Black Box Corp. :BBOX-US: Earnings Analysis: Q4, 2016 By the Numbers

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

We analyze the earnings along side the following peers of Black Box Corp. – Datalink Corporation, Polycom, Inc., CommScope Holding Co., Inc., F5 Networks, Inc., Digi International Inc., ShoreTel, Inc., Jack Henry & Associates, Inc. and General Electric Company (DTLK-US, PLCM-US, COMM-US, FFIV-US, DGII-US, SHOR-US, JKHY-US and GE-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 224.10 million, Net Earnings of USD -47.70 million.
  • Gross margins narrowed from 30.19% to 25.48% compared to the same period last year, operating (EBITDA) margins now -4.24% from 5.12%.
  • Year-on-year change in operating cash flow of -39.62% 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:

2015-03-31 2015-06-30 2015-09-30 2015-12-31 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 245.1 229.21 236.84 222.48 224.1
Revenue Growth (%YOY) 2.86 -6.53 -4.84 -12.16 -8.57
Earnings (mil) 2.9 0.75 -129.85 5.74 -47.7
Earnings Growth (%YOY) 102.15 -80.88 -4153.86 8.78 -1744.83
Net Margin (%) 1.18 0.33 -54.82 2.58 -21.29
EPS 0.19 0.05 -8.45 0.37 -3.13
Return on Equity (%) 3.4 0.89 -190.43 11.05 -104.49
Return on Assets (%) 1.65 0.44 -85.09 4.28 -38

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Market Share Versus Profits

Revenues History
Earnings History

BBOX-US‘s change in revenue this period compared to the same period last year of -8.57% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that BBOX-US is holding onto its market share. Also, for comparison purposes, revenues changed by 0.73% and earnings by -931.45% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 30.19% to 25.48%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 5.12% to -4.24% in this time frame. For comparison, gross margins were 30.13% and EBITDA margins were 5.36% 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 57.47 days from 65.42 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 -39.62% 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

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 3.32% to -6.38% and (2) one-time items that contributed to a decrease in pretax margins from 1.06% to -22.49%

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Black Box Corp.

Company Profile

Black Box Corp. is a technology solutions provider to help customers design, build, manage, and secure their information technology infrastructure. The company offers its product under Products and Services Platforms. The Products platform includes information technology infrastructure, specialty networking, multimedia and keyboard/video/mouse switching. The Services platform includes unified communications, data infrastructure and managed services. The company operates its business through four segments: North America Products, North America Services, International Products and International Services. Black Box was founded in 1976 and is headquartered in Lawrence, PA.

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