Microsoft Corp reports 40.4% CAPEX growth while 8.8% Revenue decline
19/07/2016 • About Microsoft Corp (
$4338) • By InTwits
Microsoft Corp reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Microsoft Corp has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.1%. At the same time it's in pair with industry average of 6.1%.
- CAPEX is quite volatile: 8,343 in FY2016, 5,944 in FY2015, 5,485 in FY2014, 4,257 in FY2013, 2,305 in FY2012
- The company has highly profitable business model: ROIC is at 20.0%
- It operates with high leverage: Net Debt/EBITDA is 1.4x 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. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 73,723 | 77,849 | 86,833 | 93,580 | 91,154 | -2.6% |
| Gross Profit | 56,193 | 57,600 | 59,755 | 60,542 | 58,374 | -3.6% |
| SG&A | 18,426 | 20,425 | 20,488 | 20,324 | 19,198 | -5.5% |
| EBITDA | 24,730 | 30,519 | 32,971 | 24,118 | 32,700 | 35.6% |
| Net Income | 16,978 | 21,863 | 22,074 | 12,193 | 20,539 | 68.4% |
Balance Sheet
|
|---|
| Cash | 6,938 | 3,804 | 8,669 | 5,595 | 6,510 | 16.4% |
| Short Term Debt | 1,231 | 2,999 | 2,000 | 7,484 | 12,904 | 72.4% |
| Long Term Debt | 10,713 | 12,601 | 20,645 | 27,808 | 40,557 | 45.8% |
Cash flow
|
|---|
| Capex | 2,305 | 4,257 | 5,485 | 5,944 | 8,343 | 40.4% |
Ratios
|
|---|
| Revenue growth | 5.4% | 5.6% | 11.5% | 7.8% | -2.6% | |
| EBITDA growth | -17.4% | 23.4% | 8.0% | -26.9% | 35.6% | |
| Gross Margin | 76.2% | 74.0% | 68.8% | 64.7% | 64.0% | -0.7% |
| EBITDA Margin | 33.5% | 39.2% | 38.0% | 25.8% | 35.9% | 10.1% |
| Net Income Margin | 23.0% | 28.1% | 25.4% | 13.0% | 22.5% | 9.5% |
| SG&A, % of revenue | 25.0% | 26.2% | 23.6% | 21.7% | 21.1% | -0.7% |
| CAPEX, % of revenue | 3.1% | 5.5% | 6.3% | 6.4% | 9.2% | 2.8% |
| ROIC | 28.6% | 30.3% | 26.2% | 15.6% | 20.0% | 4.4% |
| ROE | 27.5% | 30.1% | 26.2% | 14.4% | 25.2% | 10.8% |
| Net Debt/EBITDA | 0.2x | 0.4x | 0.4x | 1.2x | 1.4x | 0.2x |
Microsoft Corp ($4338) key quoterly financial indicators
| mln. $ | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 20,910 | 25,253 | 21,517 | 23,474 | | | | |
| EBITDA | 7,777 | 9,033 | 7,984 | 7,906 | | | | |
| Net Income | 5,069 | 5,938 | 4,305 | 5,227 | | | | |
Balance Sheet
|
|---|
| Cash | 5,431 | 7,185 | 7,170 | 6,510 | | | | |
| Short Term Debt | 10,748 | 3,750 | 5,498 | 12,904 | | | | |
| Long Term Debt | 27,819 | 40,679 | 40,896 | 40,557 | | | | |
Ratios
|
|---|
| Gross Margin | 65.5% | 60.9% | 64.1% | 66.0% | | | | |
| EBITDA Margin | 37.2% | 35.8% | 37.1% | 33.7% | | | | |
| Net Income Margin | 24.2% | 23.5% | 20.0% | 22.3% | | | | |
Revenue and profitability
The company's Revenue decreased on 2.6%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin jumped on 10.1 pp from 25.8% to 35.9% in FY2016.
Gross Margin decreased slightly on 0.66 pp from 64.7% to 64.0% in FY2016. SG&A as a % of Revenue decreased slightly on 0.66 pp from 21.7% to 21.1% in FY2016.
Net Income marign increased on 9.5 pp from 13.0% to 22.5% in FY2016.
Capital expenditures (CAPEX) and working capital investments
In FY2016 Microsoft Corp had CAPEX/Revenue of 9.2%. The company showed CAPEX/Revenue growth of 3.7 pp from 5.5% in FY2013 to 9.2% in FY2016. Average CAPEX/Revenue for the last three years was 7.3%.
Return on investment
The company operates at high and attractive ROE (25.17%) while ROIC is a bit lower (19.98%). ROIC increased on 4.4 pp from 15.6% to 20.0% in FY2016. ROE jumped on 10.8 pp from 14.4% to 25.2% in FY2016.
Leverage (Debt)
Debt level is 1.4x Net Debt / EBITDA and 1.6x Debt / EBITDA. Net Debt / EBITDA jumped on 0.2x from 1.2x to 1.4x in FY2016. Debt surged on 51.5% while cash surged on 16.4%.
Management team
The company's CEO is Satya Nadella. Satya Nadella has 4 years tenure at the company. Amy E Hood is a The company's CFO. Amy E Hood has spent 5 years 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Yunbo Digital Synergy Group Ltd ($8050) | | 241.6% | -31.9% | 348.0% | 99.6% |
| Pizu Group Holdings Ltd ($8053) | | -42.9% | 1,742.9% | 157.9% | 235.2% |
| China Eco-Farming Ltd ($8166) | -23.6% | -7.7% | 21.8% | 155.5% | |
| ICO Group Ltd ($8140) | | -11.1% | -3.1% | 104.9% | 29.8% |
| Aurum Pacific China Group Ltd ($8148) | | | 50.0% | 92.7% | |
| |
|---|
| Median (37 companies) | 19.9% | 11.2% | 21.2% | 10.7% | 10.0% |
|---|
| Microsoft Corp ($4338) | | | | 7.8% | -2.6% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| China Bio Cassava Holdings Ltd ($8129) | 90.4% | 97.4% | 98.4% | 98.3% | |
| Chanjet Information Technology Co Ltd ($1588) | 89.2% | 91.3% | 92.4% | 91.4% | |
| China Binary Sale Technology Ltd ($8255) | 63.5% | 68.5% | 67.7% | 85.9% | |
| Kingdee International Software Group Co Ltd ($268) | 65.0% | 75.3% | 82.5% | 81.5% | |
| Tian Ge Interactive Holdings Ltd ($1980) | 88.5% | 87.6% | 84.8% | 77.7% | |
| |
|---|
| Median (36 companies) | 44.3% | 40.5% | 39.7% | 41.4% | 27.8% |
|---|
| Microsoft Corp ($4338) | | | 68.8% | 64.7% | 64.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| International Entertainment Corp ($1009) | 50.8% | 64.0% | 54.9% | 62.0% | 45.5% |
| Sinosoft Technology Group Ltd ($1297) | 62.6% | 54.9% | 57.2% | 59.0% | |
| China Binary Sale Technology Ltd ($8255) | 35.1% | 35.4% | 44.4% | 50.5% | |
| Boyaa Interactive International Ltd ($434) | 38.5% | 25.8% | 30.7% | 47.6% | |
| TravelSky Technology Ltd ($696) | 38.1% | 35.8% | 31.9% | 41.1% | |
| |
|---|
| Median (37 companies) | 9.8% | 11.1% | 9.1% | 9.1% | 2.4% |
|---|
| Microsoft Corp ($4338) | | | 38.0% | 25.8% | 35.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| NetDragon Websoft Inc ($777) | 21.1% | 34.6% | 54.6% | 42.9% | |
| China Information Technology Development Ltd ($8178) | 4.1% | 1.1% | 0.5% | 40.7% | |
| Aurum Pacific China Group Ltd ($8148) | | 2.9% | 7.5% | 20.6% | |
| TravelSky Technology Ltd ($696) | 8.9% | 21.7% | 18.1% | 18.1% | |
| Kingsoft Corp Ltd ($3888) | 4.3% | 3.8% | 14.3% | 11.1% | |
| |
|---|
| Median (37 companies) | 1.4% | 1.6% | 3.1% | 2.0% | 0.8% |
|---|
| Microsoft Corp ($4338) | | | 6.3% | 6.4% | 9.2% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Pizu Group Holdings Ltd ($8053) | -21.8% | -13.4% | -6.8% | 120.0% | 51.7% |
| ICO Group Ltd ($8140) | | 43.5% | 6.8% | 37.7% | 27.1% |
| IGG Inc ($8002) | | 55.9% | 41.4% | 25.9% | |
| Boyaa Interactive International Ltd ($434) | 75.3% | 21.3% | 20.0% | 21.4% | |
| Sinosoft Technology Group Ltd ($1297) | 34.0% | 21.9% | 20.2% | 20.8% | |
| |
|---|
| Median (37 companies) | 5.2% | 6.4% | 3.9% | 2.2% | 2.3% |
|---|
| Microsoft Corp ($4338) | | | 26.2% | 15.6% | 20.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Epicurean and Co Ltd ($8213) | 2.3x | 4.7x | 12.3x | 12.0x | 13.9x |
| Sing Lee Software Group Ltd ($8076) | | | 6.2x | 4.4x | |
| Century Sage Scientific Holdings Ltd ($1450) | 0.2x | 0.0x | -0.2x | 1.8x | |
| Chinasoft International Ltd ($354) | -0.7x | 0.7x | 1.5x | 0.7x | |
| China Technology Solar Power Holdings Ltd ($8111) | | 7.4x | 3.3x | 0.2x | 0.9x |
| |
|---|
| Median (21 companies) | -1.0x | -1.5x | -1.8x | -1.2x | -0.4x |
|---|
| Microsoft Corp ($4338) | | | 0.4x | 1.2x | 1.4x |
