Bang & Olufsen A/S :BGOUY-US: Earnings Analysis: Q2, 2017 By the Numbers : January 18, 2017

Bang & Olufsen A/S reports financial results for the quarter ended November 30, 2016.


  • Summary numbers: Revenues of USD 127.42 million, Net Earnings of USD 3.34 million.
  • Gross margins widened from 31.61% to 34.66% compared to the same period last year, operating (EBITDA) margins now 11.80% from 1.81%.
  • Change in operating cash flow of -21.03% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-11-30 2016-08-31 2016-05-31 2016-02-29 2015-11-30
Relevant Numbers (Quarterly)
Revenues (mil) 127.42 77.21 105.93 102.17 106.7
Revenue Growth (%YOY) 19.42 2.27 3.69 -17.5 -16.58
Earnings (mil) 3.34 -9.96 -11.47 -1.56 -2.86
Earnings Growth (%YOY) 216.82 27.59 75.51 -158.1 76.4
Net Margin (%) 2.62 -12.9 -10.83 -1.52 -2.68
EPS 0.07 -0.22 -0.24 -0 -0.03
Return on Equity (%) 5.47 -15.75 -17.49 -2.36 -4.27
Return on Assets (%) 3.16 -9.54 -10.72 -1.36 -2.44

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, BGOUY-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if BGOUY-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 65.04% and earnings by 133.49% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 31.61% to 34.66% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 1.81% to 11.80% compared to the same period last year. For comparison, gross margins were 26.63% and EBITDA margins were -7.76% in the last reporting period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

BGOUY-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 118.75 days from 149.42 days for the same period last year.

Cash Versus Earnings – Sustainable Performance?

BGOUY-US‘s year-on-year change in operating cash flow of -21.03% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -6.20% to 3.21% and (2) one-time items. The company’s pretax margins are now 3.63% compared to -3.20% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Bang & Olufsen A/S engages in the development, manufacture, and trade of sound systems for residential, commercial, and automotive sectors. It operates through the Bang and Olufsen and B&O PLAY segments. The Bang and Olufsen segment involves in the distribution and sale of audio and video products such as music equipment, loudspeakers, and multimedia devices. The B&O PLAY segment includes supplies of earphones and portable audio equipment. The company was founded by Peter Boas Bang and Svend Andreas Gron Olufsen in 1925 and is headquartered in Struer, Denmark.

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