International Speedway Corp. :ISCB-US: Earnings Analysis: Q3, 2017 By the Numbers : October 12, 2017

International Speedway Corp. reports financial results for the quarter ended August 31, 2017.

Highlights

  • Summary numbers: Revenues of USD 131.94 million, Net Earnings of USD 0.27 million.
  • Gross margins widened from 24.14% to 24.31% compared to the same period last year, operating (EBITDA) margins now 22.88% from 23.19%.
  • Change in operating cash flow of 57.63% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 2.74% to 3.51%.

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

2017-08-31 2017-05-31 2017-02-28 2016-11-30 2016-08-31
Relevant Numbers (Quarterly)
Revenues (mil) 131.94 165.28 147.95 221.84 128.99
Revenue Growth (%YOY) 2.29 -1.36 3.73 1.15 2.79
Earnings (mil) 0.27 13.23 21.27 32.44 2.17
Earnings Growth (%YOY) -87.8 -39.6 7.27 0.48 154.93
Net Margin (%) 0.2 8 14.38 14.62 1.68
EPS 0.01 0.29 0.47 0.72 0.05
Return on Equity (%) 0.02 0.94 1.51 2.33 0.16
Return on Assets (%) 0.05 2.35 3.85 5.96 0.39

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, ISCB-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if ISCB-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -20.17% and earnings by -98.00% compared to the previous period.

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 23.19% to 22.88%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 24.14% to 24.31%. For comparison, gross margins were 29.11% and EBITDA margins 28.48% in the immediate last period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ISCB-US’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 144.86, compared to last year’s level of 140.10 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

ISCB-US’s year-on-year change in operating cash flow of 57.63% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from 3.03% to 3.39% and pretax margins widened from 2.74% to 3.51%.

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for International Speedway Corp.

Company Profile

International Speedway Corp. engages in the provision of motors sports. It specializes in the facilitation of amusement to the public in the form of motorsports themed entertainment. It operates through the Motorsports Event and All Other segments. The Motorsports Event segment is the operation of racing events. The All Other segment comprises the radio network production and syndication of numerous racing events and programs, certain souvenir merchandising operations not associated with the promotion of motorsports events at the Company’s facilities, construction management services, leasing operations, and financing and licensing operations. The company was founded in 1953 and is headquartered in Daytona Beach, FL.

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