Intel : 2018 Q4 Earnings Releases PDF

Intel Corporation

2200 Mission College Blvd. Santa Clara, CA 95054-1549

News Release

Intel Reports Fourth-Quarter and Full-Year 2018 Financial Results

Announces Five Percent Increase to Quarterly Cash Dividend

News Summary:

• • Fourth-quarter revenue was $18.7 billion, up 9 percent year-over-year (YoY); and full-year revenue set an all-time record of $70.8 billion, up 13 percent YoY.

• • Delivered outstanding fourth-quarter earnings per share of $1.12 ($1.28 on a non-GAAP basis); achieved record full-year operating income, net income and EPS.

• • In 2018, Intel generated a record $29.4 billion cash from operations, generated $14.3 billion of free cash flow and returned nearly $16.3 billion to shareholders.

• • Expecting record 2019 revenue of approximately $71.5 billion and first-quarter revenue of approximately $16 billion.

SANTA CLARA, Calif., January 24, 2019 -- Intel Corporation today reported fourth-quarter and full-year 2018 financial results. The company also announced that its board of directors has approved a five percent increase in its cash dividend to $1.26 per-share on an annual basis.The board declared a quarterly dividend of $0.315 per-share on the company's common stock, which will be payable on March 1 to shareholders of record on February 7.

"2018 was a truly remarkable year for Intel with record revenue in every business segment and record profits as we transform the company to pursue our biggest market opportunity ever," said Bob Swan, Intel CFO and Interim CEO. "In the fourth quarter, we grew revenue, expanded earnings and previewed new 10nm-based products that position Intel to compete and win going forward. Looking ahead, we are forecasting another record year and raising the dividend based on our view that the explosive growth of data will drive continued demand for Intel products."

Q4 2018 Financial Highlights

GAAP	Non-GAAP
Q4 2018	Q4 2017	vs. Q4 2017	Q4 2018	Q4 2017	vs. Q4 2017
Revenue ($B)	$18.7	$17.1	up 9%	$18.7^	$17.1^	up 9%
Gross Margin	60.2%	63.2%	down 3 pts	61.7%	64.9%	down 3.2 pts
R&D and MG&A ($B)	$5.0	$5.1	down 3%	$5.0^	$5.1^	down 3%
Operating Income ($B)	$6.2	$5.4	up 15%	$6.6	$6.0	up 10%
Tax Rate	7.8%	111.4%	n/m1	8.8%	21.2%	down 12.4 pts
Net Income (Loss) ($B)	$5.2	$(0.7)	n/m1	$5.9	$5.2	up 14%
due to tax impact
Earnings Per Share	$1.12	$(0.15)	n/m1	$1.28	$1.08	up 18%
due to tax impact

In the fourth quarter, the company generated approximately $6.9 billion in cash from operations, paid dividends of $1.4 billion and used $2.3 billion to repurchase 51 million shares of stock.

Full-Year 2018 Financial Highlights

2018

GAAP	Non-GAAP
2017	vs. 2017	2018	2017	vs. 2017
Revenue ($B)	$70.8	$62.8	up 13%	$70.8^	$62.8^	up 13%
Gross Margin	61.7%	62.3%	down 0.6 pts	63.3%	63.8%	down 0.5 pts
R&D and MG&A ($B)	$20.3	$20.5	down 1%	$20.3^	$20.4	flat 0%
Operating Income ($B)	$23.3	$18.1	up 29%	$24.5	$19.7	up 25%
Tax Rate	9.7%	52.8%	n/m1	11.0%	22.5%	down 11.5 pts
Net Income ($B)	$21.1	$9.6	n/m1	$21.5	$16.8	up 28%
Earnings Per Share	$4.48	$1.99	n/m1	$4.58	$3.46	up 32%

For the full year, the company generated a record $29.4 billion cash from operations, paid dividends of $5.5 billion and used $10.7 billion to repurchase 217 million shares of stock.

Business Unit Summary

Key Business Unit Revenue and Trends

Q4 2018	vs. Q4 2017	2018	vs. 2017
PC-centric	CCG	$9.8 billion	up 10%	$37.0 billion	up 9%
DCG	$6.1 billion	up 9%	$23.0 billion	up 21%
IOTG	$816 million	down 7%	$3.5 billion	up 9%
Data-centric	NSG	$1.1 billion	up 25%	$4.3 billion	up 22%
PSG	$612 million	up 8%	$2.1 billion	up 12%
up 9%*	up 20%*

In the fourth quarter, Intel achieved revenue growth in nearly every business segment, and in 2018 every segment of the business set new annual all-time revenue records.

The PC-centric business (CCG) was up 10 percent in the fourth quarter due to continued strong demand for Intel's higher performance products and strength in commercial and gaming. CCG expanded its product portfolio for 2019 with the recent launch of new 9th Gen Intel® Core™ processors and unveiled "Ice Lake" the upcoming, 10nm-based PC processor, which is expected to be in OEM systems on shelves for holiday, 2019.

Collectively, Intel's data-centric businesses grew 9 percent YoY in the quarter and 20 percent YoY in 2018. In the fourth quarter, DCG achieved 24 percent cloud segment growth and 12 percent communications service provider segment growth while enterprise revenue declined 5 percent. Intel recently announced that the new "Cascade Lake" family of high performance Intel® Xeon® processors with advanced AI and memory capabilities is now shipping.

Fourth-quarter Internet of Things Group (IOTG) revenue declined 7 percent YoY. However, excluding Wind River, which Intel divested in the second quarter, fourth-quarter IOTG revenue was up 4 percent YoY despite supply tightness. Record quarterly revenue in Intel's memory business (NSG) was up 25 percent YoY. Intel's Programmable Solutions Group (PSG) also achieved record quarterly revenue, up 8 percent YoY driven by strength in the data center and communications market segments.

Mobileye fourth-quarter revenue of $183 million was up 43 percent YoY as customer momentum continued. In 2018, Mobileye achieved 28 new design wins and 78 vehicle model launches.

Additional information regarding Intel's results can be found in the Q4'18 Earnings Presentation available at:www.intc.com/results.cfm.

Business Outlook

Intel's guidance for the first-quarter and full-year 2019 includes both GAAP and non-GAAP estimates. Reconciliations between these GAAP and non-GAAP financial measures are included below.

Q1 2019	GAAP	Non-GAAP
Approximately	Approximately
Revenue	$16.0 billion	$16.0 billion^
Operating margin	27%	29%
Tax rate	14%	14%^
Earnings per share	$0.81	$0.87
Full-Year 2019	GAAP	Non-GAAP
Approximately	Approximately
Revenue	$71.5 billion	$71.5 billion^
Operating margin	32%	34%
Tax rate	13.5%	13.5%^
Earnings per share	$4.35	$4.60
Full-year capital spending	$15.5 billion	$15.5 billion^
Free cash flow	N/A	$16.0 billion

Intel's Business Outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments and other significant transactions that may be completed after January 24, 2019. Actual results may differ materially from Intel's Business Outlook as a result of, among other things, the factors described under "Forward-Looking Statements" below. Our guidance above reflects the divestiture of Wind River, which was completed during the second quarter of 2018.

Earnings Webcast

Intel will hold a public webcast at 2:00 p.m. PDT today to discuss the results for its fourth quarter of 2018. The live public webcast can be accessed on Intel's Investor Relations website atwww.intc.com/results.cfm. The Q4'18 Earnings Presentation, webcast replay, and audio download will also be available on the site.

Intel plans to report its earnings for the first quarter of 2018 on April 25, 2019 promptly after close of market, and related materials will be available atwww.intc.com/results.cfm. A public webcast of Intel's earnings conference call will follow at 2:00 p.m. PDT atwww.intc.com.

^ No adjustment on a non-GAAP basis

Forward-Looking Statements

Intel's Business Outlook and other statements in this release that refer to future plans and expectations are forward-looking statements that involve a number of risks and uncertainties. Words such as "anticipates," "expects," "intends," "goals," "plans," "believes," "seeks," "estimates," "continues," "may," "will," "would," "should," "could," and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to total addressable market (TAM) or market opportunity, future products and the expected availability and benefits of such products, and anticipated trends in our businesses or the markets relevant to them, also identify forward-looking statements. All forward-looking statements included in this release are based on management's expectations as of the date of this release and, except as required by law, Intel disclaims any obligation to update these forward-looking statements to reflect future events or circumstances. Forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Intel presently considers the following to be among the important factors that could cause actual results to differ materially from the company's expectations.

• • Demand for Intel's products is highly variable and could differ from expectations due to factors including changes in business and economic conditions; customer confidence or income levels, and the levels of customer capital spending; the introduction, availability and market acceptance of Intel's products, products used together with Intel products, and competitors' products; competitive and pricing pressures, including actions taken by competitors; supply constraints and other disruptions affecting customers; changes in customer order patterns including order cancellations; changes in customer needs and emerging technology trends; and changes in the level of inventory at customers.

• • Intel's results could vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; segment product mix; the timing and execution of the manufacturing ramp and associated costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; and product manufacturing quality/yields. Variations in results may also be caused by the timing of Intel product introductions and related expenses, including marketing programs, and Intel's ability to respond quickly to technological developments and to introduce new products or incorporate new features into existing products, which may result in restructuring and asset impairment charges.

• • Intel's results could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including recession or slowing growth, military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns, fluctuations in currency exchange rates, sanctions and tariffs, and continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad, including the United Kingdom's vote to withdraw from the European Union. Results may also be affected by the formal or informal imposition by countries of new or revised export and/or import and doing-business regulations, which could be changed without prior notice.

• • Intel operates in highly competitive industries and its operations have high costs that are either fixed or difficult to reduce in the short term. In addition, in connection with our strategic transformation to a data-centric company, we have entered new areas and introduced adjacent products, where we face new sources of competition and uncertain market demand or acceptance of our products, and these new areas and products may not grow as projected.

• • The amount, timing and execution of Intel's stock repurchase program may fluctuate based on Intel's priorities for the use of cash for other purposes-such as investing in our business, including operational and capital spending, acquisitions, and returning cash to our stockholders as dividend payments-and because of changes in cash flows, tax laws, or the market price of our common stock.

• • Intel's expected tax rate is based on current tax law, including current interpretations of the Tax Cuts and Jobs Act of 2017 ("TCJA"), and current expected income and may be affected by evolving interpretations of TCJA; changes in the volume and mix of profits earned across jurisdictions with varying tax rates; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties; and the ability to realize deferred tax assets.

• • Intel's results could be affected by gains or losses from equity securities and interest and other, which could vary depending on gains or losses on the change in fair value, sale, exchange, or impairments of equity and debt investments, interest rates, cash balances, and changes in fair value of derivative instruments.

• • Product defects or errata (deviations from published specifications) may adversely impact our expenses, revenues and reputation.

• • We or third parties regularly identify security vulnerabilities with respect to our processors and other products as well as the operating systems and workloads running on them. Security vulnerabilities and any limitations of, or adverse effects resulting from, mitigation techniques can adversely affect our results of operations, financial condition, customer relationships, prospects, and reputation in a number of ways, any of which may be material, including incurring significant costs related to developing and deploying updates and mitigations, writing down inventory value, a reduction in the competitiveness of our products, defending against product claims and litigation, responding to regulatory inquiries or actions, paying damages, addressing customer satisfaction considerations, or taking other remedial steps with respect to third parties. Adverse publicity about security vulnerabilities or mitigations could damage our reputation with customers or users and reduce demand for our products and services. A detailed description of these risks is set forth in the "Risk Factors" section of our most recent reports on Forms 10-K and 10-Q.

• • Intel's results could be affected by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust, commercial, disclosure and other issues. An unfavorable ruling could include monetary damages or an injunction prohibiting Intel from manufacturing or selling one or more products, precluding particular business practices, impacting Intel's ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property.

• • Intel's results may be affected by the timing of closing of acquisitions, divestitures and other significant transactions.

Detailed information regarding these and other factors that could affect Intel's business and results is included in Intel's SEC filings, including the company's most recent reports on Forms 10-K and 10-Q, particularly the "Risk Factors" sections of those reports. Copies of these filings may be obtained by visiting our Investor Relations website atwww.intc.comor the SEC's website at www.sec.gov.

About Intel

Intel (NASDAQ: INTC), a leader in the semiconductor industry, is shaping the data-centric future with computing and communications technology that is the foundation of the world's innovations. The company's engineering expertise is helping address the world's greatest challenges as well as helping secure, power and connect billions of devices and the infrastructure of the smart, connected world - from the cloud to the network to the edge and everything in between. Find more information about Intel at newsroom.intel.com and intel.com.

Intel, the Intel logo, Intel Core, Intel Optane, and Xeon, are trademarks of Intel Corporation or its subsidiaries in the U.S. and/or other countries.

*Other names and brands may be claimed as the property of others.

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