Due to Repercussions of Inventory Buildup in FY17 and Impacts from Weakening End Demands, Full Year Sales Decreased Year-on-Year

FY19 to Generate Early Synergies from IDT Integration and Pursue Continued Thorough

Cost and Cash Management in Preparation for the Continuing Weak End Demands in FY19

• Q4 2018: Non-GAAP⁽¹⁾ semiconductor sales of 183.8 billion yen, down 11.0% year-on-year. Non-GAAP gross margin of 40.9%, down 7.0 points year-on-year and Non-GAAP operating profits (margin) of 21.2 billion yen (11.3%), down 12.9 billion yen (4.9 points) year-on-year.
• Full Year 2018: Non-GAAP semiconductor sales of 740.5 billion yen, down 3.3% year-on-year. Non-GAAP gross margin of 44.7%, down 2.1 points year-on-year and Non-GAAP operating profits (margin) of 110.6 billion yen (14.6%), down 17.5 billion yen (1.8 points) year-on-year.
• Outlook for Q1 2019 (IFRS basis): Non-GAAP semiconductor sales within the range of 146.0 billion and 154.0 billion yen. Non-GAAP gross margin of 39%, based on the midpoint of forecasted sales.

TOKYO — (BUSINESS WIRE) — February 7, 2019 — Renesas Electronics Corporation (TSE:6723, “Renesas”), a premier supplier of advanced semiconductor solutions, today reported the financial results for the fourth quarter ended December 31, 2018 (October 1, 2018 to December 31, 2018) and the financial results for the year ended December 31, 2018 (January 1, 2018 to December 31, 2018).

“In our full year 2018 and fourth quarter, our non-GAAP semiconductor sales decreased by 3.3% year-on-year, and the non-GAAP gross margin decreased by 2.1 points on a year-on-year basis. Our fourth quarter non-GAAP semiconductor sales decreased by 11.0% year-on-year, and non-GAAP gross margin decreased by 7.0 points on a year-on-year basis. Impacts from the weak market conditions as well as our continued efforts to restrain our production volume to achieve optimal inventory levels led to these decreases,” said Bunsei Kure, Representative Director, President and CEO, Renesas Electronics Corporation. “For the first quarter ending March 31, 2019, in light of the continued weak market, we expect semiconductor sales to decrease year-on-year and also foresee a drop in gross margin from a year-ago quarter. With uncertainties for sales in the short term, we will thoroughly control cash and improve operational efficiency and reduce costs through selective concentration of R&D. As for our growth strategy, we will update and announce our mid-term plan after the completion of IDT acquisition.”

Quarterly Financial Summary (Billion yen)
Non-GAAP Basis		Q4 FY2018 (Oct-Dec 2018)		Q3 FY2018 (Jul-Sep 2018)		Q4 FY2017 (Oct-Dec 2017)		QoQ		YoY
Net Sales		187.7		180.2		210.2		4.2%		-10.7%
Semi. Sales		183.8		175.6		206.4		4.7%		-11.0%
Gross Margin		40.9%		44.4%		47.9%		-3.5pts		-7.0pts
Operating Income		21.2		24.1		34.1		-3.0		-12.9
Operating Margin		11.3%		13.4%		16.2%		-2.1pts		-4.9pts
EBITDA (2)		43.9		46.8		54.5		-2.9		-10.6

Japan GAAP Basis		Q4 FY2018 (Oct-Dec 2018)		Q3 FY2018 (Jul-Sep 2018)		Q4 FY2017 (Oct-Dec 2017)		QoQ		YoY
Net Sales		187.7		180.2		210.2		4.2%		-10.7%
Semi. Sales		183.8		175.6		206.4		4.7%		-11.0%
Gross Margin		40.7%		44.1%		47.7%		-3.5pts		-7.0pts
Operating Income		10.1		13.1		21.9		-3.0		-11.7
Operating Margin		5.4%		7.3%		10.4%		-1.9pts		-5.0pts
EBITDA		42.4		45.0		52.6		-2.7		-10.2

Yearly Financial Summary (Billion yen)
Non-GAAP basis		Full-Year 2018 (Jan-Dec 2018)		Full-Year 2017 (Jan-Dec 2017)		YoY
Net Sales		757.4		781.5		-3.1%
Semi. Sales		740.5		765.6		-3.3%
Gross Margin		44.7%		46.7%		-2.1pts
Operating Income		110.6		128.1		-17.5
Operating Margin		14.6%		16.4%		-1.8pts
EBITDA		200.6		202.8		-2.2

Japan GAAP basis		Full Year 2018 (Jan-Dec 2018)		Full Year 2017 (Jan-Dec 2017)		YoY
Net Sales		757.4		780.3		-2.9%
Semi. Sales		740.5		764.4		-3.1%
Gross Margin		44.4%		45.2%		-0.8pt
Operating Income		66.8		78.4		-11.6
Operating Margin		8.8%		10.0%		-1.2pts
EBITDA		194.5		187.1		+7.4

(1)		Non-GAAP Basis: Non-GAAP figures are calculated by adjusting or removing non-recurring items and other adjustments from GAAP figures. The Group believes non-GAAP measures provide useful information in understanding and evaluating the Group’s constant business results, and therefore results are provided in non-GAAP base. This adjustment and exclusion include the amortization of goodwill and depreciation of intangible assets recognized from acquisitions, other PPA (purchase price allocation) adjustments and costs relating to acquisitions, stock-based compensation, as well as other non-recurring expenses and income the Group believes to be applicable. In addition, following the adoption of IFRS, amortization of goodwill has been removed from the definition above.
(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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