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Microsoft Corp CAPEX jumped on 43.1% and Revenue jumped on 14.3%

19/07/2018 • About Microsoft Corp ($4338) • By InTwits

Microsoft Corp reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • EBITDA Margin is expanding: 41.1% in FY2018 vs. 39.1% in FY2017 vs. 38.0% in FY2014
  • Microsoft Corp has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.2%. At the same time it's a lot of higher than industry average of 5.7%.
  • CAPEX is quite volatile: 4,984 in FY2018, 9,925 in FY2017, 12,613 in FY2016, 16,008 in FY2015, 9,292 in FY2014
  • The company has highly profitable business model: ROIC is at 19.8%
  • It operates with high leverage: Net Debt/EBITDA is 1.6x while industry average is -2.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Microsoft Corp ($4338) key annual financial indicators

mln. $201420152016201720182018/2017
P&L
Revenue86,83393,58091,15496,571110,36014.3%
Gross Profit59,75560,54258,37462,31072,00715.6%
SG&A20,48820,32419,19819,94222,22311.4%
EBITDA32,97124,11832,70037,80345,31919.9%
Net Income22,07412,19320,53925,48916,571-35.0%
Balance Sheet
Cash8,6695,5956,5107,66311,94655.9%
Short Term Debt2,0007,48412,90411,5445,397-53.2%
Long Term Debt20,64527,80840,55781,44577,810-4.5%
Cash flow
Capex5,4855,9448,3438,12911,63243.1%
Ratios
Revenue growth11.5%7.8%-2.6%5.9%14.3%
EBITDA growth8.0%-26.9%35.6%15.6%19.9%
Gross Margin68.8%64.7%64.0%64.5%65.2%0.7%
EBITDA Margin38.0%25.8%35.9%39.1%41.1%1.9%
Net Income Margin25.4%13.0%22.5%26.4%15.0%-11.4%
SG&A, % of revenue23.6%21.7%21.1%20.7%20.1%-0.5%
CAPEX, % of revenue6.3%6.4%9.2%8.4%10.5%2.1%
ROIC26.2%15.6%20.0%17.5%19.8%2.2%
ROE26.2%14.4%25.2%29.8%19.4%-10.4%
Net Debt/EBITDA0.4x1.2x1.4x2.3x1.6x-0.7x

Revenue and profitability


The company's Revenue surged on 14.3%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 1.3 pp from 18.0% to 19.3% in FY2018.

Gross Margin increased slightly on 0.72 pp from 64.5% to 65.2% in FY2018. SG&A as a % of Revenue decreased slightly on 0.51 pp from 20.7% to 20.1% in FY2018.

Net Income marign dropped on 11.4 pp from 26.4% to 15.0% in FY2018.

Capital expenditures (CAPEX) and working capital investments


Microsoft Corp's CAPEX/Revenue was 10.5% in FY2018. CAPEX/Revenue increased on 4.2 pp from 6.4% in FY2015 to 10.5% in FY2018. For the last three years the average CAPEX/Revenue was 9.4%.

Return on investment


The company operates at good ROIC (19.76%) and ROE (19.45%). ROIC increased on 2.2 pp from 17.5% to 19.8% in FY2018. ROE dropped on 10.4 pp from 29.8% to 19.4% in FY2018.

Leverage (Debt)


Debt level is 1.6x Net Debt / EBITDA and 1.8x Debt / EBITDA. Net Debt / EBITDA dropped on 0.7x from 2.3x to 1.6x in FY2018. Debt dropped on 10.5% while cash surged on 55.9%.

Appendix 1: Peers in Software


Below we provide Microsoft Corp benchmarking against other companies in Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.