Western Digital Corporation reports 39.0% EBITDA growth in 2018 and 8.1% Revenue growth
07/26/2018 • About Western Digital Corporation (
$WDC) • By InTwits
Western Digital Corporation reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Western Digital Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.0%. At the same time it's in pair with industry average of 5.2%
- CAPEX is quite volatile: $127m in 2018, $111m in 2017, $50m in 2016, $46m in 2015, $38m in 2014
- In the last 5 years the company invested considerably less than D&A: $3,237m vs. $7,696m. In FY2018 this situation was still the same: CAPEX was 835 while D&A was 2,056
- The company has highly profitable business model: ROIC is 15.3%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.1x while industry average is -2.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Western Digital Corporation's Revenue increased on 8.1%. Revenue growth showed slowdown in FY18Q4 - it was 5.7% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018. During FY2014-FY2018 EBITDA Margin bottomed in FY2016 at 12.5% and was growing since that time.
Gross Margin increased on 5.5 pp from 31.8% to 37.3% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2016 at 7.7% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. SBC as a % of Revenue grew at 0.25 pp per annum in FY2014-FY2018.
Net Income margin increased slightly on 1.2 pp from 2.1% to 3.3% in FY2018. During FY2014-FY2018 Net Income margin bottomed in FY2016 at 1.9% and was growing since that time. The efficient tax rate was 67.6% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 4.0%. Western Digital Corporation's CAPEX/Revenue showed almost no change from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 3.9%.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Inventories as a % of Revenue increased slightly on 2.0 pp from 12.3% to 14.3% in FY2018. Accounts payable as a % of Revenue increased slightly on 1.0 pp from 16.5% to 17.5% in FY2018.
Western Digital Corporation has spent
$100m on M&A in FY2018 which accounts for 0.48% of revenue.
Return on investment
The company operates at good ROIC (15.3%) while ROE is low (5.9%). ROIC increased on 7.9 pp from 7.4% to 15.3% in FY2018. ROE increased on 2.4 pp from 3.5% to 5.9% in FY2018. During FY2014-FY2018 ROIC bottomed in FY2016 at 2.3% and was growing since that time. During the last 5 years ROE bottomed in FY2016 at 2.4% and was growing since that time.
Leverage (Debt)
Debt level is 1.1x Net Debt / EBITDA and 2.0x Debt / EBITDA. Net Debt / EBITDA dropped on 0.6x from 1.7x to 1.1x in FY2018. Debt dropped on 15.0% while cash dropped on 21.2%.
Western Digital Corporation has good short term financial stability: Interest coverage ratio (ICR) is 5.4x. Western Digital Corporation has no short term refinancing risk: cash is higher than short term debt (2,796.1%).
Average interest expence charged on company's debt was 6.1% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 4.7x and P/E 30.4x.
The company paid 87.9% of Net Income as dividends in FY2018. Dividends grew on average at 18.0% per annum in the last 5 years).
Management team
The company's CEO Stephen D Milligan "Steve" is a founder and has spent 3 years with the company. CEO total compensation was
$19,738,381 in FY2018 which included
$1,250,000 salary.
Insider ownership is 0.51%. Insider ownership didn't change in 2018.
At the end of financial year the company had 71,600 employees. The number of employees increased on 5.9%. Average revenue per employee in FY2018 was
$288,366 and it increased on 2.1%.
Financial and operational results
FY ended 06/29/2018
Western Digital Corporation ($WDC) key annual financial indicatorsmln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
---|
P&L
|
---|
Revenue | 15,130 | 14,572 | 12,994 | 19,093 | 20,647 | 8.1% |
Gross Profit | 4,360 | 4,221 | 3,435 | 6,072 | 7,705 | 26.9% |
SG&A | 813 | 788 | 997 | 1,445 | 1,473 | 1.9% |
EBITDA | 3,035 | 2,725 | 1,620 | 4,082 | 5,673 | 39.0% |
EBIT | 1,791 | 1,611 | 466 | 1,954 | 3,617 | 85.1% |
Interest expence | | 49 | 266 | 847 | 676 | -20.2% |
Tax | 135 | 112 | -89 | 372 | 1,410 | 279.0% |
Net Income | 1,617 | 1,465 | 242 | 397 | 675 | 70.0% |
Stock Based Compensation | 156 | 162 | 191 | 394 | 377 | -4.3% |
Balance Sheet
|
---|
Cash | 4,804 | 5,024 | 8,151 | 6,354 | 5,005 | -21.2% |
Accounts Receivable | 1,989 | 1,532 | 1,461 | 1,948 | 2,197 | 12.8% |
Inventory | 1,226 | 1,368 | 2,129 | 2,341 | 2,944 | 25.8% |
Accounts Payable | 1,971 | 1,881 | 1,888 | 2,144 | 2,265 | 5.6% |
Short Term Debt | 125 | 407 | 3,334 | 233 | 179 | -23.2% |
Long Term Debt | 2,313 | 2,149 | 13,660 | 12,918 | 10,993 | -14.9% |
Cash flow
|
---|
Capex | 628 | 612 | 584 | 578 | 835 | 44.5% |
Dividends | 259 | 396 | 464 | 574 | 593 | 3.3% |
Acquisitions | 823 | 257 | 9,835 | | 100 | |
Ratios
|
---|
Revenue growth | -1.4% | -3.7% | -10.8% | 46.9% | 8.1% | |
EBITDA growth | 21.4% | -10.2% | -40.6% | 152.0% | 39.0% | |
|
---|
Gross Margin | 28.8% | 29.0% | 26.4% | 31.8% | 37.3% | 5.5% |
EBITDA Margin | 20.1% | 18.7% | 12.5% | 21.4% | 27.5% | 6.1% |
EBIT Margin | 11.8% | 11.1% | 3.6% | 10.2% | 17.5% | 7.3% |
SG&A, % of revenue | 5.4% | 5.4% | 7.7% | 7.6% | 7.1% | -0.4% |
SBC, % of revenue | 1.0% | 1.1% | 1.5% | 2.1% | 1.8% | -0.2% |
Net Income Margin | 10.7% | 10.1% | 1.9% | 2.1% | 3.3% | 1.2% |
CAPEX, % of revenue | 4.2% | 4.2% | 4.5% | 3.0% | 4.0% | 1.0% |
|
---|
ROIC | 17.1% | 14.1% | 2.3% | 7.4% | 15.3% | 7.9% |
ROE | 19.3% | 16.2% | 2.4% | 3.5% | 5.9% | 2.4% |
Net Debt/EBITDA | -0.8x | -0.9x | 5.5x | 1.7x | 1.1x | -0.6x |
Interest expence / Average debt | | 2.0% | 2.7% | 5.6% | 6.1% | 0.4% |
People
|
---|
Insider ownership | 0.5% | 0.5% | 0.5% | 0.5% | 0.5% | 0.0% |
Employees | 84,072 | 76,449 | 72,878 | 67,600 | 71,600 | 5.9% |
Revenue/Employee, th. $ | 180 | 191 | 178 | 282 | 288 | 2.1% |
Western Digital Corporation ($WDC) key quoterly financial indicators
mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
---|
P&L
|
---|
Revenue | 5,181 | 5,336 | 5,013 | 5,117 | | 9.9% | 9.2% | 7.8% | 5.7% |
EBITDA | 1,438 | 1,490 | 1,413 | 1,332 | | 94.3% | 40.7% | 30.2% | 11.2% |
Net Income | 681 | -823 | 61 | 756 | | | -450.2% | -75.4% | 170.0% |
Balance Sheet
|
---|
Cash | 6,886 | 6,272 | 4,963 | 5,005 | | 68.9% | 27.0% | -12.2% | -21.2% |
Short Term Debt | 258 | 274 | 124 | 179 | | 230.8% | 112.4% | -31.5% | -23.2% |
Long Term Debt | 12,873 | 11,777 | 11,076 | 10,993 | | -1.4% | -9.0% | -14.2% | -14.9% |
Ratios
|
---|
Gross Margin | 36.9% | 37.7% | 38.4% | 36.2% | | 8.6% | 6.4% | 5.7% | 1.5% |
EBITDA Margin | 27.8% | 27.9% | 28.2% | 26.0% | | 12.1% | 6.3% | 4.8% | 1.3% |
Net Income Margin | 13.1% | -15.4% | 1.2% | 14.8% | | 20.9% | -20.2% | -4.1% | 9.0% |
Peers in Technology Hardware, Storage &
Below we provide Western Digital Corporation benchmarking against other companies in Technology Hardware, Storage & 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 |
---|
Crossroads Systems Inc ($CRSS) | | -90.6% | -35.5% | -89.5% | 39,959.5% |
Immersion Corporation ($IMMR) | | 19.8% | -9.9% | -38.7% | 217.0% |
Veritec Inc ($VRTC) | | -42.2% | -28.0% | -52.2% | 53.1% |
Boxlight Corporation ($BOXL) | | -88.5% | 503.2% | 26.4% | 47.0% |
Pure Storage, Inc. ($PSTG) | | 308.2% | 152.4% | 67.9% | 38.6% |
|
---|
Median (30 companies) | -16.9% | -3.2% | -4.3% | 1.5% | 4.3% |
---|
Western Digital Corporation ($WDC) | | -3.7% | -10.8% | 46.9% | 8.1% |
Top companies by Gross margin, %
Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
---|
Immersion Corporation ($IMMR) | 99.1% | 99.3% | 99.7% | 99.4% | 99.8% |
Pure Storage, Inc. ($PSTG) | 43.5% | 55.5% | 61.9% | 65.9% | 65.5% |
NetApp, Inc. ($NTAP) | 62.0% | 62.6% | 60.8% | 61.3% | 62.7% |
Avid Technology, Inc. ($AVID) | 61.4% | 60.9% | 65.0% | 57.8% | 57.9% |
Datasea Inc ($DTSS) | | | | 39.3% | 54.4% |
|
---|
Median (29 companies) | 38.6% | 36.3% | 39.3% | 39.6% | 38.8% |
---|
Western Digital Corporation ($WDC) | 28.8% | 29.0% | 26.4% | 31.8% | 37.3% |
Top companies by EBITDA margin, %
Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
---|
Immersion Corporation ($IMMR) | 12.3% | 9.0% | -25.1% | -127.0% | 48.6% |
Apple Inc. ($AAPL) | 33.1% | 35.3% | 32.7% | 31.2% | 30.8% |
NetApp, Inc. ($NTAP) | 16.9% | 16.7% | 11.3% | 15.4% | 22.9% |
Seagate Technology PLC ($STX) | 19.3% | 21.1% | 11.3% | 16.7% | 20.0% |
Hewlett Packard Enterprise Company ($HPE) | 11.8% | 10.5% | 25.4% | 12.7% | 14.4% |
|
---|
Median (29 companies) | 7.1% | 6.2% | 3.8% | 3.5% | 7.9% |
---|
Western Digital Corporation ($WDC) | 20.1% | 18.7% | 12.5% | 21.4% | 27.5% |
Top companies by CAPEX/Revenue, %
Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
---|
Hewlett Packard Enterprise Company ($HPE) | 6.6% | 6.4% | 10.8% | 10.9% | 9.6% |
Pure Storage, Inc. ($PSTG) | 28.7% | 24.2% | 8.9% | 10.4% | 6.3% |
3D Systems Corporation ($DDD) | 3.5% | 3.4% | 2.6% | 4.8% | 5.9% |
Apple Inc. ($AAPL) | 5.2% | 4.8% | 5.9% | 5.4% | 5.0% |
Video Display Corp ($VIDE) | 0.5% | 0.5% | 0.9% | 1.5% | 3.9% |
|
---|
Median (29 companies) | 2.6% | 2.9% | 1.7% | 1.8% | 2.2% |
---|
Western Digital Corporation ($WDC) | 4.2% | 4.2% | 4.5% | 3.0% | 4.0% |
Top companies by ROIC, %
Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
---|
Avid Technology, Inc. ($AVID) | | | | | 252.4% |
Ionix Technology Inc ($IINX) | | | | 23.9% | 204.5% |
Immersion Corporation ($IMMR) | 7.6% | 5.8% | -21.5% | -138.9% | 96.8% |
HP Inc. ($HPQ) | 8.0% | 8.7% | 15.8% | 60.8% | 72.9% |
NetApp, Inc. ($NTAP) | 12.5% | 14.8% | 7.3% | 14.0% | 28.1% |
|
---|
Median (37 companies) | 5.9% | 5.0% | -2.6% | 0.2% | 2.2% |
---|
Western Digital Corporation ($WDC) | 17.1% | 14.1% | 2.3% | 7.4% | 15.3% |
Top companies by Net Debt / EBITDA
Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
---|
CPI Card Group Inc. ($PMTS) | 3.4x | 3.5x | 5.8x | | 12.4x |
NCR Corporation ($NCR) | 4.9x | 6.6x | 2.7x | 2.3x | 5.2x |
Avid Technology, Inc. ($AVID) | -0.7x | 3.1x | 1.7x | 5.6x | 4.8x |
Xerox Corporation ($XRX) | 3.5x | 3.5x | 3.1x | 3.0x | 3.0x |
Electronics for Imaging, Inc. ($EFII) | -0.2x | 1.4x | 1.3x | 1.6x | 1.7x |
|
---|
Median (19 companies) | -0.2x | 0.6x | 0.1x | 0.2x | 0.2x |
---|
Western Digital Corporation ($WDC) | -0.8x | -0.9x | 5.5x | 1.7x | 1.1x |