(4) Automotive: Renesas mainly supplies microcontrollers (MCUs), system-on-chip (SoCs), analog semiconductors and power devices for the “Automotive control” and “Automotive information” product categories.
(5) Industrial: Renesas mainly supplies MCUs and SoCs for “Smart factory,” “Smart home” and “Smart infrastructure” product categories.
(6) Broad-based: Renesas mainly supplies general-purpose MCUs and general-purpose analog semiconductors to a wide variety of end market solutions.
Summary of Second Quarter 2017 Results (Non-GAAP Basis)
Second quarter consolidated net sales were 198.1 billion yen, up 11.5% quarter-on-quarter and up 30.4% year-on-year. Second quarter semiconductor sales were 194.3 billion yen, up 12.6% quarter-on-quarter. On a year-on-year basis, semiconductor sales increased by 31.7%, which can be attributed to the solid growth of the Renesas standalone sales, which excludes the sales of Intersil from the entire Renesas Group sales. The growth is also attributed to the integration of Intersil and the dissipation of the impact from the Kumamoto earthquake that occurred in the same period a year ago. Automotive sales increased by 21.8% year-on-year on a pro-forma basis, driven by strong demand for Automotive Control and for Automotive Information products. Industrial and Broad-based sales increased year-on-year on a pro-forma basis by 18.9% and 16.7%, respectively, mainly due to the strong demand for factory automation, home appliance and analog semiconductors.
Non-GAAP gross margin was 45.7%, 1.8 points above the Company’s guidance. On a sequential basis, gross margin increased by 0.2 points and improved by 1.4 points year-on-year, benefiting from the significant increase in sales and integration of Intersil.
Non-GAAP R&D (7) expenses in the second quarter were 33.5 billion yen, compared to 27.0 billion yen and 24.4 billion yen in the sequential and year-ago quarter. Second quarter R&D ratio to net sales was 16.9%.
Non-GAAP SG&A (8) expenses in the second quarter were 28.0 billion yen, compared to 24.7 billion yen and 22.1 billion yen in the sequential and year-ago quarter. Second quarter SG&A ratio to net sales was 14.2%.
Excluding seasonal headwinds, half-yearly OPEX (Operating expenses such as R&D and SG&A) was kept under control within the range of long-term financial targets.
Non-GAAP operating income was 29.0 billion yen, equivalent to 14.6% of net sales in the second quarter, showing a decrease versus 29.1 billion yen, or 16.4% of net sales in the 2017 first quarter. Non-GAAP operating margin varies due to the seasonal headwinds of OPEX on quarterly basis. On a year-on-year basis, Non-GAAP operating income improved by 8.2 billion yen (0.9 points) mainly due to sales increases and continued OPEX discipline.
Non-GAAP net income attributable to shareholders of parent company was 37.3 billion yen, due to special income of 14.4 billion yen, which can mainly be attributed to the insurance income related to last year’s Kumamoto earthquake.
Net cash provided by operating activities in the second quarter was 59.5 billion yen and net cash used in investing activities was negative 28.1 billion yen. These resulted in positive free cash flows of 31.4 billion yen.
Capital expenditures for property, plant, equipment (manufacturing equipment) and intangible assets, were 24.2 billion yen in the second quarter. These expenditures are based on the amount of investment decisions made during the period and does not refer to the cash outlays in the cash flow statement.
Equity ratio was 46.2% as of June 30, 2017 and was 44.5% as of March 31, 2017. Debt/equity ratio (gross) was 0.54 as of June 30, 2017.
(7) R&D: Research & Development
(8) SG&A: Selling, general and administrative expenses
Outlook for Third Quarter 2017
Based on an assumed exchange rate of 110 yen to the US$ and 125 yen to the Euro, in the third quarter of the 2017, Renesas expects semiconductor sales of 191.9 billion yen, up 29.4% year-on-year. Non-GAAP gross margin and non-GAAP operating margin are expected to come in at 45.5% and 15.6%, respectively.
Capital expenditures are based on the amount of investment decisions made for property, plant and equipment (manufacturing equipment) and intangible assets during the third quarter, and are expected to be 18.7% of net revenue.
References
Refer to “Consolidated Financial Results for the Second Quarter Ended June 30, 2017” for the quarterly consolidated balance sheets, the quarterly statements of income and the quarterly consolidated statements of cash flows.
Forward-Looking Statements
The statements in this press release with respect to the plans,
strategies and financial outlook of Renesas Electronics and its
consolidated subsidiaries (collectively “we”) are forward-looking
statements involving risks and uncertainties. We caution you in advance
that actual results may differ materially from such forward-looking
statements due to several important factors including, but not limited
to, general economic conditions in our markets, which are primarily
Japan, North America, Asia, and Europe; demand for, and competitive
pricing pressure on, products and services in the marketplace; ability
to continue to win acceptance of products and services in these highly
competitive markets; and fluctuations in currency exchange rates,
particularly between the yen and the U.S. dollar. Among other factors,
downturn of the world economy; deteriorating financial conditions in
world markets, or deterioration in domestic and overseas stock markets,
may cause actual results to differ from the projected results forecast.
