In the annual general meeting of Netcomm Wireless Limited (ASX: NTC), chairman Justin Milne addresses the shareholders and shares the financial update to them. He highlighted the growth in the annual revenue for the past 6 years. Within a span of 6 years, there was an increase in the revenue by 69% and it was recorded as $182 million in FY2018. The EBITDA also increased by 5.7 times over the past 6 years and reported to be around $20.5 million. There was also an increase in the net profit after tax from $0.8 million to $8 million. In the FY2018, the company holds cash in the bank worth $27.3 million. Also, the company has additional debt facility available worth $20 million. There was a massive turnaround in terms of the operating cash flow. Within a span of 6 years of time, i.e. from 2012 to 2018, the company was able to convert its major negative operating cash flow to positive cash flow. The cash flow which was -$270k in 2012 generated $23.6 million of operating cash flow. Another achievement was in terms of return on equity which was 5% in the year 2012 increased in the year 2018 reached 9%. The market capitalization which was only 12.5 million in 2012 reached $106 million in 2018.
The company continuously made efforts in scaling the business to a significant extent. The company has 3 research and development centers in Sydney and Melbourne in Australia and Sunrise in the USA. The company has made its expansion globally in regions of Australia and New Zealand, the USA, Canada, Europe, and the UK. Another factor which influenced the growth in the revenue was due to the increase in the headcount which depicts the capability of associates to deliver the product on a larger scale. Since 2012, the company has covered a number of milestones. The company only use to make modems in 2012. However, as the time passed away, the company is now selling a wide range of complex wireless and fixed line technologies to Tier1 Telcos around the world along with M2M solutions.
The company made a significant investment in terms of research and development. The company has sophisticated test labs which have drastically increased the speed to approach the market. Also, it creates the ability to innovate new prototypes at a higher pace. The upcoming opportunity for the company is the 5G technology for which it is already prepared. This has made NTC position itself well amongst the major global telcos.
Within a period of 12 months, 4 new innovations were developed. These were reverse powered DPU, fixed wireless, a 4G residential gateway for urban areas and 4G industrial IoT.
Further, in FY2019, it is expected that revenue might go up by 15% to 20% over FY2018. The gross margin is expected to be low which would be affected by the change in the sales mix and higher component cost. Underlying EBITDA is expected to maintain the similar level that of FY2018. A further expenditure of $9 million will be made in 5G technologies, where $5 million will be the capex and $4 million will the opex. The EBITDA is expected to be in the range of $15 million to $18 million.
The key operating priorities of FY19 will be the investment that will be made on 5G technologies which will be the foundation for the accelerated growth in the mid-term. Further contracts will be rolled out. The company will also be a step ahead to look for opportunities with tier 1 telcos across the globe in order to expand its customer base.
At present, the market price of the share is A$0.74 (AEST:3:30 pm, 21 November 2018) with the market capitalization of A$109.02 million and PE ratio 13.67x.
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