Intel Reports Third Quarter 2019 Financial Results

10/24/2019

Intel Reports Third-Quarter 2019 Financial Results

News Summary:

  • Third-quarter revenue of $19.2 billion set a new record and exceeded July guidance, driven by record data-centric revenue*, which grew 6 percent year-over-year (YoY). PC-centric revenue declined 5 percent YoY, consistent with guidance.
  • Third-quarter earnings-per-share (EPS) exceeded July guidance. GAAP EPS of $1.35 declined 2 percent YoY; non-GAAP EPS of $1.42 was up 1 percent.
  • Year-to-date, Intel has generated a record $23.3 billion cash from operations, generated $11.7 billion of free cash flow and returned approximately $14.3 billion to shareholders.
  • Raising full-year revenue outlook to $71 billion, up $1.5 billion from July guidance. Now expecting full-year GAAP EPS of $4.42 and raising full-year non-GAAP EPS outlook to $4.60.

SANTA CLARA, Calif., October 24, 2019 -- Intel Corporation today reported third-quarter 2019 financial results.

“We've been on a multiyear journey to reposition Intel’s portfolio to take advantage of the exponential growth of data. Our third-quarter financial performance underscores our progress as our data-centric businesses turned in their best performance ever, making up almost half our total revenue in a record quarter,” said Bob Swan, Intel CEO. “Our priorities are accelerating growth, improving our execution and deploying capital for attractive returns. We now expect to deliver a fourth record year in a row.”

Q3 2019 Financial Highlights

GAAP

Non-GAAP

Q3 2019

Q3 2018

vs. Q3 2018

Q3 2019

Q3 2018

vs. Q3 2018

Revenue ($B)

$19.2

$19.2

flat

$19.2^

$19.2^

flat

Gross Margin

58.9%

64.5%

down 5.6 pts

60.4%

65.9%

down 5.6 pts

R&D and MG&A ($B)

$4.7

$5.0

down 7%

$4.7^

$5.0^

down 7%

Operating Income ($B)

$6.4

$7.3

down 12%

$6.9

$7.6

down 9%

Tax Rate

10.8%

10.4%

up 0.4 pt

10.8%

11.9%

down 1.2 pts

Net Income ($B)

$6.0

$6.4

down 6%

$6.3

$6.5

down 3%

Earnings Per Share

$1.35

$1.38

down 2%

$1.42

$1.40

up 1%

Intel today announced its board of directors has approved a $20 billion increase in its stock repurchase program authorization. In the third quarter, the company generated approximately $10.7 billion in cash from operations, paid dividends of $1.4 billion and used $4.5 billion to repurchase 92 million shares of stock.

Business Unit Summary

Key Business Unit Revenue and Trends

Q3 2019

vs. Q3 2018

PC-centric

CCG

$9.7 billion

down

5%

Data-centric

DCG

$6.4 billion

up

4%

Internet of Things

IOTG

$1.0 billion

up

9%

Mobileye

$229 million

up

20%

NSG

$1.3 billion

up

19%

PSG

$507 million

up

2%

up

6%*

Third-quarter revenue of $19.2 billion was $1.2 billion higher than July guidance and set an all-time quarterly record, driven by record data-centric revenue, up 6 percent YoY. PC-centric revenue was in-line with expectations, down 5 percent compared to last year.

The PC-centric business (CCG) was down 5 percent in the third quarter on lower year-on-year platform volume, partially offset by a strong mix of Intel's higher performance products as the commercial segment of the PC market remained strong. Major PC manufacturers introduced systems featuring the new, 10nm-based 10th Gen Intel® Core™ processors (code-named "Ice Lake"). Eighteen new Ice Lake-powered system designs have shipped to date, with a total of 30 designs expected to launch in 2019. The company also announced new 10th Gen Intel® Core™ mobile PC processors (formerly code-named "Comet Lake") and new Intel® Xeon® W and X-Series processors for workstations and high-end desktops.

Collectively, Intel's data-centric businesses achieved record revenue in the third quarter, up 6 percent YoY. The Data Center Group (DCG) delivered record revenue driven by a strong mix of high-performance Intel® Xeon® processors and growth in every segment of the business. The communications service provider segment grew 11 percent while the cloud segment returned to growth, up 3 percent, and enterprise and government revenue grew 1 percent. The Internet of Things Group (IOTG) also achieved record revenue, up 9 percent on strength in retail and transportation. Mobileye achieved record revenue, up 20 percent YoY on increasing ADAS adoption. Intel's memory business (NSG) also achieved record revenue, up 19 percent YoY. The Programmable Solutions Group (PSG) shipped the first 10nm-based Intel® Agilex™ FPGAs in the third quarter. PSG third-quarter revenue was up 2 percent YoY.

Additional information regarding Intel’s results can be found in the Q3'19 Earnings Presentation available at: www.intc.com/results.cfm.

Business Outlook

 

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

Q4 2019

GAAP

Non-GAAP

Approximately

Approximately

Revenue

$19.2 billion

$19.2 billion^

Operating margin

31.5%

33.5%

Tax rate

15.0%

13.5%

Earnings per share

$1.28

$1.24

Full-Year 2019

GAAP

Non-GAAP

Approximately

Approximately

Revenue

$71.0 billion

$71.0 billion^

Operating margin

30.0%

32.5%

Tax rate

12.5%

12.0%

Earnings per share

$4.42

$4.60

Cash from operations

$32.0 billion

N/A

Full-year capital spending

$16.0 billion

$16.0 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 October 24, 2019, except for the planned divestiture of the majority of our smartphone modem business and the pending sale of Intel's interest in the IM Flash Technologies, LLC joint venture, which are both expected to close in the fourth quarter of 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.

Earnings Webcast

Intel will hold a public webcast at 2:00 p.m. PDT today to discuss the results for its third quarter of 2019. The live public webcast can be accessed on Intel's Investor Relations website at www.intc.com/results.cfm. The Q3'19 Earnings Presentation, webcast replay, and audio download will also be available on the site.

Intel plans to report its earnings for the fourth quarter of 2019 on January 23, 2020 promptly after close of market, and related materials will be available at www.intc.com/results.cfm. A public webcast of Intel’s earnings conference call will follow at 2:00 p.m. PDT at www.intc.com.

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, as well as decisions to exit product lines or businesses, 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. In addition, these transactions could fail to achieve our financial or strategic objectives, disrupt our ongoing business, and adversely impact our results of operations. We also may not realize the expected benefits of portfolio decisions due to numerous risks, including unfavorable prices and terms; changes in market conditions; limitations due to regulatory or governmental approvals, contractual terms, or other conditions; and potential continued financial obligations associated with such transactions. Risks associated with the planned divestiture of the majority of Intel’s smartphone modem business are described in the “Forward-Looking Statements” section of Intel’s press release titled “Apple to Acquire Majority of Intel’s Smartphone Modem Business,” dated July 25, 2019.

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 at www.intc.com or 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 Corporation. Intel, the Intel logo, and other Intel marks are trademarks of Intel Corporation or its subsidiaries. Other names and brands may be claimed as the property of others.

CONTACTS:

Brooke Wells

Cara Walker

Investor Relations

Media Relations

503-613-8230

503-696-0831

brooke.wells@intel.com

cara.walker@intel.com

 

INTEL CORPORATION

CONSOLIDATED SUMMARY STATEMENT OF INCOME DATA AND OTHER INFORMATION

 

 

Three Months Ended

 

Nine Months Ended

(In Millions, Except Per Share Amounts; Unaudited)

 

Sep 28,
2019

 

Sep 29,
2018

 

Sep 28,
2019

 

Sep 29,
2018

NET REVENUE

 

$

19,190

 

 

$

19,163

 

 

$

51,756

 

 

$

52,191

 

Cost of sales

 

7,895

 

 

6,803

 

 

21,494

 

 

19,681

 

GROSS MARGIN

 

11,295

 

 

12,360

 

 

30,262

 

 

32,510

 

Research and development (R&D)

 

3,208

 

 

3,428

 

 

9,978

 

 

10,110

 

Marketing, general and administrative (MG&A)

 

1,486

 

 

1,605

 

 

4,608

 

 

5,230

 

R&D AND MG&A

 

4,694

 

 

5,033

 

 

14,586

 

 

15,340

 

Restructuring and other charges

 

104

 

 

(72)

 

 

288

 

 

(72)

 

Amortization of acquisition-related intangibles

 

50

 

 

50

 

 

150

 

 

150

 

OPERATING EXPENSES

 

4,848

 

 

5,011

 

 

15,024

 

 

15,418

 

OPERATING INCOME

 

6,447

 

 

7,349

 

 

15,238

 

 

17,092

 

Gains (losses) on equity investments, net

 

318

 

 

(75)

 

 

922

 

 

365

 

Interest and other, net

 

(46)

 

 

(132)

 

 

(170)

 

 

225

 

INCOME BEFORE TAXES

 

6,719

 

 

7,142

 

 

15,990

 

 

17,682

 

Provision for taxes

 

729

 

 

744

 

 

1,847

 

 

1,824

 

NET INCOME

 

$

5,990

 

 

$

6,398

 

 

$

14,143

 

 

$

15,858

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - BASIC

 

$

1.36

 

 

$

1.40

 

 

$

3.18

 

 

$

3.42

 

EARNINGS PER SHARE - DILUTED

 

$

1.35

 

 

$

1.38

 

 

$

3.14

 

 

$

3.35

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:

 

 

 

 

 

 

 

 

BASIC

 

4,391

 

 

4,574

 

 

4,450

 

 

4,632

 

DILUTED

 

4,433

 

 

4,648

 

 

4,507

 

 

4,728

 

 

 

 

Three Months Ended

(In Millions)

 

Sep 28,
2019

 

Sep 29,
2018

 

 

 

 

 

EARNINGS PER SHARE OF COMMON STOCK INFORMATION:

 

 

 

 

Weighted average shares of common stock outstanding – basic

 

4,391

 

 

4,574

 

Dilutive effect of employee equity incentive plans

 

30

 

 

40

 

Dilutive effect of convertible debt

 

12

 

 

34

 

Weighted average shares of common stock outstanding – diluted

 

4,433

 

 

4,648

 

 

 

 

 

 

STOCK BUYBACK:

 

 

 

 

Shares repurchased

 

92

 

 

50

 

Cumulative shares repurchased (in billions)

 

5.4

 

 

5.1

 

Remaining dollars authorized for buyback (in billions)

 

$

7.2

 

 

$

4.7

 

 

 

 

 

 

OTHER INFORMATION:

 

 

 

 

Employees (in thousands)

 

111.9

 

 

107.1

 

 

INTEL CORPORATION

CONSOLIDATED SUMMARY BALANCE SHEET DATA

(In Millions)

 

Sep 28,
2019

 

Dec 29,
2018

CURRENT ASSETS

 

(unaudited)

 

 

Cash and cash equivalents

 

$

3,935

 

 

$

3,019

 

Short-term investments

 

1,849

 

 

2,788

 

Trading assets

 

6,241

 

 

5,843

 

Total cash investments

 

12,025

 

 

11,650

 

Accounts receivable

 

6,880

 

 

6,722

 

Inventories

 

 

 

 

Raw materials

 

803

 

 

813

 

Work in process

 

5,945

 

 

4,511

 

Finished goods

 

1,890

 

 

1,929

 

 

 

8,638

 

 

7,253

 

Other current assets

 

2,414

 

 

3,162

 

TOTAL CURRENT ASSETS

 

29,957

 

 

28,787

 

 

 

 

 

 

Property, plant and equipment, net

 

53,563

 

 

48,976

 

Equity investments

 

4,819

 

 

6,042

 

Other long-term investments

 

3,428

 

 

3,388

 

Goodwill

 

24,727

 

 

24,513

 

Identified intangible assets, net

 

11,019

 

 

11,836

 

Other long-term assets

 

6,255

 

 

4,421

 

TOTAL ASSETS

 

$

133,768

 

 

$

127,963

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Short-term debt

 

$

5,200

 

 

$

1,261

 

Accounts payable

 

4,809

 

 

3,824

 

Accrued compensation and benefits

 

3,220

 

 

3,622

 

Other accrued liabilities

 

11,835

 

 

7,919

 

TOTAL CURRENT LIABILITIES

 

25,064

 

 

16,626

 

 

 

 

 

 

Debt

 

23,707

 

 

25,098

 

Contract liabilities

 

1,413

 

 

2,049

 

Income taxes payable, non-current

 

4,974

 

 

4,897

 

Deferred income taxes

 

1,696

 

 

1,665

 

Other long-term liabilities

 

2,506

 

 

2,646

 

 

 

 

 

 

TEMPORARY EQUITY

 

166

 

 

419

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

Preferred stock

 

 

 

 

Common stock and capital in excess of par value

 

25,290

 

 

25,365

 

Accumulated other comprehensive income (loss)

 

(722)

 

 

(974)

 

Retained earnings

 

49,674

 

 

50,172

 

TOTAL STOCKHOLDERS' EQUITY

 

74,242

 

 

74,563

 

TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY

 

$

133,768

 

 

$

127,963

 

 

INTEL CORPORATION

CONSOLIDATED SUMMARY STATEMENT OF CASH FLOWS

 

 

Nine Months Ended

(In Millions)

 

Sep 28,
2019

 

Sep 29,
2018

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

$

3,019

 

 

$

3,433

 

Cash flows provided by (used for) operating activities:

 

 

 

 

Net income

 

14,143

 

 

15,858

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation

 

6,647

 

 

5,420

 

Share-based compensation

 

1,290

 

 

1,203

 

Amortization of intangibles

 

1,211

 

 

1,172

 

(Gains) losses on equity investments, net

 

(395)

 

 

(329)

 

Changes in assets and liabilities:

 

 

 

 

Accounts receivable

 

(156)

 

 

(449)

 

Inventories

 

(1,376)

 

 

(362)

 

Accounts payable

 

728

 

 

430

 

Accrued compensation and benefits

 

(365)

 

 

(801)

 

Customer deposits and prepaid supply agreements

 

(674)

 

 

1,472

 

Income taxes

 

435

 

 

(1,057)

 

Other assets and liabilities

 

1,769

 

 

(25)

 

Total adjustments

 

9,114

 

 

6,674

 

Net cash provided by operating activities

 

23,257

 

 

22,532

 

Cash flows provided by (used for) investing activities:

 

 

 

 

Additions to property, plant and equipment

 

(11,547)

 

 

(11,291)

 

Purchases of available-for-sale debt investments

 

(2,028)

 

 

(3,090)

 

Sales of available-for-sale debt investments

 

1,198

 

 

135

 

Maturities of available-for-sale debt investments

 

1,920

 

 

2,232

 

Purchases of trading assets

 

(5,769)

 

 

(8,316)

 

Maturities and sales of trading assets

 

5,467

 

 

9,705

 

Sales of equity investments

 

1,414

 

 

1,646

 

Other investing

 

(575)

 

 

(440)

 

Net cash used for investing activities

 

(9,920)

 

 

(9,419)

 

Cash flows provided by (used for) financing activities:

 

 

 

 

Increase (decrease) in short-term debt, net

 

835

 

 

1,707

 

Issuance of long-term debt, net of issuance costs

 

650

 

 

423

 

Repayment of debt and debt conversion

 

(1,478)

 

 

(1,928)

 

Proceeds from sales of common stock through employee equity incentive plans

 

797

 

 

545

 

Repurchase of common stock

 

(10,100)

 

 

(8,464)

 

Payment of dividends to stockholders

 

(4,214)

 

 

(4,173)

 

Other financing

 

1,089

 

 

(1,249)

 

Net cash provided by (used for) financing activities

 

(12,421)

 

 

(13,139)

 

Net increase (decrease) in cash and cash equivalents

 

916

 

 

(26

)

Cash and cash equivalents, end of period

 

$

3,935

 

 

$

3,407

 

INTEL CORPORATION

SUPPLEMENTAL OPERATING SEGMENT RESULTS

 

 

Three Months Ended

 

Nine Months Ended

(In Millions)

 

Sep 28,
2019

 

Sep 29,
2018

 

Sep 28,
2019

 

Sep 29,
2018

Net Revenue

 

 

 

 

 

 

 

 

Client Computing Group

 

 

 

 

 

 

 

 

Platform

 

$

8,379

 

 

$

9,023

 

 

$

24,128

 

 

$

24,703

 

Adjacency

 

1,330

 

 

1,211

 

 

3,008

 

 

2,479

 

 

 

9,709

 

 

10,234

 

 

27,136

 

 

27,182

 

Data Center Group

 

 

 

 

 

 

 

 

Platform

 

5,819

 

 

5,637

 

 

14,854

 

 

15,561

 

Adjacency

 

564

 

 

502

 

 

1,414

 

 

1,361

 

 

 

6,383

 

 

6,139

 

 

16,268

 

 

16,922

 

Internet of Things

 

 

 

 

 

 

 

 

IOTG

 

1,005

 

 

919

 

 

2,901

 

 

2,639

 

Mobileye

 

229

 

 

191

 

 

639

 

 

515

 

 

 

1,234

 

 

1,110

 

 

3,540

 

 

3,154

 

 

 

 

 

 

 

 

 

 

Non-Volatile Memory Solutions Group

 

1,290

 

 

1,081

 

 

3,145

 

 

3,200

 

Programmable Solutions Group

 

507

 

 

496

 

 

1,482

 

 

1,511

 

All Other

 

67

 

 

103

 

 

185

 

 

222

 

TOTAL NET REVENUE

 

$

19,190

 

 

$

19,163

 

 

$

51,756

 

 

$

52,191

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

Client Computing Group

 

$

4,305

 

 

$

4,532

 

 

$

11,114

 

 

$

10,557

 

Data Center Group

 

3,115

 

 

3,082

 

 

6,756

 

 

8,421

 

Internet of Things

 

 

 

 

 

 

 

 

IOTG

 

309

 

 

321

 

 

854

 

 

791

 

Mobileye

 

67

 

 

52

 

 

188

 

 

106

 

 

 

376

 

 

373

 

 

1,042

 

 

897

 

 

 

 

 

 

 

 

 

 

Non-Volatile Memory Solutions Group

 

(499)

 

 

160

 

 

(1,080)

 

 

14

 

Programmable Solutions Group

 

92

 

 

106

 

 

233

 

 

304

 

All Other

 

(942)

 

 

(904)

 

 

(2,827)

 

 

(3,101)

 

TOTAL OPERATING INCOME

 

$

6,447

 

 

$

7,349

 

 

$

15,238

 

 

$

17,092

 

Revenue for our reportable and non-reportable operating segments is primarily related to the following product lines:

  • CCG includes platforms designed for end-user form factors, focusing on higher growth segments of 2-in-1, thin-and-light, commercial and gaming, and growing adjacencies such as WiFi and Thunderbolt™ products.
  • DCG includes workload-optimized platforms and related products designed for cloud, enterprise, and communication infrastructure market segments.
  • IOTG includes high-performance compute solutions for targeted verticals and embedded applications in market segments such as retail, manufacturing, health care, energy, automotive, and government.
  • Mobileye includes computer vision and machine learning-based sensing, data analysis, localization mapping and driving policy technology for advanced driver assistance systems (ADAS) and autonomous driving
  • NSG includes Intel® Optane™ technology and 3D NAND flash memory, primarily used in solid-state drives (SSDs).
  • PSG includes programmable semiconductors, primarily field-programmable gate arrays (FPGAs), and related products for a broad range of markets, such as communications, data center, industrial, and military.

We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments.

All other category includes revenue, expenses, and charges such as:

  • results of operations from non-reportable segments not otherwise presented;
  • historical results of operations from divested businesses;
  • results of operations of start-up businesses that support our initiatives, including our foundry business;
  • amounts included within restructuring and other charges;
  • a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and
  • acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.

A substantial majority of our revenue is generated from the sale of platform products. Platform products incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multi-chip package based on Intel® architecture. Our remaining primary product lines are incorporated in "adjacency."

 

INTEL CORPORATION

SUPPLEMENTAL PLATFORM REVENUE INFORMATION

Q3 2019

Q3 2019

YTD 2019

compared to
Q2 2019

compared to
Q3 2018

compared to
YTD 2018

Client Computing Group Platform

Notebook platform volumes

3%

(10)%

(6)%

Notebook platform average selling prices

2%

4%

6%

Desktop platform volumes

15%

(11)%

(10)%

Desktop platform average selling prices

(2)%

3%

5%

Data Center Group Platform

Unit volumes

20%

(6)%

(8)%

Average selling prices

7%

9%

4%

INTEL CORPORATION

EXPLANATION OF NON-GAAP MEASURES

In addition to disclosing financial results in accordance with GAAP, this document contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance.

Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects where applicable. Income tax effects have been calculated using an appropriate tax rate for each adjustment. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.

Amortization of acquisition-related intangible assets: Amortization of acquisition-related intangible assets consists of amortization of intangible assets such as developed technology, brands, and customer relationships acquired in connection with business combinations. We record charges related to the amortization of these intangibles within both cost of sales and operating expenses in our GAAP financial statements. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions, rather than our core operations. Consequently, our non-GAAP adjustments exclude these charges to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

Restructuring and other charges: Restructuring charges are costs associated with a formal restructuring plan and are primarily related to employee severance and benefit arrangements. Other charges include asset impairments, pension charges, and costs associated with the exit of the 5G smartphone modem business. We exclude restructuring and other charges, including any adjustments to charges recorded in prior periods, for purposes of calculating certain non-GAAP measures. We believe that these costs do not reflect our current operating performance. Consequently, our non-GAAP adjustments exclude these charges to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

Ongoing mark-to-market on marketable equity securities: We exclude gains and losses resulting from ongoing mark-to-market adjustments of our marketable equity securities, after the initial mark-to-market adjustment is recorded upon a security becoming marketable, when calculating certain non-GAAP measures, as we do not believe this volatility correlates to our core operational performance. Consequently, our non-GAAP earnings per share figures exclude these impacts to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

Tax Reform adjustment: During 2018, we made adjustments to our U.S. Tax Cuts and Jobs Act (Tax Reform) provisional tax estimates that we recorded in Q4 2017. We exclude these provisional tax adjustments when calculating certain non-GAAP measures. We believe excluding these adjustments facilitates a better evaluation of our current operating performance and comparisons to past operating performance.

Free cash flow: We reference a non-GAAP financial measure of free cash flow, which is used by management when assessing our sources of liquidity, capital resources, and quality of earnings. We believe this non-GAAP financial measure is helpful to investors in understanding our capital requirements and provides an additional means to reflect the cash flow trends of our business.

INTEL CORPORATION

SUPPLEMENTAL RECONCILIATIONS OF GAAP OUTLOOK TO NON-GAAP OUTLOOK

Set forth below are reconciliations of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measures disclosed by the company have limitations and should not be considered a substitute for, or superior to, the financial measures prepared in accordance with GAAP, and the financial outlook prepared in accordance with GAAP and the reconciliations from this Business Outlook should be carefully evaluated. Please refer to "Explanation of Non-GAAP Measures" in this document for a detailed explanation of the adjustments made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.

 

 

 

Q4 2019 Outlook

 

Full-Year 2019

 

 

 

 

 

 

 

Approximately

 

Approximately

GAAP OPERATING MARGIN

 

31.5

%

 

30.0

%

Amortization of acquisition-related intangible assets

 

2.0

%

 

2.5

%

NON-GAAP OPERATING MARGIN

 

33.5

%

 

32.5

%

 

 

 

 

 

GAAP TAX RATE

 

15.0

%

 

12.5

%

Other

 

(1.5)

%

 

(0.5)

%

NON-GAAP TAX RATE

 

13.5

%

 

12.0

%

 

 

 

 

 

GAAP DILUTED EARNINGS PER COMMON SHARE

 

$

1.28

 

 

$

4.42

 

Amortization of acquisition-related intangible assets

 

0.08

 

 

0.30

 

Restructuring and other charges

 

0.01

 

 

0.08

 

Ongoing mark-to-market on marketable equity securities

 

 

 

(0.04)

 

(Gains) losses from divestiture

 

(0.16)

 

 

(0.16)

 

Income tax effect

 

0.03

 

 

 

NON-GAAP DILUTED EARNINGS PER COMMON SHARE

 

$

1.24

 

 

$

4.60

 

 

(In Billions)

 

Full-Year 2019

 

 

 

GAAP CASH FROM OPERATIONS

 

$

32.0

 

Additions to property, plant and equipment

 

(16.0)

 

FREE CASH FLOW

 

$

16.0

 

INTEL CORPORATION

SUPPLEMENTAL RECONCILIATIONS OF GAAP ACTUALS TO NON-GAAP ACTUALS

Set forth below are reconciliations of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measure disclosed by the company has limitations and should not be considered a substitute for, or superior to, the financial measure prepared in accordance with GAAP, and the reconciliations from GAAP to Non-GAAP actuals should be carefully evaluated. Please refer to "Explanation of Non-GAAP Measures" in this document for a detailed explanation of the adjustment made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.

 

 

Three Months Ended

 

Nine Months Ended

(In Millions, Except Per Share Amounts)

Sep 28,
2019

 

Sep 29,
2018

 

Sep 28,
2019

 

Sep 29,
2018

GAAP GROSS MARGIN

$

11,295

 

 

$

12,360

 

 

$

30,262

 

 

$

32,510

 

Amortization of acquisition-related intangible assets

288

 

 

276

 

 

856

 

 

826

 

NON-GAAP GROSS MARGIN

$

11,583

 

 

$

12,636

 

 

$

31,118

 

 

$

33,336

 

 

 

 

 

 

 

 

 

GAAP GROSS MARGIN PERCENTAGE

58.9

%

 

64.5

%

 

58.5

%

 

62.3

%

Amortization of acquisition-related intangible assets

1.5

%

 

1.4

%

 

1.7

%

 

1.6

%

NON-GAAP GROSS MARGIN PERCENTAGE

60.4

%

 

65.9

%

 

60.1

%

 

63.9

%

 

 

 

 

 

 

 

 

GAAP OPERATING INCOME

$

6,447

 

 

$

7,349

 

 

$

15,238

 

 

$

17,092

 

Amortization of acquisition-related intangible assets

338

 

 

326

 

 

1,006

 

 

976

 

Restructuring and other charges

104

 

 

(72)

 

 

288

 

 

(72)

 

NON-GAAP OPERATING INCOME

$

6,889

 

 

$

7,603

 

 

$

16,532

 

 

$

17,996

 

 

 

 

 

 

 

 

 

GAAP TAX RATE

10.8

%

 

10.4

%

 

11.6

%

 

10.3

%

Other

(0.1)

%

 

1.5

%

 

%

 

1.5

%

NON-GAAP TAX RATE

10.8

%

 

11.9

%

 

11.5

%

 

11.8

%

 

 

 

 

 

 

 

 

GAAP NET INCOME

$

5,990

 

 

$

6,398

 

 

$

14,143

 

 

$

15,858

 

Amortization of acquisition-related intangible assets

338

 

 

326

 

 

1,006

 

 

976

 

Restructuring and other charges

104

 

 

(72)

 

 

288

 

 

(72)

 

(Gains) losses from divestiture

 

 

 

 

 

 

(494)

 

Ongoing mark-to-market on marketable equity securities

(114)

 

 

(8)

 

 

(188)

 

 

(379)

 

Tax Reform

 

 

(113)

 

 

 

 

(294)

 

Income tax effect

(29)

 

 

(23)

 

 

(127)

 

 

28

 

NON-GAAP NET INCOME

$

6,289

 

 

$

6,508

 

 

$

15,122

 

 

$

15,623

 

 

 

 

 

 

 

 

 

GAAP DILUTED EARNINGS PER COMMON SHARE

$

1.35

 

 

$

1.38

 

 

$

3.14

 

 

$

3.35

 

Amortization of acquisition-related intangible assets

0.08

 

 

0.07

 

 

0.22

 

 

0.21

 

Restructuring and other charges

0.02

 

 

(0.02)

 

 

0.07

 

 

(0.02)

 

(Gains) losses from divestiture

 

 

 

 

 

 

(0.10)

 

Ongoing mark-to-market on marketable equity securities

(0.02)

 

 

 

 

(0.04)

 

 

(0.08)

 

Tax Reform

 

 

(0.02)

 

 

 

 

(0.06)

 

Income tax effect

(0.01)

 

 

(0.01)

 

 

(0.03)

 

 

 

NON-GAAP DILUTED EARNINGS PER COMMON SHARE

$

1.42

 

 

$

1.40

 

 

$

3.36

 

 

$

3.30

 

 

 

Nine Months Ended

(In Millions)

Sep 28,
2019

 

 

GAAP CASH FROM OPERATIONS

$

23,257

 

Additions to property, plant and equipment

(11,547)

 

FREE CASH FLOW

$

11,710

 

 

 

GAAP CASH USED FOR INVESTING ACTIVITIES

$

(9,920)

 

GAAP CASH USED FOR FINANCING ACTIVITIES

$

(12,421)

 

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