Microchip Technology Incorporated CAPEX jumped on 175% and Revenue jumped on 16.8%
05/08/2018 • About Microchip Technology Incorporated (
$MCHP) • By InTwits
Microchip Technology Incorporated reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Microchip Technology Incorporated is a fast growth stock: FY2018 revenue growth was 16.8%, 5 year revenue CAGR was 20.3% at FY2018 ROIC 14.4%
- Microchip Technology Incorporated has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.9%. At the same time it's in pair with industry average of 7.4%
- CAPEX is quite volatile: $207m in FY2018, $75m in FY2017, $98m in FY2016, $149m in FY2015, $113m in FY2014
- In the last 5 years the company invested considerably less than D&A: $643m vs. $1,836m. In FY2018 this situation was still the same: CAPEX was 207 while D&A was 616
- The company has highly profitable business model: ROIC is 14.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Microchip Technology Incorporated's Revenue jumped on 16.8%. Revenue growth showed slowdown in FY18Q4 - it was 11.0% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin surged on 17.1 pp from 21.9% to 39.0% in FY2018. During the last 5 years EBITDA Margin bottomed in FY2017 at 21.9%.
Gross Margin increased on 9.2 pp from 51.6% to 60.8% in FY2018. During the last 5 years Gross Margin bottomed in FY2017 at 51.6%. SG&A as a % of Revenue decreased on 3.3 pp from 14.7% to 11.4% in FY2018. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 1.4 pp from 3.8% to 2.3% in FY2018.
Net Income margin increased slightly on 1.6 pp from 4.8% to 6.4% in FY2018. Net Income margin declined at -4.0 pp per annum in FY2014-FY2018. The efficient tax rate was 65.4% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 Microchip Technology Incorporated had CAPEX/Revenue of 5.2%. Microchip Technology Incorporated's CAPEX/Revenue decreased slightly on 1.8 pp from 7.0% in FY2015 to 5.2% in FY2018. It's average level of CAPEX/Revenue for the last three years was 4.0%.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Inventories as a % of Revenue showed almost no change at 12.0% in FY2018. Accounts payable as a % of Revenue showed almost no change in FY2018.
Return on investment
The company operates at good ROIC (14.4%) while ROE is low (7.8%). ROIC increased on 9.6 pp from 4.8% to 14.4% in FY2018. ROE increased slightly on 1.7 pp from 6.1% to 7.8% in FY2018. During the last 5 years ROIC bottomed in FY2017 at 4.8%. ROE stuck to a declining trend at -3.5 pp per annum in FY2014-FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.4x and Debt / EBITDA is 2.0x. Net Debt / EBITDA dropped on 1.3x from 2.7x to 1.4x in FY2018. Debt increased on 4.0% while cash decreased slightly on 0.81%.
Microchip Technology Incorporated has good short term financial stability: Interest coverage ratio (ICR) is 4.7x. Microchip Technology Incorporated has short term refinancing risk: cash is only 68.8% of short term debt.
Average interest expence paid by the company was 6.5% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 15.5x and P/E 85.5x.
The company paid 132.3% of Net Income as dividends in FY2018. Dividends grew on average at 3.8% per annum in the last 5 years).
Management team
Microchip Technology Incorporated's CEO Steve Sanghi is a founder and has spent 3 years with the company. CEO total compensation was
$7,893,460 in FY2018 which included
$740,042 salary and
$48,012 annual bonus.
Insider ownership is 2.2%. Insider ownership didn't change in 2018.
The company has 14,234 employees. The number of employees surged on 12.5%. Average revenue per employee in FY2018 was
$279,668 and it increased on 3.9%.
Financial and operational results
FY ended 03/31/2018
Microchip Technology Incorporated ($MCHP) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,931 | 2,147 | 2,173 | 3,408 | 3,981 | 16.8% |
| Gross Profit | 1,129 | 1,230 | 1,205 | 1,757 | 2,421 | 37.8% |
| SG&A | 267 | 275 | 302 | 500 | 452 | -9.5% |
| EBITDA | 648 | 704 | 636 | 745 | 1,552 | 108.3% |
| EBIT | 459 | 426 | 352 | 276 | 936 | 239.5% |
| Interest expence | | 62 | 104 | 146 | 199 | 36.0% |
| Tax | 37 | -19 | -43 | -81 | 482 | |
| Net Income | 395 | 369 | 324 | 165 | 255 | 55.2% |
| Stock Based Compensation | 52 | 57 | 71 | 128 | 93 | -27.2% |
Balance Sheet
|
|---|
| Cash | 467 | 608 | 2,093 | 909 | 901 | -0.8% |
| Accounts Receivable | 242 | 274 | 290 | 478 | 564 | 17.8% |
| Inventory | 263 | 279 | 307 | 417 | 476 | 14.1% |
| Accounts Payable | 74 | 87 | 79 | 149 | 144 | -3.4% |
| Short Term Debt | 18 | 0 | 0 | 50 | 1,310 | 2,519.8% |
| Long Term Debt | 1,003 | 1,827 | 2,453 | 2,901 | 1,758 | -39.4% |
Cash flow
|
|---|
| Capex | 113 | 149 | 98 | 75 | 207 | 174.6% |
| Dividends | 281 | 286 | 291 | 315 | 338 | 7.3% |
| Acquisitions | 11 | 628 | 344 | 2,748 | | |
Ratios
|
|---|
| Revenue growth | 22.1% | 11.2% | 1.2% | 56.8% | 16.8% | |
| EBITDA growth | 69.3% | 8.6% | -9.7% | 17.2% | 108.3% | |
|
|---|
| Gross Margin | 58.4% | 57.3% | 55.5% | 51.6% | 60.8% | 9.2% |
| EBITDA Margin | 33.6% | 32.8% | 29.2% | 21.9% | 39.0% | 17.1% |
| EBIT Margin | 23.8% | 19.8% | 16.2% | 8.1% | 23.5% | 15.4% |
| SG&A, % of revenue | 13.8% | 12.8% | 13.9% | 14.7% | 11.4% | -3.3% |
| SBC, % of revenue | 2.7% | 2.7% | 3.3% | 3.8% | 2.3% | -1.4% |
| Net Income Margin | 20.5% | 17.2% | 14.9% | 4.8% | 6.4% | 1.6% |
| CAPEX, % of revenue | 5.9% | 7.0% | 4.5% | 2.2% | 5.2% | 3.0% |
|
|---|
| ROIC | 13.4% | 10.9% | 7.6% | 4.8% | 14.4% | 9.6% |
| ROE | 19.4% | 17.7% | 15.5% | 6.1% | 7.8% | 1.7% |
| Net Debt/EBITDA | 0.9x | 1.7x | 0.6x | 2.7x | 1.4x | -1.3x |
| Interest coverage ratio (ICR) | | 6.9x | 3.4x | 1.9x | 4.7x | 2.8x |
| Interest expence / Average debt | | 4.4% | 4.9% | 5.4% | 6.5% | 1.1% |
People
|
|---|
| Insider ownership | 2.2% | 2.2% | 2.2% | 2.2% | 2.2% | 0.0% |
| Employees | 8,640 | 9,449 | 9,766 | 12,656 | 14,234 | 12.5% |
| Revenue/Employee, th. $ | 224 | 227 | 223 | 269 | 280 | 3.9% |
Microchip Technology Incorporated ($MCHP) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 972 | 1,012 | 994 | 1,002 | | 21.6% | 16.2% | 19.2% | 11.0% |
| EBITDA | 373 | 378 | 400 | 401 | | 591.0% | 115.3% | 71.6% | 42.0% |
| Net Income | 171 | 189 | -251 | 147 | | | 457.8% | -334.3% | 7.2% |
Balance Sheet
|
|---|
| Cash | 773 | 826 | 672 | 901 | | 28.7% | 68.7% | 1.2% | -0.8% |
| Short Term Debt | 11 | 6 | 0 | 1,310 | | | | | 2,519.8% |
| Long Term Debt | 2,984 | 3,012 | 3,040 | 1,758 | | -10.6% | -3.0% | -2.7% | -39.4% |
Ratios
|
|---|
| Gross Margin | 60.1% | 60.7% | 61.1% | 61.4% | | 16.5% | 13.6% | 5.3% | 2.3% |
| EBITDA Margin | 38.4% | 37.3% | 40.2% | 40.0% | | 31.7% | 17.2% | 12.3% | 8.7% |
| Net Income Margin | 17.5% | 18.7% | -25.3% | 14.6% | | 31.7% | 14.8% | -38.1% | -0.5% |
Peers in Semiconductors
Below we provide Microchip Technology Incorporated benchmarking against other companies in Semiconductors 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.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 8.5% | 5.2% | 10.9% | 4.7% |
|---|
| Microchip Technology Incorporated ($MCHP) | | 11.2% | 1.2% | 56.8% | 16.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 45.3% | 47.0% | 47.2% | 48.6% | 50.4% |
|---|
| Microchip Technology Incorporated ($MCHP) | 58.4% | 57.3% | 55.5% | 51.6% | 60.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.3% | 9.2% | 10.7% | 9.8% |
|---|
| Microchip Technology Incorporated ($MCHP) | 33.6% | 32.8% | 29.2% | 21.9% | 39.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.6% | 4.7% | 4.4% |
|---|
| Microchip Technology Incorporated ($MCHP) | 5.9% | 7.0% | 4.5% | 2.2% | 5.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.0% | 3.8% | 1.4% | 3.2% | 3.0% |
|---|
| Microchip Technology Incorporated ($MCHP) | 13.4% | 10.9% | 7.6% | 4.8% | 14.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.6x | -0.3x | -0.0x | 0.4x | 0.3x |
|---|
| Microchip Technology Incorporated ($MCHP) | 0.9x | 1.7x | 0.6x | 2.7x | 1.4x |
