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Intel Corp Net Income surged on 119% and EBITDA Margin increased on 4.0 pp from 41.7% to 45.7%

01/24/2019 • About Intel Corp ($INTC) • By InTwits

Intel Corp reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Intel Corp has high CAPEX intensity: 5 year average CAPEX/Revenue was 17.5%. At the same time it's a lot of higher than industry average of 7.6%.
  • The company has highly profitable business model: ROIC is 23.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Intel Corp's Revenue surged on 12.9%. Revenue growth showed slowdown in FY18Q4 - it was 9.4% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 4.0 pp from 41.7% to 45.7% in FY2018. During FY2014-FY2018 EBITDA Margin bottomed in FY2016 at 35.2% and was growing since that time.

Gross Margin decreased slightly on 0.56 pp from 62.3% to 61.7% in FY2018. SG&A as a % of Revenue decreased on 2.3 pp from 11.9% to 9.5% in FY2018. SG&A as a % of Revenue stuck to a declining trend at -1.3 pp per annum in FY2014-FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018.

Net Income margin jumped on 14.4 pp from 15.3% to 29.7% in FY2018. During the last 5 years Net Income margin bottomed in FY2017 at 15.3%. The efficient tax rate was 9.7% in FY2018 while the average for the last five years was 26.0%.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 21.4% in FY2018. Intel Corp showed CAPEX/Revenue growth of 8.2 pp from 13.2% in FY2015 to 21.4% in FY2018. For the last three years the average CAPEX/Revenue was 18.8%. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2015 at 13.2% and was growing since that time.

Accounts receivable as a % of Revenue increased slightly on 0.55 pp from 8.9% to 9.5% in FY2018. Inventories as a % of Revenue decreased slightly on 0.89 pp from 11.1% to 10.2% in FY2018. Accounts payable as a % of Revenue increased slightly on 1.7 pp from 12.4% to 14.1% in FY2018.

Intel Corp has spent $190m on M&A in FY2018 which accounts for 0.27% of revenue.

Return on investment

The company operates at high and attractive ROIC (23.2%) and ROE (29.1%). ROIC increased on 4.4 pp from 18.8% to 23.2% in FY2018. ROE jumped on 15.0 pp from 14.0% to 29.1% in FY2018. During the last 5 years ROIC bottomed in FY2016 at 14.8% and was growing since that time. During the last 5 years ROE bottomed in FY2017 at 14.0%.

Leverage (Debt)

Debt level is 0.7x Net Debt / EBITDA and 0.8x Debt / EBITDA. Net Debt / EBITDA dropped on 0.2x from 0.9x to 0.7x in FY2018. Debt decreased slightly on 1.7% while cash dropped on 12.1%.

Intel Corp has good short term financial stability: Interest coverage ratio (ICR) is 49.8x. Intel Corp has no short term refinancing risk: cash is higher than short term debt (239.4%).

Average interest expence charged on company's debt was 1.8% in FY2018.

Valuation and dividends

The company's trades at EV/EBITDA 7.4x and P/E 10.2x.

The company paid 26.3% of Net Income as dividends in FY2018. Dividends grew on average at 4.7% per annum in the last 5 years).

Management team

CEO total compensation was $34,757,000 in FY2018 which included $1,592,000 salary and $2,500,000 annual bonus.

0.022% of the company is owned by insiders. Insider ownership didn't change in 2018.

At the end of financial year the company had 107,400 employees. The number of employees increased on 4.6%. Average revenue per employee in FY2018 was $659,665 and it increased on 7.9%.

Financial and operational results

FY ended 12/29/2018

Intel Corp ($INTC) key annual financial indicators

mln. $201420152016201720182018/2017
Gross Profit35,60934,67936,23339,09843,73711.9%
Interest expence192337733646468-27.6%
Net Income11,70411,42010,3169,60121,053119.3%
Stock Based Compensation1,0261,3051,4441,3581,54613.8%
Balance Sheet
Accounts Receivable4,4274,7874,6905,6076,72219.9%
Accounts Payable2,7482,0632,4752,9283,82430.6%
Short Term Debt1,5962,6344,6341,7761,261-29.0%
Long Term Debt12,05920,03620,64925,03725,0980.2%
Cash flow
Revenue growth6.0%-0.9%7.3%5.7%12.9%
EBITDA growth17.6%-5.0%-7.9%25.1%23.8%

Gross Margin63.7%62.6%61.0%62.3%61.7%-0.6%
EBITDA Margin42.8%41.0%35.2%41.7%45.7%4.0%
EBIT Margin27.5%25.3%22.1%28.8%32.9%4.1%
SG&A, % of revenue14.6%14.3%14.1%11.9%9.5%-2.3%
SBC, % of revenue1.8%2.4%2.4%2.2%2.2%0.0%
Net Income Margin20.9%20.6%17.4%15.3%29.7%14.4%
CAPEX, % of revenue18.1%13.2%16.2%18.8%21.4%2.7%

Net Debt/EBITDA0.5x0.3x0.9x0.9x0.7x-0.2x
Interest expence / Average debt1.4%1.9%3.1%2.5%1.8%-0.7%
Insider ownership0.0%0.0%0.0%0.0%0.0%0.0%
Revenue/Employee, th. $5245165606116607.9%

Intel Corp ($INTC) key quoterly financial indicators

mln. $FY18Q1FY18Q2FY18Q3FY18Q4 YoY change
Revenue16,06616,96219,16318,657 8.6%14.9%18.7%9.4%
EBITDA6,6667,3959,6238,717 19.5%26.8%33.7%15.1%
Net Income4,4545,0066,3985,195 50.3%78.3%41.7%
Balance Sheet
Cash3,5542,6143,4073,019 -28.0%-77.6%-62.5%-12.1%
Short Term Debt3,8423,5103,0511,261 -24.3%-15.0%-26.3%-29.0%
Long Term Debt24,77024,63224,82325,098 19.8%-11.6%-9.7%0.2%
Gross Margin60.6%61.4%64.5%60.2% -1.3%-0.2%2.2%-3.0%
EBITDA Margin 41.5% 43.6% 50.2% 46.7% 3.8%4.1%5.7%2.3%
Net Income Margin 27.7% 29.5% 33.4% 27.8% 7.7%10.5%5.4%31.9%

Peers in Semiconductors

Below we provide Intel Corp benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
NanoFlex Power Corp ($OPVS)72.5%354.8%
MoSys, Inc. ($MOSY)-18.4%37.2%46.8%87.7%
SMART Global Holdings, Inc. ($SGH)-16.9%42.5%69.3%
Micron Technology, Inc. ($MU)-1.0%-23.4%63.9%49.5%
Adesto Technologies Corporation ($IOTS)4.3%1.6%27.6%48.8%
Median (67 companies)54.6%9.7%4.4%11.0%4.7%
Intel Corp ($INTC)-0.9%7.3%5.7%12.9%

Top companies by Gross margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
CEVA, Inc. ($CEVA)90.2%90.9%91.6%92.1%89.8%
NVE Corporation ($NVEC)77.9%80.3%76.1%78.5%79.0%
Rambus, Inc. ($RMBS)85.9%84.7%80.1%79.9%76.8%
Universal Display Corporation ($OLED)76.0%64.2%83.9%80.8%75.5%
Intermolecular, Inc. ($IMI)48.3%57.4%66.5%67.5%70.3%
Median (65 companies)45.3%47.0%47.2%48.6%50.4%
Intel Corp ($INTC)63.7%62.6%61.0%62.3%61.7%

Top companies by EBITDA margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
NVE Corporation ($NVEC)58.8%66.0%61.8%65.6%65.1%
Micron Technology, Inc. ($MU)31.7%35.0%25.4%47.9%65.0%
NXP Semiconductors N.V. ($NXPI)25.7%41.5%21.6%46.2%49.9%
Texas Instruments Incorporated ($TXN)39.7%42.0%43.5%46.7%48.6%
Broadcom Inc. ($AVGO)24.9%38.0%19.9%40.4%44.2%
Median (66 companies)9.6%11.3%9.2%10.7%9.8%
Intel Corp ($INTC)42.8%41.0%35.2%41.7%45.7%

Top companies by CAPEX/Revenue, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Alpha and Omega Semiconductor Limited ($AOSL)3.0%6.6%6.5%12.2%42.2%
Renesola Ltd. ($SOL)3.5%0.0%0.0%78.0%41.7%
First Solar, Inc. ($FSLR)7.6%4.0%7.9%17.5%33.0%
Sigma Designs Inc ($SIGM)11.0%6.5%6.2%14.1%29.3%
Micron Technology, Inc. ($MU)19.0%24.8%46.9%23.3%29.2%
Median (66 companies)3.6%4.0%3.6%4.7%4.4%
Intel Corp ($INTC)18.1%13.2%16.2%18.8%21.4%

Top companies by ROIC, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
SMART Global Holdings, Inc. ($SGH)2.5%21.5%51.7%
Texas Instruments Incorporated ($TXN)25.1%29.8%34.9%43.1%47.5%
Micron Technology, Inc. ($MU)18.8%15.8%0.8%21.5%42.9%
Applied Materials Inc ($AMAT)15.8%15.2%19.0%31.2%36.4%
NVIDIA Corporation ($NVDA)9.2%13.3%13.1%27.3%35.3%
Median (73 companies)5.0%3.8%1.4%3.2%3.0%
Intel Corp ($INTC)20.7%17.8%14.8%18.8%23.2%

Top companies by Net Debt / EBITDA

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
MACOM Technology Solutions Holdings, Inc. ($MTSI)25.4x3.3x3.0x7.2x98.6x
Inphi Corporation ($IPHI)-6.4x4.5x33.7x32.2x
JinkoSolar Holding Company Limited ($JKS)4.2x3.3x4.1x11.0x8.2x
Lattice Semiconductor Corporation ($LSCC)-1.8x6.5x19.0x3.9x
Renesola Ltd. ($SOL)7.0x35.0x123.6x2.3x3.3x
Median (45 companies)-0.6x-0.3x-0.0x0.4x0.3x
Intel Corp ($INTC)0.5x0.3x0.9x0.9x0.7x