 4.3% |
| CAPEX, % of revenue | 1.4% | 1.5% | 1.8% | 1.2% | 1.4% | 0.2% |
|
|---|
| ROIC | 9.2% | 7.8% | 7.6% | -5.6% | -0.3% | 5.2% |
| ROE | 17.0% | 12.7% | 8.2% | -75.1% | -105.7% | -30.6% |
| Net Debt/EBITDA | 4.3x | 4.6x | 4.4x | 27.0x | 10.5x | -16.5x |
People
|
|---|
| Insider ownership | 1.9% | 1.9% | 1.9% | | | |
| Employees | 25,000 | 20,000 | 20,000 | | | |
| Revenue/Employee, th. $ | 197 | 228 | 228 | | | |
CommScope Holding Company, Inc. ($COMM) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 2,033 | 2,103 | 2,168 | 2,132 | | 84.9% | -18.1% | -8.9% | -7.3% |
| EBITDA | 200 | 35 | 292 | 350 | | 6.8% | 66.3% | 57.5% | - |
| Net Income | -160 | -321 | -116 | 24 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 394 | 823 | 583 | 522 | | 123.5% | 136.6% | -4.3% | -12.8% |
| Short Term Debt | 92 | 94 | 95 | 94 | | 215.0% | 8.0% | 2.1% | 0.7% |
| Long Term Debt | 9,844 | 10,088 | 9,719 | 9,608 | | 30.7% | -3.9% | -5.4% | -3.5% |
Ratios
|
|---|
| Gross Margin | 31.5% | 31.2% | 33.9% | 33.5% | | -4.7% | 5.5% | 8.3% | 1.5% |
| EBITDA Margin | 9.8% | 1.6% | 13.5% | 16.4% | | -7.2% | 0.8% | 5.7% | 18.8% |
| Net Income Margin | -7.9% | -15.3% | -5.4% | 1.1% | | -7.7% | -2.3% | 1.2% | 20.1% |
Peers in Communications Equipment
Below we provide CommScope Holding Company, Inc. benchmarking against other companies in Communications Equipment 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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | - | 116.2% | -19.8% | 40.3% | 329.9% |
| Franklin Wireless Corp ($FKWL) | - | -18.8% | -38.1% | 21.3% | 105.9% |
| Ribbon Communications Inc. ($RBBN) | - | 30.6% | 75.2% | -2.6% | 49.8% |
| Inseego Corp. ($INSG) | - | -10.0% | -7.7% | 8.4% | 43.0% |
| Casa Systems, Inc. ($CASA) | - | 11.2% | -15.5% | -5.0% | 39.3% |
| |
|---|
| Median (35 companies) | 7.5% | 5.6% | 3.5% | 3.7% | 4.4% |
|---|
| CommScope Holding Company, Inc. ($COMM) | - | -7.4% | 0.2% | 82.7% | 1.1% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| F5 Networks, Inc. ($FFIV) | 83.1% | 83.1% | 83.3% | 84.1% | 82.6% |
| Radware Ltd. ($RDWR) | 81.8% | 81.3% | 82.2% | 82.1% | 82.0% |
| Radcom Ltd. ($RDCM) | 69.6% | 71.8% | 74.0% | 70.0% | 71.4% |
| AudioCodes Ltd. ($AUDC) | 60.7% | 62.4% | 62.8% | 47.4% | 67.9% |
| Arista Networks, Inc. ($ANET) | 64.0% | 64.5% | 63.8% | 64.1% | 63.9% |
| |
|---|
| Median (33 companies) | 43.9% | 41.7% | 41.2% | 44.3% | 46.8% |
|---|
| CommScope Holding Company, Inc. ($COMM) | 41.2% | 38.8% | 37.0% | 28.8% | 32.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| InterDigital, Inc. ($IDCC) | 73.6% | 67.3% | 41.9% | 37.5% | 39.5% |
| EchoStar Corporation ($SATS) | 40.3% | 38.1% | 37.4% | 36.4% | 35.0% |
| Arista Networks, Inc. ($ANET) | 23.3% | 29.8% | 14.0% | 35.7% | 33.1% |
| Motorola Solutions, Inc. ($MSI) | 22.2% | 25.5% | 22.0% | 26.7% | 25.9% |
| F5 Networks, Inc. ($FFIV) | 30.3% | 29.9% | 30.1% | 26.2% | 22.9% |
| |
|---|
| Median (32 companies) | 5.5% | 6.0% | 4.6% | 3.9% | 8.8% |
|---|
| CommScope Holding Company, Inc. ($COMM) | 19.6% | 18.6% | 17.7% | 4.2% | 10.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | 132.5% | 124.8% | 245.2% | 109.7% | 22.3% |
| EchoStar Corporation ($SATS) | 39.9% | 30.9% | 26.5% | 22.2% | 21.7% |
| KVH Industries, Inc. ($KVHI) | 3.2% | 8.0% | 9.3% | 7.9% | 8.9% |
| Harmonic Inc. ($HLIT) | 3.7% | 3.2% | 1.7% | 2.6% | 8.5% |
| Applied Optoelectronics, Inc. ($AAOI) | 19.0% | 17.5% | 26.9% | 15.1% | 6.7% |
| |
|---|
| Median (32 companies) | 2.0% | 1.9% | 1.6% | 2.5% | 2.2% |
|---|
| CommScope Holding Company, Inc. ($COMM) | 1.4% | 1.5% | 1.8% | 1.2% | 1.4% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Franklin Wireless Corp ($FKWL) | 12.2% | 4.7% | -14.9% | -13.0% | 37.5% |
| Motorola Solutions, Inc. ($MSI) | 26.4% | 39.5% | 35.3% | 34.0% | 26.4% |
| Arista Networks, Inc. ($ANET) | 25.7% | 33.9% | 14.5% | 33.3% | 23.5% |
| AudioCodes Ltd. ($AUDC) | 6.1% | 8.6% | 16.1% | -7.7% | 20.8% |
| F5 Networks, Inc. ($FFIV) | 43.1% | 46.9% | 47.9% | 34.1% | 16.5% |
| |
|---|
| Median (35 companies) | 2.2% | 2.1% | 0.3% | 1.2% | 2.3% |
|---|
| CommScope Holding Company, Inc. ($COMM) | 9.2% | 7.8% | 7.6% | -5.6% | -0.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inseego Corp. ($INSG) | - | - | 3.9x | 82.5x | 26.9x |
| Harmonic Inc. ($HLIT) | - | - | 3.4x | 1.9x | 6.5x |
| Ribbon Communications Inc. ($RBBN) | -17.2x | - | - | - | 3.5x |
| Casa Systems, Inc. ($CASA) | -0.2x | 0.3x | 0.2x | 32.1x | 3.2x |
| EchoStar Corporation ($SATS) | 1.5x | 1.7x | 3.3x | 1.4x | 2.5x |
| |
|---|
| Median (24 companies) | -0.9x | -0.8x | -0.3x | -0.4x | -0.5x |
|---|
| CommScope Holding Company, Inc. ($COMM) | 4.3x | 4.6x | 4.4x | 27.0x | 10.5x |
