Non-GAAP gross margin in the full year was 44.7%, decreased by 2.1 points due to decreased revenue and restrained production.

Non-GAAP R&D expenses in the full year were 122.9 billion yen, compared to 125.8 billion yen year-on-year. Full year R&D ratio to net sales was 16.2%.

Non-GAAP SG&A expenses in the full year were 105.0 billion yen, compared to 111.5 billion yen year-on-year. Full year SG&A ratio to net sales was 13.9%.

With regard to OPEX (Operating expenses such as R&D and SG&A), while R&D investments were made to attain future growth, Renesas continued to control SG&A discipline.

Non-GAAP operating income was 110.6 billion yen, equivalent to 14.6% of operating margin in the full year. On a year-on-year basis, non-GAAP operating income decreased from 128.1 billion (16.4%) yen by 17.5 billion yen (1.8 points), mainly due to a decrease in sales despite continued OPEX discipline.

Non-GAAP net income attributable to shareholders of parent company in the full year was 92.3 billion yen. Non-GAAP net income per share for the full year was 55.4 yen.

Net cash provided by operating activities in the full year was 164.2 billion yen and net cash used in investing activities was 61.3 billion yen. These resulted in positive free cash flows of 102.8 billion yen.

Capital expenditures for property, plant, equipment (manufacturing equipment) and intangible assets, were 17.6 billion yen in the full year. These expenditures are based on the amount of investment decisions made and does not refer to the cash outlays in the cash flow statement.

Outlook for First Quarter 2019

Renesas will disclose its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) starting from the annual securities report for the fiscal year ended December 31, 2018. Similarly, starting from the consolidates forecasts for the three months ending March 31, 2019, the Group will present financial forecasts as a range. In order to provide useful information that will help to better understand the Group’s constant business results, figures such as sales, semiconductor sales and gross margin will be presented in the non-GAAP format, which excludes or adjusts the non-recurring items related to acquisitions and other adjustments removed as non-recurring expenses or income. Therefore, as the first and the fourth quarter of 2018 was represented under Japan GAAP, the percentage change from those periods are not provided.

In the first quarter of 2019, Renesas expects semiconductor sales within the range of 146.0 billion yen and 154.0 billion yen.

Based on the midpoint of the sales outlook, Non-GAAP gross margin and operating margin for the first quarter of 2019 is expected to be 39% and 4.5%, respectively.

The forecasts for the first quarter of the 2019 are calculated at the rate of 109 yen per USD and 124 yen per Euro.

Refer to page 19 of the presentation material available on our website for Japan GAAP based percentage change from the previous quarter and the year-ago quarter.

References

Refer to Renesas Electronics’ earnings report “Renesas Electronics Reports Financial Results for the Year Ended December 31, 2018” for the consolidated balance sheets, the consolidated statements of income and the consolidated statements of cash flows.

Refer to the separate sheet for Japan GAAP – non-GAAP reconciliation.

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.

About Renesas Electronics Corporation

Renesas Electronics Corporation ( TSE: 6723) delivers trusted embedded design innovation with complete semiconductor solutions that enable billions of connected, intelligent devices to enhance the way people work and live. A global leader in microcontrollers, analog, power, and SoC products, Renesas provides comprehensive solutions for a broad range of automotive, industrial, home electronics, office automation, and information communication technology applications that help shape a limitless future. Learn more at renesas.com.

Separate Sheet
Renesas Electronics
Japan GAAP – Non-GAAP Reconciliation
(Billion yen)		Q4 FY2018 Actual (Dec-Oct 2018)		Q3 FY2018 Actual (Jul-Sep 2018)		Q4 FY2017 Actual (Dec-Oct 2017)
Net Sales (after PPA adjustment)		187.7		180.2		210.2
PPA Effects		-		-		+0.0
Non-GAAP Net Sales		187.7		180.2		210.2
GAAP Gross Profit		76.3		79.5		100.2
GAAP Gross Margin (%)		40.7%		44.1%		47.7%
PPA Effects (COGS)		+0.3		+0.3		+0.4
Stock-Based Compensation (COGS)		+0.2		+0.2		+0.2
Non-GAAP Gross Profit		76.8		80.0		100.8
Non-GAAP Gross Margin (%)		40.9%		44.4%		47.9%
GAAP Operating Profit		10.1		13.1		21.9
PPA Effects (Net Sales/COGS)		+0.3		+0.3		+0.4
PPA Effects (R&D, SG&A) Increase in Depreciation of Fixed Assets, etc.		+0.1		+0.1		+0.2
Stock-Based Compensation (COGS)		+0.2		+0.2		+0.2
Amortization of Goodwill (SG&A)		+5.3		+5.2		+5.3
Costs Related to the Acquisition of Intersil (SG&A)		+0.2		+0.2		+0.2
Costs Related to the Acquisition of Intersil (R&D)		+0.1		+0.1		+0.1
Amortization of Purchased Intangible Assets (SG&A)		+3.9		+3.8		+4.5
Stock-Based Compensation (R&D)		+0.5		+0.4		+0.5
Stock-Based Compensation (SG&A)		+0.5		+0.5		+0.9
Costs Related to the Offering and Others (SG&A)		+0.1		+0.4		-
Non-GAAP Operating Profit		21.2		24.1		34.1
Non-GAAP Operating Margin (%)		11.3%		13.4%		16.2%

GAAP Net Profit Attributable to Shareholders of Parent Company		-2.4		7.6		18.6
Reconciliations in Operating Profit Level		+11.1		+11.1		+12.2
Reconciliations in Ordinary Profit (PPA Effects)		-		-		+0.1
Reconciliations in Net Profit (PPA Effects)		-		-		-0.5
Reconciliations in Net Profit (Impact from Intersil Acquisition)		-		-		-
Reconciliations in Net Profit (Other Non-Ordinary Income)		+8.7		-		-
Non-GAAP Net Profit Attributable to Shareholders of Parent Company		17.4		18.6		30.3

Renesas Electronics
Japan GAAP – Non-GAAP Reconciliation
(Billion yen)		Full Year 2018 (Jan-Dec 2018)		Full Year 2017 (Jan-Dec 2017)
Net Sales (after PPA adjustments)		757.4		780.3
PPA Effects		-		+1.2
Non-GAAP Net Sales		757.4		781.5
GAAP Gross Profit		336.6		352.8
GAAP Gross Margin (%)		44.4%		45.2%
PPA Effects (COGS)		+1.3		+12.4
Stock-Based Compensation (COGS)		+0.6		+0.2
Non-GAAP Gross Profit		338.5		365.3
Non-GAAP Gross Margin (%)		44.7%		46.7%
GAAP Operating Profit		66.8		78.4
PPA Effects (Net Sales/COGS)		+1.3		+12.4
PPA Effects (R&D, SG&A) Increase in Depreciation of Fixed Assets, etc.		+0.3		+0.7
Stock-Based Compensation (COGS)		+0.6		+0.2
Amortization of Goodwill (SG&A)		+20.7		+17.4
Costs Related to the Acquisition of Intersil (SG&A)		+0.8		+1.5
Costs Related to the Acquisition of Intersil (R&D)		+0.2		+0.1
Amortization of Purchased Intangible Assets (SG&A)		+15.5		+14.7
Stock-Based Compensation (R&D)		+1.7		+1.1
Stock-Based Compensation (SG&A)		+2.2		+1.5
Costs Related to the Offering (SG&A)		+0.6		+0.2
Non-GAAP Operating Profit		110.6		128.1
Non-GAAP Operating Margin (%)		14.6%		16.4%

GAAP Net Profit Attributable to Shareholders of Parent Company		54.6		77.2
Reconciliations in Operating Profit Level		+43.8		+49.7
Reconciliations in Ordinary Profit (PPA Effects)		-		+0.1
Reconciliations in Net Profit (PPA Effects)		-		-3.0
Reconciliations in Net Profit (Impact from Intersil Acquisition and Non-Recurring Expense)		-6.1		-
Non-GAAP Net Profit Attributable to Shareholders of Parent Company		92.3		123.9