HP Inc. reports 9.8% Net Income decline in 2020 and 3.6% Revenue decline
11/24/2020 • About HP Inc. (
$HPQ) • By InTwits
HP Inc. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is relatively stable: 7.9% in FY2020 vs. 7.9% in FY2019 vs. 8.0% in FY2016
- HP Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.0%.
- The company has highly profitable business model: ROIC is 109.2%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.6x while industry average is -0.1x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
HP Inc.'s Revenue decreased on 3.6%. Annual revenue decline showed slowdown in FY20Q4 - revenue decreased slightly on 0.97%. During FY2016-FY2020 Revenue growth topped in FY2018 at 12.3% and was decelerating since that time. EBITDA Margin showed almost no change in FY2020. During the last 5 years EBITDA Margin bottomed in FY2017 at 7.4% and was growing since that time.
Gross Margin decreased slightly on 0.58 pp from 19.0% to 18.4% in FY2020. SG&A as a % of Revenue showed almost no change in FY2020.
Net Income margin showed almost no change in FY2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 1.0% in FY2020. HP Inc. showed almost no change in CAPEX/Revenue from FY2017 to FY2020. Average CAPEX/Revenue for the last three years was 1.0%.
Leverage (Debt)
Debt level is 0.6x Net Debt / EBITDA and 1.6x Debt / EBITDA. Net Debt / EBITDA jumped on 0.4x from 0.1x to 0.6x in FY2020. Debt jumped on 44.0% while cash increased on 7.2%.
HP Inc. has no short term refinancing risk: cash is higher than short term debt (512.5%).
Valuation and dividends
The company's trades at EV/EBITDA 7.4x and P/E 10.8x.
Management team
HP Inc.'s CEO Enrique Lores has spent 1 year with the company.
Financial and operational results
FY ended 10/31/2020
HP Inc. ($HPQ) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 48,238 | 52,056 | 58,472 | 58,756 | 56,639 | -3.6% |
| Gross Profit | 8,998 | 9,578 | 10,669 | 11,170 | 10,437 | -6.6% |
| SG&A | 3,833 | 4,376 | 4,859 | 5,368 | 4,906 | -8.6% |
| EBITDA | 3,881 | 3,873 | 4,592 | 4,621 | 4,487 | -2.9% |
| EBIT | 3,549 | 3,519 | 4,064 | | | |
| Interest expence | 273 | 309 | 312 | | | |
| Tax | 1,095 | 750 | -2,314 | | | |
| Net Income | 2,496 | 2,526 | 5,327 | 3,152 | 2,844 | -9.8% |
| Stock Based Compensation | 182 | 224 | 268 | | | |
Balance Sheet
|
|---|
| Cash | 6,288 | 6,997 | 5,166 | 4,537 | 4,864 | 7.2% |
| Accounts Receivable | 4,114 | 4,414 | 5,113 | | | |
| Inventory | 4,484 | 5,786 | 6,062 | | | |
| Accounts Payable | 11,103 | 13,279 | 14,816 | | | |
| Short Term Debt | 78 | 1,072 | 1,463 | 357 | 949 | 165.8% |
| Long Term Debt | 6,735 | 6,747 | 4,524 | 4,780 | 6,447 | 34.9% |
Cash flow
|
|---|
| Capex | 433 | 402 | 546 | 671 | 580 | -13.6% |
| Dividends | 858 | 894 | 899 | | | |
| Acquisitions | 7 | | 1,036 | | | |
Ratios
|
|---|
| Revenue growth | -6.3% | 7.9% | 12.3% | 0.5% | -3.6% | |
| EBITDA growth | -51.4% | -0.2% | 18.6% | 0.6% | -2.9% | |
|
|---|
| Gross Margin | 18.7% | 18.4% | 18.2% | 19.0% | 18.4% | -0.6% |
| EBITDA Margin | 8.0% | 7.4% | 7.9% | 7.9% | 7.9% | 0.1% |
| EBIT Margin | 7.4% | 6.8% | 7.0% | | |
| SG&A, % of revenue | 7.9% | 8.4% | 8.3% | 9.1% | 8.7% | -0.5% |
| SBC, % of revenue | 0.4% | 0.4% | 0.5% | | |
| Net Income Margin | 5.2% | 4.9% | 9.1% | 5.4% | 5.0% | -0.3% |
| CAPEX, % of revenue | 0.9% | 0.8% | 0.9% | 1.1% | 1.0% | -0.1% |
|
|---|
| ROIC | 15.8% | 60.8% | 72.9% | 116.0% | 109.2% | -6.8% |
| Net Debt/EBITDA | 0.1x | 0.2x | 0.2x | 0.1x | 0.6x | 0.4x |
| Interest expence / Average debt | 4.0% | 4.2% | 4.5% | | | |
People
|
|---|
| Insider ownership | 0.2% | 0.2% | 0.2% | | | |
| Employees | 49,000 | 49,000 | 55,000 | | | |
| Revenue/Employee, th. $ | 984 | 1,062 | 1,063 | | | |
HP Inc. ($HPQ) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 14,618 | 12,469 | 14,294 | 15,258 | | -0.6% | -11.2% | -2.1% | -1.0% |
| EBITDA | 1,130 | 1,077 | 1,033 | 1,247 | | 3.3% | -2.9% | -18.6% | 8.5% |
| Net Income | 678 | 764 | 734 | 668 | | -15.6% | -2.3% | -37.7% | 72.2% |
Balance Sheet
|
|---|
| Cash | 4,205 | 4,054 | 4,679 | 4,864 | | 24.9% | 14.0% | -4.9% | 7.2% |
| Short Term Debt | 1,178 | 1,793 | 533 | 949 | | 296.6% | 518.3% | 62.5% | 165.8% |
| Long Term Debt | 4,852 | 4,840 | 6,885 | 6,447 | | 3.1% | 1.9% | 45.6% | 34.9% |
Ratios
|
|---|
| Gross Margin | 19.6% | 20.0% | 16.7% | 17.6% | | 1.9% | 0.6% | -3.2% | -1.4% |
| EBITDA Margin | 7.7% | 8.6% | 7.2% | 8.2% | | 0.3% | 0.7% | -1.5% | 0.7% |
| Net Income Margin | 4.6% | 6.1% | 5.1% | 4.4% | | -0.8% | 0.6% | -2.9% | 1.9% |
Peers in Technology Hardware, Storage & Peripherals
Below we provide HP Inc. benchmarking against other companies in Technology Hardware, Storage & Peripherals 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 |
|---|
| Ionix Technology Inc ($IINX) | - | 246.0% | -5.8% | 92.3% | 66.8% |
| Veritec Inc ($VRTC) | - | -52.2% | 53.1% | -38.5% | 42.9% |
| Pure Storage, Inc. ($PSTG) | - | 67.9% | 38.6% | 32.7% | 20.9% |
| USA Technologies, Inc. ($USAT) | - | 34.5% | - | - | 12.9% |
| CPI Card Group Inc. ($PMTS) | - | -17.4% | 0.4% | 8.7% | 12.3% |
| |
|---|
| Median (20 companies) | 1.4% | 1.5% | 4.3% | -3.7% | -10.2% |
|---|
| HP Inc. ($HPQ) | - | 7.9% | 12.3% | 0.5% | -3.6% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Immersion Corporation ($IMMR) | 99.7% | 99.4% | 99.8% | 99.5% | 99.4% |
| Datasea Inc ($DTSS) | - | 39.3% | 54.4% | - | 89.7% |
| Pure Storage, Inc. ($PSTG) | 61.9% | 65.9% | 65.5% | 66.4% | 69.0% |
| Avid Technology, Inc. ($AVID) | 65.0% | 57.8% | 57.9% | 60.5% | 63.3% |
| Socket Mobile, Inc. ($SCKT) | 50.2% | 53.5% | 51.4% | 52.5% | 53.1% |
| |
|---|
| Median (21 companies) | 39.3% | 39.6% | 38.8% | 35.1% | 38.2% |
|---|
| HP Inc. ($HPQ) | 18.7% | 18.4% | 18.2% | 19.0% | 18.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Apple Inc. ($AAPL) | 32.7% | 31.2% | 30.8% | 29.4% | 28.7% |
| CPI Card Group Inc. ($PMTS) | 14.9% | -0.0% | 9.0% | 15.2% | 17.9% |
| Immersion Corporation ($IMMR) | -25.1% | -127.0% | 48.6% | -50.4% | 17.4% |
| Avid Technology, Inc. ($AVID) | 17.5% | 6.6% | 8.4% | 13.5% | 13.6% |
| Western Digital Corporation ($WDC) | 12.5% | 21.4% | 27.5% | 11.5% | 11.7% |
| |
|---|
| Median (19 companies) | 3.8% | 3.5% | 7.9% | 7.7% | 7.6% |
|---|
| HP Inc. ($HPQ) | 8.0% | 7.4% | 7.9% | 7.9% | 7.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Datasea Inc ($DTSS) | - | 0.0% | 0.0% | - | 20.9% |
| Hewlett Packard Enterprise Company ($HPE) | 10.8% | 10.9% | 9.6% | 9.8% | 8.8% |
| Pure Storage, Inc. ($PSTG) | 8.9% | 10.4% | 6.3% | 7.4% | 5.3% |
| Stratasys, Ltd. ($SSYS) | 6.7% | 3.3% | 3.5% | 3.5% | 5.2% |
| Western Digital Corporation ($WDC) | 4.5% | 3.0% | 4.0% | 5.3% | 3.9% |
| |
|---|
| Median (19 companies) | 2.0% | 1.9% | 2.4% | 2.3% | 2.3% |
|---|
| HP Inc. ($HPQ) | 0.9% | 0.8% | 0.9% | 1.1% | 1.0% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Apple Inc. ($AAPL) | 27.0% | 23.8% | 28.0% | 29.5% | 33.0% |
| Avid Technology, Inc. ($AVID) | - | - | 252.4% | 42.1% | 30.0% |
| CPI Card Group Inc. ($PMTS) | 12.8% | -9.3% | 2.7% | 15.4% | 20.5% |
| NCR Corporation ($NCR) | 13.9% | 16.3% | 4.6% | 14.3% | 5.5% |
| Crossroads Systems Inc ($CRSS) | -175.9% | -96.3% | - | - | 3.9% |
| |
|---|
| Median (21 companies) | -2.6% | 0.2% | 2.2% | 2.9% | 2.0% |
|---|
| HP Inc. ($HPQ) | 15.8% | 60.8% | 72.9% | 116.0% | 109.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Diebold Nixdorf Incorporated ($DBD) | - | 8.3x | - | 6.6x | 7.3x |
| CPI Card Group Inc. ($PMTS) | 5.8x | - | 12.4x | 7.2x | 5.2x |
| Hewlett Packard Enterprise Company ($HPE) | 0.4x | 1.2x | 1.6x | 2.6x | 5.2x |
| NCR Corporation ($NCR) | 2.7x | 2.3x | 5.2x | 3.3x | 4.8x |
| Western Digital Corporation ($WDC) | 5.5x | 1.7x | 1.1x | 3.7x | 3.5x |
| |
|---|
| Median (11 companies) | 0.4x | 0.5x | 1.1x | 1.8x | 3.3x |
|---|
| HP Inc. ($HPQ) | 0.1x | 0.2x | 0.2x | 0.1x | 0.6x |
