Microsoft Corp reports 44.8% Net Income decline while 7.8% Revenue growth
21/07/2015 • About Microsoft Corp (
$4338) • By InTwits
Microsoft Corp reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Microsoft Corp has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.9%. At the same time it's in pair with industry average of 6.1%.
- CAPEX is quite volatile: 5,944 in FY2015, 5,485 in FY2014, 4,257 in FY2013, 2,305 in FY2012, 2,355 in FY2011
- The company has highly profitable business model: ROIC is at 15.6%
- It operates with high leverage: Net Debt/EBITDA is 1.2x while industry average is -2.3x
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. $ | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 69,943 | 73,723 | 77,849 | 86,833 | 93,580 | 7.8% |
| Gross Profit | 54,366 | 56,193 | 57,600 | 59,755 | 60,542 | 1.3% |
| SG&A | 18,162 | 18,426 | 20,425 | 20,488 | 20,324 | -0.8% |
| EBITDA | 29,927 | 24,730 | 30,519 | 32,971 | 24,118 | -26.9% |
| Net Income | 23,150 | 16,978 | 21,863 | 22,074 | 12,193 | -44.8% |
Balance Sheet
|
|---|
| Cash | 9,610 | 6,938 | 3,804 | 8,669 | 5,595 | -35.5% |
| Short Term Debt | 0 | 1,231 | 2,999 | 2,000 | 7,484 | 274.2% |
| Long Term Debt | 11,921 | 10,713 | 12,601 | 20,645 | 27,808 | 34.7% |
Cash flow
|
|---|
| Capex | 2,355 | 2,305 | 4,257 | 5,485 | 5,944 | 8.4% |
Ratios
|
|---|
| Revenue growth | 11.9% | 5.4% | 5.6% | 11.5% | 7.8% | |
| EBITDA growth | 11.8% | -17.4% | 23.4% | 8.0% | -26.9% | |
| Gross Margin | 77.7% | 76.2% | 74.0% | 68.8% | 64.7% | -4.1% |
| EBITDA Margin | 42.8% | 33.5% | 39.2% | 38.0% | 25.8% | -12.2% |
| Net Income Margin | 33.1% | 23.0% | 28.1% | 25.4% | 13.0% | -12.4% |
| SG&A, % of revenue | 26.0% | 25.0% | 26.2% | 23.6% | 21.7% | -1.9% |
| CAPEX, % of revenue | 3.4% | 3.1% | 5.5% | 6.3% | 6.4% | 0.0% |
| ROIC | 43.4% | 28.6% | 30.3% | 26.2% | 15.6% | -10.6% |
| ROE | 44.8% | 27.5% | 30.1% | 26.2% | 14.4% | -11.8% |
| Net Debt/EBITDA | 0.1x | 0.2x | 0.4x | 0.4x | 1.2x | 0.8x |
Revenue and profitability
Microsoft Corp's Revenue increased on 7.8% in FY2015. Revenue growth was financed by EBITDA margin decline. EBITDA Margin dropped on 12.2 pp from 38.0% to 25.8% in FY2015.
Gross Margin decreased on 4.1 pp from 68.8% to 64.7% in FY2015. SG&A as a % of Revenue decreased slightly on 1.9 pp from 23.6% to 21.7% in FY2015.
Net Income marign dropped on 12.4 pp from 25.4% to 13.0% in FY2015.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 6.4% in FY2015. Microsoft Corp showed CAPEX/Revenue growth of 3.2 pp from 3.1% in FY2012 to 6.4% in FY2015. Average CAPEX/Revenue for the last three years was 6.0%.
Return on investment
The company operates at good ROIC (15.56%) and ROE (14.36%). ROIC dropped on 10.6 pp from 26.2% to 15.6% in FY2015. ROE dropped on 11.8 pp from 26.2% to 14.4% in FY2015.
Leverage (Debt)
Debt level is 1.2x Net Debt / EBITDA and 1.5x Debt / EBITDA. Net Debt / EBITDA surged on 0.8x from 0.4x to 1.2x in FY2015. Debt surged on 55.8% in FY2015 while cash dropped on 35.5% in FY2015.
Management team
The company's CEO Satya Nadella has spent 4 years at the company. Microsoft Corp's CFO is Amy E Hood. Amy E Hood has 5 years tenure at the company.
Appendix 1: Peers in Software
Below you can find Microsoft Corp benchmarking vs. other companies in Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Pizu Group Holdings Ltd ($8053) | | 40.3% | -42.9% | 1,742.9% | 157.9% |
| China City Railway Transportation Technology Holdings Co Ltd ($1522) | 194.6% | 164.0% | 33.6% | 100.5% | |
| China Mobile Games and Cultural Investment Ltd ($8081) | -16.7% | 393.7% | -6.6% | 92.2% | |
| Epicurean and Co Ltd ($8213) | | 177.0% | 185.7% | 62.6% | 22.0% |
| China Bio Cassava Holdings Ltd ($8129) | -15.0% | -14.2% | 38.8% | 55.1% | |
| |
|---|
| Median (30 companies) | 18.5% | 10.6% | 11.4% | 21.5% | 31.5% |
|---|
| Microsoft Corp ($4338) | | 5.4% | 5.6% | 11.5% | 7.8% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| China Bio Cassava Holdings Ltd ($8129) | 90.2% | 90.4% | 97.4% | 98.4% | |
| NetDragon Websoft Inc ($777) | 90.1% | 93.4% | 90.8% | 89.3% | |
| China Mobile Games and Cultural Investment Ltd ($8081) | 19.4% | 6.5% | 45.3% | 84.8% | |
| Kingdee International Software Group Co Ltd ($268) | 70.1% | 65.0% | 75.3% | 82.5% | |
| Kingsoft Corp Ltd ($3888) | 85.5% | 86.8% | 86.3% | 82.4% | |
| |
|---|
| Median (29 companies) | 41.6% | 34.3% | 36.0% | 33.0% | 28.8% |
|---|
| Microsoft Corp ($4338) | 77.7% | 76.2% | 74.0% | 68.8% | 64.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Sinosoft Technology Group Ltd ($1297) | 55.5% | 62.6% | 54.9% | 57.2% | |
| International Entertainment Corp ($1009) | 235.1% | 50.8% | 64.0% | 54.9% | 62.0% |
| Kingdee International Software Group Co Ltd ($268) | 19.5% | 7.8% | 33.2% | 37.2% | |
| TravelSky Technology Ltd ($696) | 43.3% | 38.1% | 35.8% | 31.9% | |
| Boyaa Interactive International Ltd ($434) | 38.9% | 38.5% | 25.8% | 30.7% | |
| |
|---|
| Median (30 companies) | 8.4% | 6.9% | 10.6% | 5.4% | 5.7% |
|---|
| Microsoft Corp ($4338) | 42.8% | 33.5% | 39.2% | 38.0% | 25.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| NetDragon Websoft Inc ($777) | 13.3% | 21.1% | 34.6% | 54.6% | |
| China Eco-Farming Ltd ($8166) | 0.3% | 0.6% | 0.7% | 18.1% | |
| TravelSky Technology Ltd ($696) | 5.8% | 8.9% | 21.7% | 18.1% | |
| Kingsoft Corp Ltd ($3888) | 6.8% | 4.3% | 3.8% | 14.3% | |
| Sing Lee Software Group Ltd ($8076) | 19.4% | 3.3% | 0.2% | 14.0% | |
| |
|---|
| Median (29 companies) | 2.4% | 1.4% | 2.6% | 3.5% | 1.0% |
|---|
| Microsoft Corp ($4338) | 3.4% | 3.1% | 5.5% | 6.3% | 6.4% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Sinosoft Technology Group Ltd ($1297) | 31.6% | 34.0% | 21.9% | 20.2% | |
| Boyaa Interactive International Ltd ($434) | 100.4% | 75.3% | 21.3% | 20.0% | |
| ITE Holdings Ltd ($8092) | -19.6% | -15.0% | 10.6% | 16.8% | 19.8% |
| TravelSky Technology Ltd ($696) | 16.2% | 15.0% | 13.8% | 12.5% | |
| Beijing Beida Jade Bird Universal Sci-Tech Co Ltd ($8095) | 5.6% | 8.9% | 10.7% | 11.0% | |
| |
|---|
| Median (30 companies) | 1.6% | -2.7% | 1.9% | -2.4% | 2.2% |
|---|
| Microsoft Corp ($4338) | 43.4% | 28.6% | 30.3% | 26.2% | 15.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Pizu Group Holdings Ltd ($8053) | | | | 346.1x | -0.4x |
| Epicurean and Co Ltd ($8213) | 2.9x | 2.3x | 4.7x | 12.3x | 12.0x |
| Sing Lee Software Group Ltd ($8076) | | | | 6.2x | |
| China Technology Solar Power Holdings Ltd ($8111) | | | 7.4x | 3.3x | 0.2x |
| Chinasoft International Ltd ($354) | -1.3x | -0.7x | 0.7x | 1.5x | |
| |
|---|
| Median (18 companies) | -1.0x | -0.9x | -1.4x | -1.0x | -0.4x |
|---|
| Microsoft Corp ($4338) | 0.1x | 0.2x | 0.4x | 0.4x | 1.2x |
