NII Holdings, Inc. :NIHD-US: Earnings Analysis: Q4, 2016 By the Numbers : March 16, 2017

NII Holdings, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of NII Holdings, Inc. – Swisscom AG, Total Access Communication Public Co., Ltd. Unsponsored ADR, Straight Path Communications, Inc. Class B and Spok Holdings, Inc. (SWZCF-US, TACYY-US, STRP-US and SPOK-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 248.40 million, Net Earnings of USD -84.80 million.
  • Gross margins widened from 36.11% to 54.47% compared to the same period last year, operating (EBITDA) margins now 0.08% from -4.29%.
  • Year-on-year change in operating cash flow of 318.50% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from -36.44% to -34.30%.

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

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 248.4 260.84 249.21 226.56 244.8
Revenue Growth (%YOY) 1.47 -8.37 -40.77 -70.34 -71.34
Earnings (mil) -84.8 -1411.55 -4.8 -32.81 -83.7
Earnings Growth (%YOY) -1.31 -598.97 -100.27 89.4 83.5
Net Margin (%) -34.14 -541.17 -1.92 -14.48 -34.19
EPS -0.85 -14.1 -0.05 -0.33 -0.84
Return on Equity (%) -161.45 -580.82 -1.17 -8.35 -21.13
Return on Assets (%) -23.43 -261.17 -0.69 -4.83 -12.02

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Market Share Versus Profits

Revenues History
Earnings History

NIHD-US‘s change in revenue this period compared to the same period last year of 1.47% 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 NIHD-US is holding onto its market share. Also, for comparison purposes, revenues changed by -4.77% and earnings by 93.99% 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 year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 36.11% to 54.47%, while operating margins improved from -4.29% to 0.08% over this period. For comparison, gross margins were 30.80% and EBITDA margins 6.02% in the immediate last period.

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?

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

NIHD-US‘s change in operating cash flow of 318.50% 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 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 -19.44% to -5.31% and pretax margins widened from -36.44% to -34.30%.

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

NII Holdings, Inc. engages in the provision of wireless communication services under the Nextel brand. It operates through the following segments: Nextel Brazil, Nextel Mexico, and Nextel Argentina. Its services include mobile telephone voice service, wireless data services push-to-talk other value-added services, business solutions, and voice and data roaming services. The company was founded in 1995 and is headquartered in Reston, VA.

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