Microsoft Corp Debt surged on 73.9% and Revenue increased on 5.9%
20/07/2017 • About Microsoft Corp (
$4338) • By InTwits
Microsoft Corp reported FY2017 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 7.1%. At the same time it's a lot of higher than industry average of 5.7%.
- CAPEX is quite volatile: 24,563 in 2017, 38,715 in 2016, 8,691 in 2015, 5,828 in 2014, 1,822 in 2013
- The company has highly profitable business model: ROIC is at 17.5%
- It operates with high leverage: Net Debt/EBITDA is 2.3x 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. $ | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 77,849 | 86,833 | 93,580 | 91,154 | 96,571 | 5.9% |
| Gross Profit | 57,600 | 59,755 | 60,542 | 58,374 | 62,310 | 6.7% |
| SG&A | 20,425 | 20,488 | 20,324 | 19,198 | 19,942 | 3.9% |
| EBITDA | 30,519 | 32,971 | 24,118 | 32,700 | 37,803 | 15.6% |
| Net Income | 21,863 | 22,074 | 12,193 | 20,539 | 25,489 | 24.1% |
Balance Sheet
|
|---|
| Cash | 3,804 | 8,669 | 5,595 | 6,510 | 7,663 | 17.7% |
| Short Term Debt | 2,999 | 2,000 | 7,484 | 12,904 | 11,544 | -10.5% |
| Long Term Debt | 12,601 | 20,645 | 27,808 | 40,557 | 81,445 | 100.8% |
Cash flow
|
|---|
| Capex | 4,257 | 5,485 | 5,944 | 8,343 | 8,129 | -2.6% |
Ratios
|
|---|
| Revenue growth | 5.6% | 11.5% | 7.8% | -2.6% | 5.9% | |
| EBITDA growth | 23.4% | 8.0% | -26.9% | 35.6% | 15.6% | |
| Gross Margin | 74.0% | 68.8% | 64.7% | 64.0% | 64.5% | 0.5% |
| EBITDA Margin | 39.2% | 38.0% | 25.8% | 35.9% | 39.1% | 3.3% |
| Net Income Margin | 28.1% | 25.4% | 13.0% | 22.5% | 26.4% | 3.9% |
| SG&A, % of revenue | 26.2% | 23.6% | 21.7% | 21.1% | 20.7% | -0.4% |
| CAPEX, % of revenue | 5.5% | 6.3% | 6.4% | 9.2% | 8.4% | -0.7% |
| ROIC | 30.3% | 26.2% | 15.6% | 20.0% | 17.5% | -2.4% |
| ROE | 30.1% | 26.2% | 14.4% | 25.2% | 29.8% | 4.7% |
| Net Debt/EBITDA | 0.4x | 0.4x | 1.2x | 1.4x | 2.3x | 0.8x |
Microsoft Corp ($4338) key quoterly financial indicators
| mln. $ | FY17Q1 | FY17Q2 | FY17Q3 | FY17Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 21,928 | 25,826 | 23,212 | 25,605 | 4.9% | 2.3% | 7.9% | 9.1% |
| EBITDA | 8,531 | 10,071 | 9,176 | 10,025 | 9.7% | 11.5% | 14.9% | 26.8% |
| Net Income | 5,667 | 6,267 | 5,486 | 8,069 | 11.8% | 5.5% | 27.4% | 54.4% |
Balance Sheet
|
|---|
| Cash | 13,928 | 8,468 | 6,713 | 7,663 | 156.5% | 17.9% | -6.4% | 17.7% |
| Short Term Debt | 14,536 | 25,664 | 7,786 | 11,544 | 35.2% | 584.4% | 41.6% | -10.5% |
| Long Term Debt | 60,154 | 59,306 | 76,222 | 81,445 | 116.2% | 45.8% | 86.4% | 100.8% |
Ratios
|
|---|
| Gross Margin | 64.2% | 61.7% | 65.3% | 67.0% | -1.3% | 0.8% | 1.2% | 1.0% |
| EBITDA Margin | 38.9% | 39.0% | 39.5% | 39.2% | 1.7% | 3.2% | 2.4% | 5.5% |
| Net Income Margin | 25.8% | 24.3% | 23.6% | 31.5% | 1.6% | 0.8% | 3.6% | 9.2% |
Revenue and profitability
The company's Revenue increased on 5.9%. Revenue growth showed acceleration in FY17Q4 - it increased 9.1% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.62 pp from 20.4% to 21.0% in 2017.
Gross Margin showed almost no change in FY2017. SG&A as a % of Revenue showed almost no change in FY2017.
Net Income marign increased on 3.9 pp from 22.5% to 26.4% in FY2017.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 8.4% in FY2017. CAPEX/Revenue increased on 2.1 pp from 6.3% in FY2014 to 8.4% in FY2017. For the last three years the average CAPEX/Revenue was 8.0%.
Return on investment
The company operates at high and attractive ROE (29.85%) while ROIC is a bit lower (17.54%). ROIC decreased on 2.4 pp from 20.0% to 17.5% in FY2017. ROE increased on 4.7 pp from 25.2% to 29.8% in FY2017.
Leverage (Debt)
Debt level is 2.3x Net Debt / EBITDA and 2.5x Debt / EBITDA. Net Debt / EBITDA surged on 0.8x from 1.4x to 2.3x in FY2017. Debt jumped on 73.9% while cash surged on 17.7%.
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 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Pizu Group Holdings Ltd ($8053) | -42.9% | 1,742.9% | 157.9% | 235.2% | |
| NetDragon Websoft Inc ($777) | 7.1% | 8.9% | 32.1% | 119.5% | |
| Yunbo Digital Synergy Group Ltd ($8050) | 241.6% | -31.9% | 348.0% | 99.6% | |
| China Mobile Games and Cultural Investment Ltd ($8081) | -6.6% | 92.2% | 34.8% | 97.8% | |
| China Technology Solar Power Holdings Ltd ($8111) | 63.9% | 42.3% | 52.1% | 69.8% | |
| |
|---|
| Median (31 companies) | 11.4% | 21.5% | 7.0% | 21.3% | |
|---|
| Microsoft Corp ($4338) | | | 7.8% | -2.6% | 5.9% |
Top companies by Gross margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Kingdee International Software Group Co Ltd ($268) | 75.3% | 82.5% | 81.5% | 81.3% | |
| Aurum Pacific China Group Ltd ($8148) | 81.4% | 72.9% | 76.6% | 78.8% | |
| Kingsoft Corp Ltd ($3888) | 86.3% | 82.4% | 76.8% | 67.9% | |
| Epicurean and Co Ltd ($8213) | 67.3% | 67.3% | 68.4% | 67.4% | |
| International Entertainment Corp ($1009) | 50.8% | 44.4% | 43.6% | 46.6% | |
| |
|---|
| Median (14 companies) | 42.5% | 42.1% | 40.1% | 36.5% | |
|---|
| Microsoft Corp ($4338) | | 68.8% | 64.7% | 64.0% | 64.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Kantone Holdings Ltd ($1059) | 38.9% | 30.4% | 21.2% | 53.0% | |
| International Entertainment Corp ($1009) | 64.0% | 54.9% | 62.0% | 45.5% | |
| Kingdee International Software Group Co Ltd ($268) | 33.2% | 37.2% | 31.9% | 31.3% | |
| China Technology Solar Power Holdings Ltd ($8111) | 10.4% | 16.3% | 30.7% | 28.1% | |
| Kingsoft Corp Ltd ($3888) | 35.9% | 20.1% | 15.3% | 15.1% | |
| |
|---|
| Median (13 companies) | 12.4% | 8.9% | 8.5% | 2.8% | |
|---|
| Microsoft Corp ($4338) | | 38.0% | 25.8% | 35.9% | 39.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| ICO Group Ltd ($8140) | 0.1% | 0.1% | 0.2% | 9.8% | |
| Kingdee International Software Group Co Ltd ($268) | 8.7% | 4.5% | 2.8% | 8.3% | |
| Epicurean and Co Ltd ($8213) | 10.4% | 10.3% | 5.5% | 4.9% | |
| International Entertainment Corp ($1009) | 5.3% | 6.1% | 4.1% | 3.3% | |
| Pizu Group Holdings Ltd ($8053) | 0.3% | 0.0% | 1.7% | 1.2% | |
| |
|---|
| Median (12 companies) | 1.6% | 2.6% | 2.0% | 0.5% | |
|---|
| Microsoft Corp ($4338) | | 6.3% | 6.4% | 9.2% | 8.4% |
Top companies by ROIC, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Pizu Group Holdings Ltd ($8053) | -13.4% | -6.8% | 120.0% | 51.7% | |
| ICO Group Ltd ($8140) | 43.5% | 6.8% | 37.7% | 27.1% | |
| Kantone Holdings Ltd ($1059) | 7.2% | 8.3% | 1.8% | 17.4% | |
| China Technology Solar Power Holdings Ltd ($8111) | 0.3% | 3.9% | 9.7% | 9.9% | |
| Kingsoft Corp Ltd ($3888) | 16.9% | 7.3% | 5.0% | 5.9% | |
| |
|---|
| Median (31 companies) | 6.4% | 3.3% | 2.0% | 4.1% | |
|---|
| Microsoft Corp ($4338) | | 26.2% | 15.6% | 20.0% | 17.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Epicurean and Co Ltd ($8213) | 4.7x | 12.3x | 12.0x | 13.9x | |
| China Technology Solar Power Holdings Ltd ($8111) | 7.4x | 3.3x | 0.2x | 0.9x | |
| Pizu Group Holdings Ltd ($8053) | | 346.1x | -0.4x | 0.4x | |
| Kantone Holdings Ltd ($1059) | -0.1x | -0.0x | -0.3x | -0.1x | |
| Kingdee International Software Group Co Ltd ($268) | 1.1x | 0.5x | -1.2x | -1.0x | |
| |
|---|
| Median (9 companies) | -1.4x | -2.1x | -1.2x | -1.0x | |
|---|
| Microsoft Corp ($4338) | | 0.4x | 1.2x | 1.4x | 2.3x |
