Hewlett Packard Enterprise Company reports 35.1% EBITDA decline in 2020 and 3.9 pp EBITDA Margin decline from 13.1% to 9.2%
12/01/2020 • About Hewlett Packard Enterprise Company (
$HPE) • By InTwits
Hewlett Packard Enterprise Company reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- Hewlett Packard Enterprise Company is a company in decline: FY2020 revenue growth was -7.4%, 5 years revenue CAGR was -12.3%
- EBITDA Margin is quite volatile: 9.2% in FY2020, 13.1% in FY2019, 14.4% in FY2018, 12.7% in FY2017, 25.4% in FY2016
- Hewlett Packard Enterprise Company has medium CAPEX intensity: 5 year average CAPEX/Revenue was 10.0%. At the same time it's a lot of higher than industry average of 5.5%.
- CAPEX is quite volatile: $1,407m in FY2020, $887m in FY2019, $784m in FY2018, $690m in FY2017, $539m in FY2016
- The company has unprofitable business model: ROIC is -0.9%
- It operates with high leverage: Net Debt/EBITDA is 5.2x 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
The company's Revenue decreased on 7.4%. Annual revenue decline showed slowdown in FY20Q4 - revenue showed almost no change in FY20Q4. During FY2016-FY2020 Revenue growth topped in FY2018 at 6.9% and was decelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 3.9 pp from 13.1% to 9.2% in FY2020.
Gross Margin decreased slightly on 1.2 pp from 32.6% to 31.4% in FY2020. SG&A as a % of Revenue showed almost no change in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2018 at 15.7% and was growing since that time.
Net Income margin decreased on 4.8 pp from 3.6% to -1.2% in FY2020.
Investments (CAPEX, working capital and M&A)
Hewlett Packard Enterprise Company's CAPEX/Revenue was 8.8% in FY2020. CAPEX/Revenue decreased on 2.0 pp from 10.9% in FY2017 to 8.8% in FY2020. For the last three years the average CAPEX/Revenue was 9.4%. Battling declining revenue the company invested a large share of EBITDA (96.4%) to CAPEX but that didn't help at least in this year. CAPEX as a % of Revenue followed a declining trend at -0.51 pp per annum in the last 5 years.
Return on investment
The company operates at negative ROIC (-0.9%) and ROE (-1.9%). ROIC decreased on 5.0 pp from 4.0% to -0.95% in FY2020. ROE decreased on 7.4 pp from 5.5% to -1.9% in FY2020.
Leverage (Debt)
Debt level is 5.2x Net Debt / EBITDA and 6.9x Debt / EBITDA. Net Debt / EBITDA jumped on 2.5x from 2.6x to 5.2x in FY2020. Debt surged on 23.2% while cash jumped on 12.8%. Net Debt/EBITDA stuck to a growing trend at 1.1x per annum in FY2016-FY2020.
Hewlett Packard Enterprise Company has no short term refinancing risk: cash is higher than short term debt (107.4%).
Management team
Hewlett Packard Enterprise Company's CEO is Antonio Fabio Neri. Antonio Fabio Neri has 3 years tenure with the company. Tarek A Robbiati is a the company's CFO. Tarek A Robbiati has spent 2 years at the company.
Financial and operational results
FY ended 10/31/2020
Hewlett Packard Enterprise Company ($HPE) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 30,280 | 28,871 | 30,852 | 29,135 | 26,982 | -7.4% |
| Gross Profit | 9,773 | 8,694 | 9,292 | 9,493 | 8,469 | -10.8% |
| SG&A | 5,380 | 5,006 | 4,851 | 4,907 | 4,624 | -5.8% |
| EBITDA | 7,678 | 3,676 | 4,434 | 3,809 | 2,471 | -35.1% |
| EBIT | 3,903 | 625 | 1,858 | | | |
| Interest expence | 298 | 334 | 353 | | | |
| Tax | 623 | -164 | -1,744 | | | |
| Net Income | 3,161 | 344 | 1,908 | 1,049 | -322 | -130.7% |
| Stock Based Compensation | 558 | 428 | 286 | | | |
Balance Sheet
|
|---|
| Cash | 12,987 | 9,579 | 4,880 | 3,753 | 4,233 | 12.8% |
| Accounts Receivable | 3,151 | 3,073 | 3,263 | | | |
| Inventory | 1,720 | 2,315 | 2,447 | | | |
| Accounts Payable | 4,945 | 6,072 | 6,092 | | | |
| Short Term Debt | 3,525 | 3,850 | 2,005 | 4,425 | 3,943 | -10.9% |
| Long Term Debt | 12,168 | 10,182 | 10,136 | 9,395 | 13,084 | 39.3% |
Cash flow
|
|---|
| Capex | 3,280 | 3,137 | 2,956 | 2,856 | 2,383 | -16.6% |
| Dividends | 373 | 428 | 570 | | | |
| Acquisitions | 22 | 2,202 | 207 | | | |
Ratios
|
|---|
| Revenue growth | -41.9% | -4.7% | 6.9% | -5.6% | -7.4% | |
| EBITDA growth | 40.4% | -52.1% | 20.6% | -14.1% | -35.1% | |
|
|---|
| Gross Margin | 32.3% | 30.1% | 30.1% | 32.6% | 31.4% | -1.2% |
| EBITDA Margin | 25.4% | 12.7% | 14.4% | 13.1% | 9.2% | -3.9% |
| EBIT Margin | 12.9% | 2.2% | 6.0% | | |
| SG&A, % of revenue | 17.8% | 17.3% | 15.7% | 16.8% | 17.1% | 0.3% |
| SBC, % of revenue | 1.8% | 1.5% | 0.9% | | |
| Net Income Margin | 10.4% | 1.2% | 6.2% | 3.6% | -1.2% | -4.8% |
| CAPEX, % of revenue | 10.8% | 10.9% | 9.6% | 9.8% | 8.8% | -1.0% |
|
|---|
| ROIC | 8.5% | 1.6% | 5.5% | 4.0% | -0.9% | -5.0% |
| ROE | 9.7% | 1.3% | 8.5% | 5.5% | -1.9% | -7.4% |
| Net Debt/EBITDA | 0.4x | 1.2x | 1.6x | 2.6x | 5.2x | 2.5x |
| Interest expence / Average debt | 1.9% | 2.2% | 2.7% | | | |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | | | |
| Employees | 195,000 | 66,000 | 60,000 | | | |
| Revenue/Employee, th. $ | 155 | 437 | 514 | | | |
Hewlett Packard Enterprise Company ($HPE) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 6,949 | 6,009 | 6,816 | 7,208 | | -8.0% | -16.0% | -5.6% | -0.1% |
| EBITDA | 1,080 | -148 | 701 | 838 | | -1.4% | -113.7% | 26.1% | -22.1% |
| Net Income | 333 | -821 | 9 | 157 | | 88.1% | -295.9% | - | -67.3% |
Balance Sheet
|
|---|
| Cash | 3,171 | 5,131 | 8,465 | 4,233 | | -16.1% | 43.1% | 129.2% | 12.8% |
| Short Term Debt | 4,713 | 5,359 | 5,914 | 3,943 | | 127.4% | 153.5% | 168.0% | -10.9% |
| Long Term Debt | 10,302 | 12,470 | 14,632 | 13,084 | | 0.2% | 20.7% | 40.0% | 39.3% |
Ratios
|
|---|
| Gross Margin | 32.8% | 31.9% | 30.3% | 30.6% | | 1.8% | -0.4% | -3.6% | -2.6% |
| EBITDA Margin | 15.5% | -2.5% | 10.3% | 11.6% | | 1.0% | -17.6% | 2.6% | -3.3% |
| Net Income Margin | 4.8% | -13.7% | 0.1% | 2.2% | | 2.4% | -19.5% | 0.5% | -4.5% |
Peers in Technology Hardware, Storage & Peripherals
Below we provide Hewlett Packard Enterprise Company 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. ($PMTS) | - | -17.4% | 0.4% | 8.7% | 12.3% |
| |
|---|
| Median (20 companies) | 1.4% | 2.1% | 4.3% | -2.0% | -10.2% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | - | -4.7% | 6.9% | -5.6% | -7.4% |
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. ($SCKT) | 50.2% | 53.5% | 51.4% | 52.5% | 53.1% |
| |
|---|
| Median (21 companies) | 39.3% | 39.6% | 38.8% | 35.1% | 38.2% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 32.3% | 30.1% | 30.1% | 32.6% | 31.4% |
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 ($WDC) | 12.5% | 21.4% | 27.5% | 11.5% | 11.7% |
| |
|---|
| Median (19 companies) | 3.8% | 3.5% | 7.9% | 7.7% | 7.6% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 25.4% | 12.7% | 14.4% | 13.1% | 9.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Datasea Inc ($DTSS) | - | 0.0% | 0.0% | - | 20.9% |
| Pure Storage, Inc. ($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% |
| Intevac, Inc. ($IVAC) | 4.2% | 3.9% | 3.4% | 3.8% | 2.7% |
| |
|---|
| Median (19 companies) | 1.7% | 1.8% | 2.2% | 1.7% | 1.7% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 10.8% | 10.9% | 9.6% | 9.8% | 8.8% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| HP Inc. ($HPQ) | 15.8% | 60.8% | 72.9% | 116.0% | 109.2% |
| Apple Inc. ($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 ($NCR) | 13.9% | 16.3% | 4.6% | 14.3% | 5.5% |
| |
|---|
| Median (21 companies) | -2.6% | 0.2% | 2.2% | 3.1% | 2.6% |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 8.5% | 1.6% | 5.5% | 4.0% | -0.9% |
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 |
| 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 |
| Avid Technology, Inc. ($AVID) | 1.7x | 5.6x | 4.8x | 3.5x | 3.3x |
| |
|---|
| Median (11 companies) | 0.1x | 0.2x | 0.2x | 1.3x | 2.7x |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 0.4x | 1.2x | 1.6x | 2.6x | 5.2x |
