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SMART Global Holdings, Inc. reports 34.3% EBITDA decline in 2020 and 2.8 pp EBITDA Margin decline from 9.8% to 6.9%

10/01/2020 • About SMART Global Holdings, Inc. ($SGH) • By InTwits

SMART Global Holdings, Inc. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • EBITDA Margin is quite volatile: 6.9% in FY2020, 9.8% in FY2019, 15.2% in FY2018, 11.4% in FY2017, 7.0% in FY2016
  • SMART Global Holdings, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.4%. At the same time it's in pair with industry average of 6.0%
  • CAPEX is quite volatile: $1m in FY2020, $1m in FY2019, $0m in FY2018, $2m in FY2017, $0m in FY2016
  • The company has business model with low profitability: ROIC is 8.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


SMART Global Holdings, Inc.'s Revenue decreased on 7.4%. Annual revenue decline showed slowdown in FY20Q4 - revenue increased on 6.7%. During FY2016-FY2020 Revenue growth topped in FY2018 at 69.3% and was decelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 2.8 pp from 9.8% to 6.9% in FY2020. During the last 5 years EBITDA Margin topped in FY2018 at 15.2% and was declining since that time.

Gross Margin showed almost no change in FY2020. During the last 5 years Gross Margin topped in FY2018 at 22.6% and was declining since that time. SG&A as a % of Revenue increased on 2.1 pp from 8.5% to 10.6% in FY2020. During the last 5 years SG&A as a % of Revenue bottomed in FY2018 at 6.6% and was growing since that time.

Net Income margin decreased on 4.3 pp from 4.2% to -0.10% in FY2020. During FY2016-FY2020 Net Income margin topped in FY2018 at 9.3% and was declining since that time.

Investments (CAPEX, working capital and M&A)


The company's CAPEX/Revenue was 2.2% in FY2020. CAPEX/Revenue showed almost no change from FY2017 to FY2020. It's average CAPEX/Revenue for the last three years was 2.3%.

Return on investment


The company operates at low but positive ROIC (8.4%) and negative ROE (-0.4%). ROIC dropped on 11.8 pp from 20.3% to 8.4% in FY2020. ROE dropped on 22.7 pp from 22.3% to -0.41% in FY2020. During FY2016-FY2020 ROIC topped in FY2018 at 51.7% and was declining since that time.

Leverage (Debt)


Company's Net Debt / EBITDA is 0.8x and Debt / EBITDA is 2.8x. Net Debt / EBITDA decreased on 0.1x from 0.9x to 0.8x in FY2020. Debt increased on 4.8% while cash surged on 53.7%. Net Debt/EBITDA followed a declining trend in the last 5 years.

The company has no short term refinancing risk: short term debt is zero.

Management team


SMART Global Holdings, Inc.'s CEO is Mark W Adams. Mark W Adams has 1 month tenure with the company. Jack A Pacheco is a the company's CFO. Jack A Pacheco has spent 2 years at the company.

Financial and operational results


SMART Global Holdings, Inc. ($SGH) key annual financial indicators

mln. $201620172018201920202020/2019
P&L
Revenue5347611,2891,2121,122-7.4%
Gross Profit107162292238216-8.9%
SG&A57678510312015.8%
EBITDA388719611878-34.3%
Net Income-20-811951-1-102.2%
Balance Sheet
Cash5922319815153.7%
Short Term Debt172327240-100.0%
Long Term Debt22615418418221618.6%
Cash flow
Capex1419263324-27.4%
Ratios
Revenue growth-16.9%42.5%69.3%-6.0%-7.4%
EBITDA growth-13.3%131.3%125.5%-39.8%-34.3%

Gross Margin20.0%21.3%22.6%19.6%19.3%-0.3%
EBITDA Margin7.0%11.4%15.2%9.8%6.9%-2.8%
SG&A, % of revenue10.8%8.8%6.6%8.5%10.6%2.1%
Net Income Margin-3.7%-1.0%9.3%4.2%-0.1%-4.3%
CAPEX, % of revenue2.6%2.5%2.0%2.8%2.2%-0.6%

ROIC2.5%21.5%51.7%20.3%8.4%-11.8%
ROE88.6%22.3%-0.4%-22.7%
Net Debt/EBITDA4.9x1.8x0.9x0.9x0.8x-0.1x

SMART Global Holdings, Inc. ($SGH) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
P&L
Revenue272272281297 -30.9%-10.5%19.4%6.7%
EBITDA17192126 -68.9%-34.5%45.7%26.2%
Net Income0-1018 -99.3%-176.0%-57.6%33.8%
Balance Sheet
Cash111142132151 76.9%49.1%4.6%53.7%
Short Term Debt28760 179.0%-54.6%-68.7%-100.0%
Long Term Debt201216215216 0.1%11.0%14.3%18.6%
Ratios
Gross Margin20.0%18.9%19.3%19.0% -1.6%0.1%1.0%0.2%
EBITDA Margin 6.2% 7.1% 7.4% 8.7% -7.6%-2.6%1.3%1.3%
Net Income Margin 0.1% -3.6% 0.3% 2.5% -7.8%-7.8%-0.5%0.5%

Peers in Semiconductors


Below we provide SMART Global Holdings, Inc. 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 FY2016 FY2017 FY2018 FY2019 FY2020
QUALCOMM Incorporated ($QCOM)-6.8%-5.4%2.0%6.8%-
O2Micro International Limited ($OIIM)3.1%6.4%4.2%-2.8%-
Himax Technologies, Inc. ($HIMX)16.1%-14.7%5.6%-7.2%-
Skyworks Solutions, Inc. ($SWKS)0.9%11.0%5.9%-12.7%-
Micron Technology, Inc. ($MU)-63.9%49.5%-23.0%-8.4%
 
Median (6 companies)6.1%10.9%4.4%-9.9%-8.4%
SMART Global Holdings, Inc. ($SGH)-42.5%69.3%-6.0%-7.4%


Top companies by Gross margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
QUALCOMM Incorporated ($QCOM)58.6%56.1%54.9%64.6%-
O2Micro International Limited ($OIIM)51.7%51.1%51.0%52.5%-
Skyworks Solutions, Inc. ($SWKS)50.6%50.4%50.4%47.5%-
Micron Technology, Inc. ($MU)20.2%41.5%58.9%45.7%30.6%
Sequans Communications S.A. ($SQNS)43.8%43.8%39.5%40.1%-
 
Median (6 companies)48.0%49.1%50.4%46.6%30.6%
SMART Global Holdings, Inc. ($SGH)20.0%21.3%22.6%19.6%19.3%


Top companies by EBITDA margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Micron Technology, Inc. ($MU)25.4%47.9%65.0%54.7%40.4%
Skyworks Solutions, Inc. ($SWKS)41.5%41.3%41.8%39.2%-
QUALCOMM Incorporated ($QCOM)33.6%18.3%10.1%37.4%-
Himax Technologies, Inc. ($HIMX)9.1%3.6%3.3%0.9%-
O2Micro International Limited ($OIIM)-7.4%-7.6%-10.3%-4.7%-
 
Median (6 companies)9.2%10.7%9.3%19.1%40.4%
SMART Global Holdings, Inc. ($SGH)7.0%11.4%15.2%9.8%6.9%


Top companies by CAPEX/Revenue, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Micron Technology, Inc. ($MU)46.9%23.3%29.2%41.8%38.4%
Sequans Communications S.A. ($SQNS)11.8%13.3%22.9%29.6%-
Himax Technologies, Inc. ($HIMX)1.0%5.8%10.5%14.9%-
Skyworks Solutions, Inc. ($SWKS)5.8%8.3%10.9%11.8%-
QUALCOMM Incorporated ($QCOM)2.3%3.1%3.4%3.7%-
 
Median (6 companies)3.7%4.7%4.4%13.4%38.4%
SMART Global Holdings, Inc. ($SGH)2.6%2.5%2.0%2.8%2.2%


Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
QUALCOMM Incorporated ($QCOM)15.8%5.7%2.2%38.0%-
Skyworks Solutions, Inc. ($SWKS)33.7%33.1%32.3%23.2%-
Micron Technology, Inc. ($MU)0.8%21.5%42.9%18.5%6.8%
Himax Technologies, Inc. ($HIMX)9.4%1.3%0.6%-2.9%-
O2Micro International Limited ($OIIM)-7.0%-7.9%-10.4%-8.0%-
 
Median (6 companies)1.4%3.2%2.2%7.8%6.8%
SMART Global Holdings, Inc. ($SGH)2.5%21.5%51.7%20.3%8.4%


Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Himax Technologies, Inc. ($HIMX)-0.6x0.4x3.3x20.4x-
QUALCOMM Incorporated ($QCOM)0.7x-3.2x2.0x0.5x-
Micron Technology, Inc. ($MU)1.8x0.6x-0.1x-0.1x-0.1x
Skyworks Solutions, Inc. ($SWKS)-0.8x-1.1x-0.5x-0.6x-
 
Median (4 companies)-0.0x0.4x0.3x0.2x-0.1x
SMART Global Holdings, Inc. ($SGH)4.9x1.8x0.9x0.9x0.8x