Renesas Electronics Reports Second Quarter 2018 Financial Results

~Second Quarter Sales Increased Year-on-Year Driven by Stable Demand.
Temporary Decrease in Gross Margin Due to Optimization of Inventory Levels~

Q2 2018: Non-GAAP⁽¹⁾semiconductor sales of 199.1 billion yen, up 2.5% year-on-year. Non-GAAP gross margin of 45.4%, down 0.3 point year-on-year and Non-GAAP operating profits (margin) of 33.9 billion yen (16.7%), up 4.9 billion yen (up 2.0 points) year-on-year
Outlook for Q3 2018: Non-GAAP semiconductor sales of 172.6 billion yen, down 10.2% year-on-year, Non-GAAP gross margin of 43.2%, down 4.5 points year-on-year and Non-GAAP operating margin of 8.8%, down 9.6 points year-on-year

TOKYO — (BUSINESS WIRE) — July 30, 2018 — Renesas Electronics Corporation (TSE:6723, “Renesas”), a premier supplier of advanced semiconductor solutions, today reported the financial results for the second quarter ended June 30, 2018 (April 1, 2018 to June 30, 2018).

“We have been continuously improving our gross and operating margins by pursuing sales growth and cost efficiency,” said Bunsei Kure, Representative Director, President and CEO, Renesas Electronics Corporation. “While our second quarter non-GAAP semiconductor sales increased by 2.5% year-on-year, we have been focusing on restraining our production volume as part of our improvement measures to achieve optimal inventory levels and kept our inventory on par with the level of the previous quarter. This led to our non-GAAP gross margin to be a similar level on a year-on-year basis. For the third quarter ending September 30, 2018, in light of the inventory situations at our sales channels, we expect semiconductor sales to decrease year-on-year and also foresee a drop in gross margin from a year-ago quarter. Although our short-term financial performance is expected to grow weaker from these improvement measures for future growth, we will continue our efforts to realize our mid- to long-term targets.”

Quarterly Financial Summary (Billion yen)


Non-GAAP Basis	Q2 FY2018	Q1 FY2018	Q2 FY2017	QoQ	YoY
	(Apr-Jun 2018)	(Jan-Mar 2018)	(Apr-Jun 2017)
Net Sales	203.5	185.9	198.1	9.50%	2.70%
Semi. Sales	199.1	182	194.3	9.40%	2.50%
Gross Margin	45.40%	48.00%	45.70%	-2.6pts	-0.3pt
Operating Income	33.9	31.4	29	2.5	4.9
Operating Margin	16.70%	16.90%	14.60%	-0.2pt	+2.0pts
EBITDA ⁽²⁾	56.5	53.5	47.2	3	9.3

Japan GAAP Basis	Q2 FY2018	Q1 FY2018	Q2 FY2017	QoQ	YoY
	(Apr-Jun 2018)	(Jan-Mar 2018)	(Apr-Jun 2017)
Net Sales	203.5	185.9	197.3	9.50%	3.10%
Semi. Sales	199.1	182	193.5	9.40%	2.90%
Gross Margin	45.20%	47.80%	41.50%	-2.6pts	+3.7pts
Operating Income	23	20.6	9.4	2.4	13.5
Operating Margin	11.30%	11.10%	4.80%	+0.2pt	+6.5pts
EBITDA	54.8	52.3	37.8	2.6	17.1

(1)		Non-GAAP Basis: Results excluding non-recurring and certain other items. Following the completion of the purchase of Intersil in February 2017, Non-GAAP figures exclude amortization of goodwill, amortization of purchased intangible assets, costs related to the Intersil acquisition, stock-based compensation cost, costs related to the offering, and PPA (purchase price allocation) effects associated with the acquisition. See page 5 for reconciliation of Japan GAAP and Non-GAAP.
(2)		EBITDA: Sum of operating income, depreciation and amortization, and amortization of long-term prepaid expenses. Amortization of goodwill is also included for Japan GAAP-based EBITDA.

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