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Intel Q4 Earnings Beat - Revenue Light

January 25, 2019

Intel reported fourth-quarter and full-year 2018 financial results. The company also 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.

The firm realized earnings of $1.28 per share, excluding certain items, with Wall Street expecting $1.22 per share. Intel reported revenue of $18.66 billion. But, expectations were set at $19.01 billion in revenue.

“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)
due to tax impact
n/m1   $5.9 $5.2

up 14%

Earnings Per Share

$1.12

$(0.15)
due to tax impact
n/m1   $1.28 $1.08

up 18%

^ No adjustment on a non-GAAP basis
1 Not meaningful due to Q4'17 tax impacts

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

  GAAP   Non-GAAP
 

2018

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%

^ No adjustment on a non-GAAP basis
1 Not meaningful due to Q4'17 tax impacts

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%

             Data-centric

DCG

$6.1 billion

up

 9%

$23.0 billion

up

 21%

IOTG

$816 million

down

 7%

$3.5 billion

up

 9%

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%*

* Data-centric businesses include DCG, IOTG, NSG, PSG and All Other, excluding McAfee

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.

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

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