Hewlett Packard Enterprise Company Net Income jumped on 455% and EBITDA Margin increased slightly on 1.6 pp from 12.7% to 14.4%
12/04/2018 • About Hewlett Packard Enterprise Company (
$HPE) • By InTwits
Hewlett Packard Enterprise Company reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 14.4% in FY2018, 12.7% in FY2017, 25.4% in FY2016, 10.5% in FY2015, 11.8% in FY2014
- Hewlett Packard Enterprise Company has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.9%. At the same time it's a lot of higher than industry average of 5.2%.
- CAPEX is quite volatile: $305m in 2018, $111m in 2017, $118m in 2016, $85m in 2015, $103m in 2014
- The company has potentially unprofitable business model: ROIC is 5.5%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.6x 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 6.9%. Revenue growth showed slowdown in FY18Q4 - it was 3.7% YoY. During FY2014-FY2018 Revenue growth bottomed in FY2016 at -41.9% and was accelerating since that time. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.6 pp from 12.7% to 14.4% in FY2018.
Gross Margin showed almost no change in FY2018. SG&A as a % of Revenue decreased slightly on 1.6 pp from 17.3% to 15.7% in FY2018. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 0.56 pp from 1.5% to 0.93% in FY2018. During the last 5 years SBC as a % of Revenue topped in FY2016 at 1.8% and was declining since that time.
Net Income margin increased on 5.0 pp from 1.2% to 6.2% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 9.6%. CAPEX/Revenue increased on 3.2 pp from 6.4% in FY2015 to 9.6% in FY2018. It's average CAPEX/Revenue for the last three years was 10.4%. Hewlett Packard Enterprise Company maintained rich investment policy and has spent a big chunk of EBITDA (66.7%) to CAPEX.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Inventories as a % of Revenue showed almost no change at 7.9% in FY2018. Accounts payable as a % of Revenue decreased slightly on 1.8 pp from 30.1% to 28.3% in FY2018.
Hewlett Packard Enterprise Company has spent
$207m on M&A in FY2018 which accounts for 0.67% of revenue.
Return on investment
The company operates at low ROIC (5.5%) and ROE (8.5%). ROIC increased on 3.9 pp from 1.6% to 5.5% in FY2018. ROE increased on 7.3 pp from 1.3% to 8.5% in FY2018.
Leverage (Debt)
Debt level is 1.6x Net Debt / EBITDA and 2.7x Debt / EBITDA. Net Debt / EBITDA surged on 0.4x from 1.2x to 1.6x in FY2018. Debt dropped on 13.5% while cash dropped on 49.1%.
Hewlett Packard Enterprise Company has good short term financial stability: Interest coverage ratio (ICR) is 5.3x. Hewlett Packard Enterprise Company has no short term refinancing risk: cash is higher than short term debt (243.4%).
Average interest expence paid by the company was 2.9% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 6.4x and P/E 11.0x.
The company paid 29.9% of Net Income as dividends in FY2018. Dividends grew on average at 72.8% per annum in the last 5 years).
Management team
Hewlett Packard Enterprise Company's CEO is Antonio Fabio Neri. Antonio Fabio Neri is a founder and has 1 year tenure with the company. CEO total compensation was
$13,373,047 in FY2018 which included
$1,538,366 salary. Tarek A Robbiati is a the company's CFO. Tarek A Robbiati has spent 0 years at the company.
Insider ownership is 0.12%. Insider ownership didn't change in 2018.
The company has 60,000 employees. The number of employees decreased on 9.1%. Average revenue per employee in FY2018 was
$514,200 and it jumped on 17.5%.
Financial and operational results
FY ended 10/31/2018
Hewlett Packard Enterprise Company ($HPE) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 55,123 | 52,107 | 30,280 | 28,871 | 30,852 | 6.9% |
| Gross Profit | 15,637 | 14,939 | 9,773 | 8,694 | 9,292 | 6.9% |
| SG&A | 8,717 | 8,025 | 5,380 | 5,006 | 4,851 | -3.1% |
| EBITDA | 6,479 | 5,470 | 7,678 | 3,676 | 4,434 | 20.6% |
| EBIT | 2,335 | 1,523 | 3,903 | 625 | 1,858 | 197.3% |
| Interest expence | 45 | 29 | 298 | 334 | 353 | 5.7% |
| Tax | 596 | -991 | 623 | -164 | -1,744 | |
| Net Income | 1,648 | 2,461 | 3,161 | 344 | 1,908 | 454.7% |
| Stock Based Compensation | 383 | 465 | 558 | 428 | 286 | -33.2% |
Balance Sheet
|
|---|
| Cash | 2,319 | 9,842 | 12,987 | 9,579 | 4,880 | -49.1% |
| Accounts Receivable | 8,423 | 8,538 | 3,151 | 3,073 | 3,263 | 6.2% |
| Inventory | 1,884 | 2,198 | 1,720 | 2,315 | 2,447 | 5.7% |
| Accounts Payable | 4,889 | 5,828 | 4,945 | 6,072 | 6,092 | 0.3% |
| Short Term Debt | 894 | 691 | 3,525 | 3,850 | 2,005 | -47.9% |
| Long Term Debt | 485 | 15,103 | 12,168 | 10,182 | 10,136 | -0.5% |
Cash flow
|
|---|
| Capex | 3,620 | 3,344 | 3,280 | 3,137 | 2,956 | -5.8% |
| Dividends | 37 | 32 | 373 | 428 | 570 | 33.2% |
| Acquisitions | 49 | 2,644 | 22 | 2,202 | 207 | -90.6% |
Ratios
|
|---|
| Revenue growth | -3.9% | -5.5% | -41.9% | -4.7% | 6.9% | |
| EBITDA growth | -11.8% | -15.6% | 40.4% | -52.1% | 20.6% | |
|
|---|
| Gross Margin | 28.4% | 28.7% | 32.3% | 30.1% | 30.1% | 0.0% |
| EBITDA Margin | 11.8% | 10.5% | 25.4% | 12.7% | 14.4% | 1.6% |
| EBIT Margin | 4.2% | 2.9% | 12.9% | 2.2% | 6.0% | 3.9% |
| SG&A, % of revenue | 15.8% | 15.4% | 17.8% | 17.3% | 15.7% | -1.6% |
| SBC, % of revenue | 0.7% | 0.9% | 1.8% | 1.5% | 0.9% | -0.6% |
| Net Income Margin | 3.0% | 4.7% | 10.4% | 1.2% | 6.2% | 5.0% |
| CAPEX, % of revenue | 6.6% | 6.4% | 10.8% | 10.9% | 9.6% | -1.3% |
|
|---|
| ROIC | 5.6% | 3.4% | 8.5% | 1.6% | 5.5% | 3.9% |
| ROE | 4.4% | 7.0% | 9.7% | 1.3% | 8.5% | 7.3% |
| Net Debt/EBITDA | -0.1x | 1.1x | 0.4x | 1.2x | 1.6x | 0.4x |
| Interest expence / Average debt | 3.3% | 0.3% | 1.9% | 2.2% | 2.9% | 0.7% |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% |
| Employees | | 240,000 | 195,000 | 66,000 | 60,000 | -9.1% |
| Revenue/Employee, th. $ | | 217 | 155 | 437 | 514 | 17.5% |
Hewlett Packard Enterprise Company ($HPE) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 7,674 | 7,468 | 7,764 | 7,946 | | 11.2% | 9.7% | 3.5% | 3.7% |
| EBITDA | 863 | 1,021 | 1,157 | 1,329 | | -33.3% | 3.4% | 23.3% | 190.2% |
| Net Income | 1,436 | 778 | 451 | -757 | | 437.8% | | 173.3% | -244.5% |
Balance Sheet
|
|---|
| Cash | 7,673 | 6,986 | 5,193 | 4,880 | | -22.2% | -13.8% | -33.1% | -49.1% |
| Short Term Debt | 3,915 | 3,855 | 2,326 | 2,005 | | 11.2% | 91.8% | 12.4% | -47.9% |
| Long Term Debt | 10,040 | 9,970 | 9,963 | 10,136 | | -18.2% | -16.2% | -31.4% | -0.5% |
Ratios
|
|---|
| Gross Margin | 28.3% | 30.2% | 30.7% | 30.9% | | -3.8% | 0.7% | 1.4% | 1.2% |
| EBITDA Margin | 11.2% | 13.7% | 14.9% | 16.7% | | -7.5% | -0.8% | 2.4% | 10.7% |
| Net Income Margin | 18.7% | 10.4% | 5.8% | -9.5% | | 14.8% | 19.4% | 3.6% | -16.4% |
Peers in Technology Hardware, Storage &
Below you can find Hewlett Packard Enterprise Company 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. ($PSTG) | | 308.2% | 152.4% | 67.9% | 38.6% |
| |
|---|
| Median (30 companies) | -16.9% | -3.2% | -4.3% | 2.1% | 4.3% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | | -5.5% | -41.9% | -4.7% | 6.9% |
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 ($DTSS) | | | | 39.3% | 54.4% |
| |
|---|
| Median (29 companies) | 38.6% | 36.3% | 39.3% | 39.6% | 38.8% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 28.4% | 28.7% | 32.3% | 30.1% | 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% |
| Seagate Technology PLC ($STX) | 19.3% | 21.1% | 11.3% | 16.7% | 20.0% |
| |
|---|
| Median (29 companies) | 7.1% | 6.2% | 3.8% | 3.5% | 7.9% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 11.8% | 10.5% | 25.4% | 12.7% | 14.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| 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% |
| Video Display Corp ($VIDE) | 0.5% | 0.5% | 0.9% | 1.5% | 3.9% |
| |
|---|
| Median (29 companies) | 2.6% | 2.9% | 1.7% | 1.8% | 2.2% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 6.6% | 6.4% | 10.8% | 10.9% | 9.6% |
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. ($NTAP) | 12.5% | 14.8% | 7.3% | 14.0% | 28.1% |
| |
|---|
| Median (37 companies) | 6.0% | 5.7% | -2.6% | 0.2% | 2.2% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 5.6% | 3.4% | 8.5% | 1.6% | 5.5% |
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. ($EFII) | -0.2x | 1.4x | 1.3x | 1.6x | 1.7x |
| |
|---|
| Median (19 companies) | -0.4x | 0.3x | 0.1x | 0.2x | 0.2x |
|---|
| Hewlett Packard Enterprise Company ($HPE) | -0.1x | 1.1x | 0.4x | 1.2x | 1.6x |
