Black Box Corp. :BBOX-US: Earnings Analysis: 2016 By the Numbers : July 26, 2016

Black Box Corp. reports financial results for the year ended March 31, 2016.

We analyze the earnings along side the following peers of Black Box Corp. – Polycom, Inc., F5 Networks, Inc. and General Electric Company (PLCM-US, FFIV-US and GE-US) that have also reported for this period.


  • Gross margins narrowed from 29.39% to 28.49% compared to the same period last year, operating (EBITDA) margins now 3.50% from 5.31%.
  • Year-on-year change in operating cash flow of -19.99% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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

2012 2013 2014 2015 2016
Relevant Numbers (Annual)
Revenues 1087.53 997.79 971.67 992.44 912.66
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings -247.73 28.81 -115.87 15.34 -171.1
Earnings Growth (YOY) -568.64 111.63 -502.25 113.24 -1215.25
Net Margin -22.78 2.89 -11.93 1.55 -18.75
EPS -13.98 1.73 -7.33 0.99 -11.18
Return on Equity -39.3 5.9 -27.81 4.46 -69.36
Return on Assets -24.05 3.26 -14.57 2.19 -29.45

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Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 29.39% to 28.49%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 5.31% to 3.50% in this time frame. For comparison, gross margins were 29.39% and EBITDA margins were 5.31% in the previous period.

Gross Margin Versus EBITDA Margin

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

BBOX-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 56.92 days from 60.92 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Cash Versus Earnings – Sustainable Performance?

BBOX-US‘s change in operating cash flow of -19.99% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 3.54% to 1.43% and (2) one-time items that contributed to a decrease in pretax margins from 2.38% to -21.16%

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Black Box Corp. engages in the provision of technology solutions. It supports its customers to design, build, manage, and secure their information technology (IT)infrastructure. The firm offers its products under Products and Services Platforms. The Products platform includes IT infrastructure, specialty networking, multimedia and keyboard/video/mouse switching. The Services platform includes unified communications, data infrastructure and managed services. It operates its business through the following segments: North America Products, North America Services, International Products, and International Services. The company was founded in 1976 and is headquartered in Lawrence, PA.

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