Seagate Technology PLC reports 53.1% Net Income growth in 2018 and 3.2 pp EBITDA Margin growth from 16.7% to 20.0%
07/30/2018 • About Seagate Technology PLC (
$STX) • By InTwits
Seagate Technology PLC reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Seagate Technology PLC has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.4%. At the same time it's in pair with industry average of 5.2%
- CAPEX is quite volatile: $89m in 2018, $46m in 2017, $38m in 2016, $18m in 2015, $19m in 2014
- In the last 5 years the company invested considerably less than D&A: $2,693m vs. $3,882m. In FY2018 this situation was still the same: CAPEX was 366 while D&A was 598
- The company has highly profitable business model: ROIC is 27.5%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.3x 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
The company's Revenue increased on 3.8%. Revenue growth showed acceleration in FY18Q4 - it increased 17.8% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 3.2 pp from 16.7% to 20.0% in FY2018.
Gross Margin increased slightly on 0.61 pp from 29.5% to 30.1% in FY2018. During the last 5 years Gross Margin bottomed in FY2016 at 23.4% and was growing since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SBC as a % of Revenue topped in FY2017 at 1.3%.
Net Income margin increased on 3.4 pp from 7.2% to 10.6% in FY2018. The efficient tax rate was 16.6% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 3.3%. The company's CAPEX/Revenue decreased on 2.2 pp from 5.4% in FY2015 to 3.3% in FY2018. It's average CAPEX/Revenue for the last three years was 4.2%. During FY2014-FY2018 CAPEX as a % of Revenue topped in FY2015 at 5.4% and was declining since that time.
Accounts receivable as a % of Revenue decreased slightly on 0.55 pp from 11.1% to 10.6% in FY2018. Inventories as a % of Revenue showed almost no change at 9.4% in FY2018. Accounts payable as a % of Revenue increased slightly on 0.69 pp from 21.4% to 22.1% in FY2018.
Return on investment
The company operates at high and attractive ROIC (27.5%) and ROE (78.0%). ROIC increased on 8.2 pp from 19.4% to 27.5% in FY2018. ROE surged on 25.8 pp from 52.2% to 78.0% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.3x and Debt / EBITDA is 2.2x. Net Debt / EBITDA decreased on 0.048x from 1.4x to 1.3x in FY2018. Debt decreased on 4.0% while cash dropped on 27.0%. During the last 5 years Net Debt/EBITDA topped in FY2016 at 2.4x and was declining since that time.
Seagate Technology PLC has good short term financial stability: Interest coverage ratio (ICR) is 6.9x. Seagate Technology PLC has no short term refinancing risk: cash is higher than short term debt (371.3%).
Average interest expence charged on company's debt was 4.9% in FY2018.
Valuation and dividends
Seagate Technology PLC's trades at EV/EBITDA 8.3x and P/E 13.2x.
The company paid 61.4% of Net Income as dividends in FY2018. Dividends grew on average at 5.4% per annum in the last 5 years).
Management team
William David Mosley "Dave" is a the company's CEO. William David Mosley "Dave" is a founder and has spent 1 year with the company. CEO total compensation was
$17,174,884 in FY2018 which included
$1,807,714 salary.
At the end of financial year the company had 0.62% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 43,000 employees. Average revenue per employee in FY2018 was
$260,093.
Financial and operational results
FY ended 06/29/2018
Seagate Technology PLC ($STX) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 13,724 | 13,739 | 11,160 | 10,771 | 11,184 | 3.8% |
| Gross Profit | 3,846 | 3,809 | 2,615 | 3,174 | 3,364 | 6.0% |
| EBITDA | 2,655 | 2,899 | 1,260 | 1,803 | 2,232 | 23.8% |
| EBIT | 1,776 | 2,058 | 445 | 1,054 | 1,634 | 55.0% |
| Interest expence | 195 | 207 | | 222 | 236 | 6.3% |
| Tax | -14 | 228 | 26 | 43 | 236 | 448.8% |
| Net Income | 1,570 | 1,742 | 248 | 772 | 1,182 | 53.1% |
| Stock Based Compensation | 118 | 137 | 120 | 137 | 112 | -18.2% |
Balance Sheet
|
|---|
| Cash | 2,634 | 2,479 | 1,125 | 2,539 | 1,853 | -27.0% |
| Accounts Receivable | 1,729 | 1,735 | 1,318 | 1,199 | 1,184 | -1.3% |
| Inventory | 985 | 993 | 868 | 982 | 1,053 | 7.2% |
| Accounts Payable | 1,549 | 1,540 | 1,517 | 1,626 | 1,728 | 6.3% |
| Short Term Debt | 0 | 0 | 0 | 0 | 499 | |
| Long Term Debt | 3,920 | 4,155 | 4,091 | 5,021 | 4,320 | -14.0% |
Cash flow
|
|---|
| Capex | 559 | 747 | 587 | 434 | 366 | -15.7% |
| Dividends | 557 | 664 | 727 | 561 | 726 | 29.4% |
| Acquisitions | 285 | 453 | 634 | | | |
Ratios
|
|---|
| Revenue growth | -4.4% | 0.1% | -18.8% | -3.5% | 3.8% | |
| EBITDA growth | -10.4% | 9.2% | -56.5% | 43.1% | 23.8% | |
|
|---|
| Gross Margin | 28.0% | 27.7% | 23.4% | 29.5% | 30.1% | 0.6% |
| EBITDA Margin | 19.3% | 21.1% | 11.3% | 16.7% | 20.0% | 3.2% |
| EBIT Margin | 12.9% | 15.0% | 4.0% | 9.8% | 14.6% | 4.8% |
| SBC, % of revenue | 0.9% | 1.0% | 1.1% | 1.3% | 1.0% | -0.3% |
| Net Income Margin | 11.4% | 12.7% | 2.2% | 7.2% | 10.6% | 3.4% |
| CAPEX, % of revenue | 4.1% | 5.4% | 5.3% | 4.0% | 3.3% | -0.8% |
|
|---|
| ROIC | 29.3% | 31.7% | 7.6% | 19.4% | 27.5% | 8.2% |
| ROE | 49.6% | 59.6% | 10.8% | 52.2% | 78.0% | 25.8% |
| Net Debt/EBITDA | 0.5x | 0.6x | 2.4x | 1.4x | 1.3x | -0.0x |
| Interest coverage ratio (ICR) | 9.1x | 9.9x | | 4.7x | 6.9x | 2.2x |
| Interest expence / Average debt | 5.0% | 5.1% | | 4.9% | 4.9% | 0.0% |
People
|
|---|
| Insider ownership | 0.6% | 0.6% | 0.6% | 0.6% | 0.6% | 0.0% |
| Employees | 52,100 | 52,350 | 45,500 | | 43,000 | |
| Revenue/Employee, th. $ | 263 | 262 | 245 | | 260 | |
Seagate Technology PLC ($STX) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 2,632 | 2,914 | 2,803 | 2,835 | | -5.9% | 0.7% | 4.8% | 17.8% |
| EBITDA | 416 | 590 | 584 | 642 | | -1.2% | 5.2% | 30.4% | 72.6% |
| Net Income | 181 | 159 | 381 | 461 | | 8.4% | -46.5% | 96.4% | 304.4% |
Balance Sheet
|
|---|
| Cash | 2,285 | 2,556 | 2,926 | 1,853 | | 53.5% | 49.0% | -3.3% | -27.0% |
| Short Term Debt | 0 | 560 | 503 | 499 | | | | 218.4% | |
| Long Term Debt | 5,002 | 4,316 | 4,319 | 4,320 | | 22.2% | 5.4% | -14.9% | -14.0% |
Ratios
|
|---|
| Gross Margin | 28.0% | 30.1% | 30.2% | 31.9% | | -0.7% | -0.7% | -0.3% | 4.2% |
| EBITDA Margin | 15.8% | 20.2% | 20.8% | 22.6% | | 0.8% | 0.9% | 4.1% | 7.2% |
| Net Income Margin | 6.9% | 5.5% | 13.6% | 16.3% | | 0.9% | -4.8% | 6.3% | 11.5% |
Peers in Technology Hardware, Storage &
Below you can find Seagate Technology PLC benchmarking vs. other companies in Technology Hardware, Storage & 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 | 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. ($PSTG) | | 308.2% | 152.4% | 67.9% | 38.6% |
| |
|---|
| Median (30 companies) | -16.9% | -3.3% | -4.3% | 2.1% | 5.6% |
|---|
| Seagate Technology PLC ($STX) | | 0.1% | -18.8% | -3.5% | 3.8% |
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 ($DTSS) | | | | 39.3% | 54.4% |
| |
|---|
| Median (29 companies) | 38.6% | 36.3% | 39.3% | 39.6% | 38.8% |
|---|
| Seagate Technology PLC ($STX) | 28.0% | 27.7% | 23.4% | 29.5% | 30.1% |
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% |
| Western Digital Corporation ($WDC) | 20.1% | 18.7% | 12.5% | 21.4% | 27.5% |
| NetApp, Inc. ($NTAP) | 16.9% | 16.7% | 11.3% | 15.4% | 22.9% |
| Hewlett Packard Enterprise Company ($HPE) | 11.8% | 10.5% | 25.4% | 12.7% | 14.4% |
| |
|---|
| Median (29 companies) | 7.1% | 6.2% | 3.8% | 3.5% | 7.9% |
|---|
| Seagate Technology PLC ($STX) | 19.3% | 21.1% | 11.3% | 16.7% | 20.0% |
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% |
| Western Digital Corporation ($WDC) | 4.2% | 4.2% | 4.5% | 3.0% | 4.0% |
| |
|---|
| Median (29 companies) | 2.6% | 2.9% | 1.7% | 1.8% | 2.2% |
|---|
| Seagate Technology PLC ($STX) | 4.1% | 5.4% | 5.3% | 4.0% | 3.3% |
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. ($NTAP) | 12.5% | 14.8% | 7.3% | 14.0% | 28.1% |
| |
|---|
| Median (37 companies) | 5.9% | 5.0% | -2.6% | 0.2% | 2.2% |
|---|
| Seagate Technology PLC ($STX) | 29.3% | 31.7% | 7.6% | 19.4% | 27.5% |
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. ($EFII) | -0.2x | 1.4x | 1.3x | 1.6x | 1.7x |
| |
|---|
| Median (19 companies) | -0.4x | 0.3x | 0.1x | 0.2x | 0.2x |
|---|
| Seagate Technology PLC ($STX) | 0.5x | 0.6x | 2.4x | 1.4x | 1.3x |
