Etherstack (ASX:ESK) delivers strong revenue and earnings growth as recurring income builds
Etherstack plc (ASX: ESK) has delivered an impressive full-year result for the 12 months to December 31, 2016, having achieved revenue growth of 169% and earnings before interest, tax depreciation and amortisation (EBITDA) of US$836,000, a significant improvement on the previous year’s loss of US$703,000.
From an operational perspective it has been a successful year for the group having been awarded several multi-million dollar projects in North America. Most of these have related to large corporates and utilities that provide the company with exposure to defensive earnings streams.
ESK also broadened its customer base in Australia having received its first order from the Australian Department of Defence
Recurring revenue growing exponentially
The company boasts strong recurring revenue, with royalty income increasing exponentially relative to group revenues on a year on year basis.
Income from support and royalties nearly doubled from US$550,000 in 2015 to US$1.07 million in 2016 and now accounts for approximately 18% of group revenues. Notably, royalty revenue grew by 180% on a year-on-year basis.
This provides earnings visibility and predictability, making growth of royalties and income from ongoing support a key focus for the group. Chief financial officer, David Carter, said he expected robust growth in this area in fiscal 2017, and he will be updating the market on the company’s progress.
Just how much growth remains to be seen and investors considering this stock for their portfolio, should seek professional financial advice.
ESK has finished the year in a sound financial position as it transitioned to a cash flow positive operation. Furthermore, financing costs were reduced through the repayment of convertible notes following a capital raising.
Carter expects this trend to continue in fiscal 2017 due to a substantial reduction in interest costs.
When the experts at Next Investors have a stock pick, it may pay to listen.
The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.
They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.
Click the link below to see what they are currently investing in.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.