InterCloud Systems, Inc. :ICLD-US: Earnings Analysis: Q3, 2016 By the Numbers : November 14, 2016

InterCloud Systems, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of InterCloud Systems, Inc. – VSE Corporation, KEYW Holding Corporation, RCM Technologies, Inc. and Tetra Tech, Inc. (VSEC-US, KEYW-US, RCMT-US and TTEK-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 19.55 million, Net Earnings of USD 2.07 million.
  • Gross margins narrowed from 2.27% to -0.20% compared to the same period last year, operating (EBITDA) margins now -16.53% from -7.67%.
  • Year-on-year change in operating cash flow of 65.19% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 19.55 22.59 17.79 11.47 20.21
Revenue Growth (%YOY) -3.25 1.56 -15.25 -51.75 -1.64
Earnings (mil) 2.07 -12.22 -5.89 -24.8 -2.87
Earnings Growth (%YOY) 171.92 15.6 43.11 -262.37 66.74
Net Margin (%) 10.57 -54.08 -33.11 -216.23 -14.22
EPS 0.02 -0.39 -0.23 -0.85 -0.12
Return on Equity (%) N/A N/A N/A -769.67 -36.94
Return on Assets (%) 10.74 -56.74 -26.05 -95.77 -9.96

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Market Share Versus Profits

Revenues History
Earnings History

ICLD-US‘s change in revenue this period compared to the same period last year of -3.25% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ICLD-US is holding onto its market share. Also, for comparison purposes, revenues changed by -13.46% and earnings by 116.92% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus


Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from -0.20% to 2.27% for the same period last year, while operating margins (EBITDA margins) went from -16.53% to -7.67% over the same time frame.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost


Cash Versus Earnings – Sustainable Performance?

ICLD-US‘s change in operating cash flow of 65.19% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Margins

The company’s operating (EBIT) margins contracted from -16.10% to -19.42%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -13.22% to 10.59%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

InterCloud Systems, Inc. is a cloud computing company which provides end-to-end information technology and network solutions to the enterprise markets through cloud computing and professional services. These services include professional consulting, data solutions and maintenance services to assist its customers in meeting the changing technology demands. The company was founded on November 22, 1999 and is headquartered in Shrewsbury, NJ.

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