MKS Instruments, Inc. reports 17.3% EBITDA growth in 2018 and 8.3% Revenue growth
01/29/2019 • About MKS Instruments, Inc. (
$MKSI) • By InTwits
MKS Instruments, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- MKS Instruments, Inc. is a fast growth stock: 2018 revenue growth was 8.3%, 5 year revenue CAGR was 25.4% at 2018 ROIC 22.7%
- MKS Instruments, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's a lot of higher than industry average of 3.6%.
- CAPEX is quite volatile: $63m in 2018, $31m in 2017, $19m in 2016, $12m in 2015, $13m in 2014
- In the last 5 years the company invested considerably less than D&A: $139m vs. $271m. In 2018 this situation was still the same: CAPEX was 63 while D&A was 80
- The company has highly profitable business model: ROIC is 22.7%
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 8.3%. Revenue growth showed slowdown in 18Q4 - it was -10.0% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.6 pp from 20.0% to 21.7% in 2018.
Gross Margin increased slightly on 0.67 pp from 46.5% to 47.2% in 2018. Gross Margin followed a growing trend at 0.98 pp per annum in the last 5 years. SG&A as a % of Revenue decreased slightly on 0.80 pp from 15.2% to 14.4% in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018.
Net Income margin increased slightly on 1.2 pp from 17.7% to 18.9% in 2018. The efficient tax rate was 18.3% in 2018 while the average for the last five years was 20.5%.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 3.0%. MKS Instruments, Inc. showed small growth in CAPEX/Revenue of 1.5 pp from 1.5% in 2015 to 3.0% in 2018. For the last three years the average CAPEX/Revenue was 2.0%. During the last 5 years CAPEX as a % of Revenue bottomed in 2016 at 1.5% and was growing since that time.
Accounts receivable as a % of Revenue decreased slightly on 1.4 pp from 15.7% to 14.2% in 2018. Inventories as a % of Revenue increased slightly on 0.84 pp from 17.7% to 18.5% in 2018. Accounts payable as a % of Revenue showed almost no change in 2018.
Return on investment
The company operates at high and attractive ROIC (22.7%) and ROE (22.7%). ROIC increased on 2.4 pp from 20.3% to 22.7% in 2018. ROE decreased slightly on 1.3 pp from 24.0% to 22.7% in 2018.
Leverage (Debt)
Debt level is -0.5x Net Debt / EBITDA and 0.6x Debt / EBITDA. Debt dropped on 11.5% while cash surged on 93.1%.
MKS Instruments, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 29.2x. MKS Instruments, Inc. has no short term refinancing risk: cash is higher than short term debt (16,165.2%).
Average interest expence paid by the company was 4.9% in 2018.
Valuation and dividends
MKS Instruments, Inc.'s trades at EV/EBITDA 7.1x and P/E 11.1x.
The company paid 10.7% of Net Income as dividends in 2018. Dividends grew on average at 3.7% per annum in the last 5 years).
Management team
Gerald G Colella "Jerry" is a the company's CEO. Gerald G Colella "Jerry" is a founder and has spent 1 year with the company. CEO total compensation was
$10,260,205 in 2018 which included
$993,269 salary and
$119,192 annual bonus. MKS Instruments, Inc.'s CFO is Seth H Bagshaw. Seth H Bagshaw has 9 years tenure at the company.
1.2% of the company is owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 4,851 employees. The number of employees decreased slightly on 1.5%. Average revenue per employee in 2018 was
$427,769 and it increased on 9.9%.
Financial and operational results
FY ended 12/31/2018
MKS Instruments, Inc. ($MKSI) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 781 | 814 | 1,295 | 1,916 | 2,075 | 8.3% |
| Gross Profit | 338 | 363 | 566 | 891 | 979 | 9.9% |
| SG&A | 132 | 129 | 229 | 291 | 298 | 2.6% |
| EBITDA | 156 | 179 | 223 | 489 | 574 | 17.3% |
| EBIT | 135 | 157 | 157 | 407 | 494 | 21.5% |
| Interest expence | | | 31 | 31 | 17 | -45.3% |
| Tax | 21 | 37 | 23 | 108 | 88 | -18.8% |
| Net Income | 116 | 122 | 105 | 339 | 393 | 15.9% |
| Stock Based Compensation | 11 | 12 | 24 | 24 | 27 | 11.8% |
Balance Sheet
|
|---|
| Cash | 305 | 228 | 229 | 334 | 644 | 93.1% |
| Accounts Receivable | 106 | 102 | 249 | 300 | 295 | -1.6% |
| Inventory | 155 | 153 | 276 | 339 | 385 | 13.5% |
| Accounts Payable | 34 | 23 | 69 | 83 | 84 | 1.6% |
| Short Term Debt | 0 | 0 | 11 | 3 | 4 | 34.1% |
| Long Term Debt | 0 | 0 | 601 | 390 | 344 | -11.8% |
Cash flow
|
|---|
| Capex | 13 | 12 | 19 | 31 | 63 | 101.2% |
| Dividends | 35 | 36 | 36 | 38 | 42 | 10.5% |
| Acquisitions | 87 | 10 | 940 | | | |
Ratios
|
|---|
| Revenue growth | 16.6% | 4.2% | 59.2% | 47.9% | 8.3% | |
| EBITDA growth | 106.2% | 14.8% | 24.9% | 119.2% | 17.3% | |
|
|---|
| Gross Margin | 43.3% | 44.6% | 43.7% | 46.5% | 47.2% | 0.7% |
| EBITDA Margin | 19.9% | 22.0% | 17.2% | 25.5% | 27.7% | 2.1% |
| EBIT Margin | 17.3% | 19.3% | 12.1% | 21.2% | 23.8% | 2.6% |
| SG&A, % of revenue | 16.9% | 15.9% | 17.7% | 15.2% | 14.4% | -0.8% |
| SBC, % of revenue | 1.4% | 1.5% | 1.8% | 1.3% | 1.3% | 0.0% |
| Net Income Margin | 14.8% | 15.0% | 8.1% | 17.7% | 18.9% | 1.2% |
| CAPEX, % of revenue | 1.7% | 1.5% | 1.5% | 1.6% | 3.0% | 1.4% |
|
|---|
| ROIC | 12.7% | 13.9% | 10.1% | 20.3% | 22.7% | 2.4% |
| ROE | 11.0% | 10.9% | 8.7% | 24.0% | 22.7% | -1.3% |
| Net Debt/EBITDA | -2.0x | -1.3x | 1.7x | 0.1x | -0.5x | -0.6x |
| Interest expence / Average debt | | | 10.0% | 6.2% | 4.9% | -1.3% |
People
|
|---|
| Insider ownership | 1.2% | 1.2% | 1.2% | 1.2% | 1.2% | 0.0% |
| Employees | 2,371 | 2,181 | 4,667 | 4,923 | 4,851 | -1.5% |
| Revenue/Employee, th. $ | 329 | 373 | 278 | 389 | 428 | 9.9% |
MKS Instruments, Inc. ($MKSI) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 554 | 573 | 487 | 461 | | 26.8% | 19.2% | 0.2% | -10.0% |
| EBITDA | 152 | 171 | 137 | 114 | | 44.3% | 50.9% | 4.8% | -18.6% |
| Net Income | 105 | 123 | 93 | 72 | | 61.6% | 2.0% | 22.7% | -7.7% |
Balance Sheet
|
|---|
| Cash | 341 | 427 | 400 | 644 | | 33.2% | 1.1% | 30.7% | 93.1% |
| Short Term Debt | 5 | 13 | 6 | 4 | | -48.6% | 27.5% | 52.5% | 34.1% |
| Long Term Debt | 341 | 342 | 343 | 344 | | -38.2% | -38.0% | -21.3% | -11.8% |
Ratios
|
|---|
| Gross Margin | 47.4% | 48.0% | 47.6% | 45.6% | | 0.4% | 2.3% | 0.7% | -1.0% |
| EBITDA Margin | 27.4% | 29.9% | 28.0% | 24.8% | | 3.3% | 6.3% | 1.2% | -2.6% |
| Net Income Margin | 19.0% | 21.4% | 19.1% | 15.6% | | 4.1% | -3.6% | 3.5% | 0.4% |
Peers in Semiconductor Equipment
Below we provide MKS Instruments, Inc. benchmarking against other companies in Semiconductor Equipment 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 |
|---|
| Atomera Incorporated ($ATOM) | | | | | 123.6% |
| ACM Research, Inc. ($ACMR) | | | -12.3% | 33.4% | 104.5% |
| SCI Engineered Materials Inc ($SCIA) | | -13.0% | -32.1% | 24.4% | 67.0% |
| Aehr Test Systems ($AEHR) | | -49.1% | 44.7% | 30.3% | 56.4% |
| SolarEdge Technologies, Inc. ($SEDG) | | 144.0% | 50.7% | 23.9% | 54.4% |
| |
|---|
| Median (37 companies) | | -2.0% | 6.5% | 24.2% | 15.5% |
|---|
| MKS Instruments, Inc. ($MKSI) | | 4.2% | 59.2% | 47.9% | 8.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Xperi Corporation ($XPER) | 99.5% | 99.8% | 99.8% | 98.3% | 96.7% |
| KLA-Tencor Corporation ($KLAC) | 57.9% | 56.8% | 61.0% | 63.0% | 64.1% |
| Teradyne, Inc. ($TER) | 53.3% | 55.8% | 54.7% | 57.2% | 58.1% |
| Nova Measuring Instruments Ltd. ($NVMI) | 52.7% | 51.9% | 45.9% | 59.1% | 57.8% |
| Nanometrics Incorporated ($NANO) | 47.2% | 47.9% | 51.6% | 52.9% | 56.7% |
| |
|---|
| Median (38 companies) | 34.4% | 38.3% | 37.3% | 43.2% | 40.2% |
|---|
| MKS Instruments, Inc. ($MKSI) | 43.3% | 44.6% | 43.7% | 46.5% | 47.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| KLA-Tencor Corporation ($KLAC) | 29.2% | 26.4% | 34.4% | 38.3% | 39.6% |
| DAQO New Energy Corp. ($DQ) | 32.9% | 31.6% | 43.3% | 49.1% | 36.1% |
| Xperi Corporation ($XPER) | 66.7% | 67.5% | 47.6% | 23.4% | 34.3% |
| Lam Research Corporation ($LRCX) | 21.1% | 20.3% | 23.2% | 27.6% | 32.0% |
| Cabot Microelectronics Corporation ($CCMP) | 21.6% | 22.6% | 23.4% | 27.2% | 31.5% |
| |
|---|
| Median (37 companies) | 6.8% | 9.8% | 11.4% | 16.0% | 16.2% |
|---|
| MKS Instruments, Inc. ($MKSI) | 19.9% | 22.0% | 17.2% | 25.5% | 27.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Rubicon Technology, Inc. ($RBCN) | 15.0% | 4.0% | 3.6% | 0.0% | 58.8% |
| DAQO New Energy Corp. ($DQ) | 42.2% | 44.7% | 29.5% | 19.8% | 47.4% |
| AXT Inc ($AXTI) | 2.4% | 5.4% | 3.4% | 21.6% | 39.6% |
| STR Holdings Inc ($STRI) | 7.9% | 8.1% | 1.6% | 9.0% | 36.6% |
| Photronics, Inc. ($PLAB) | 20.0% | 19.8% | 10.4% | 20.4% | 17.3% |
| |
|---|
| Median (37 companies) | 2.3% | 2.9% | 2.6% | 3.2% | 2.9% |
|---|
| MKS Instruments, Inc. ($MKSI) | 1.7% | 1.5% | 1.5% | 1.6% | 3.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| KLA-Tencor Corporation ($KLAC) | 17.9% | 16.5% | 27.2% | 34.0% | 39.9% |
| Lam Research Corporation ($LRCX) | 10.7% | 10.9% | 11.8% | 18.7% | 33.9% |
| Versum Materials, Inc. ($VSM) | | 26.2% | 32.4% | 30.0% | 32.1% |
| Advanced Energy Industries, Inc. ($AEIS) | 8.8% | 30.2% | 41.2% | 45.7% | 31.3% |
| SolarEdge Technologies, Inc. ($SEDG) | -815.6% | 33.6% | 31.2% | 26.5% | 28.6% |
| |
|---|
| Median (39 companies) | 3.4% | 5.2% | 6.9% | 12.2% | 11.2% |
|---|
| MKS Instruments, Inc. ($MKSI) | 12.7% | 13.9% | 10.1% | 20.3% | 22.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Xperi Corporation ($XPER) | -0.3x | -0.1x | 4.2x | 5.0x | 2.6x |
| Ultra Clean Holdings, Inc. ($UCTT) | -1.2x | 1.5x | 0.4x | -0.2x | 2.4x |
| Ichor Holdings ($ICHR) | 3.1x | 1.7x | -0.4x | 2.0x | 1.8x |
| Versum Materials, Inc. ($VSM) | -0.2x | -0.1x | 2.7x | 2.1x | 1.4x |
| DAQO New Energy Corp. ($DQ) | 4.6x | 4.3x | 2.3x | 0.9x | 1.2x |
| |
|---|
| Median (31 companies) | -1.2x | -1.0x | -1.3x | -0.7x | -1.0x |
|---|
| MKS Instruments, Inc. ($MKSI) | -2.0x | -1.3x | 1.7x | 0.1x | -0.5x |
