Third quarter consolidated net sales were 195.5 billion yen, roughly the same as the forecast, down 1.3% quarter-on-quarter and up 28.1% year-on-year. Third quarter semiconductor sales were 192.3 billion yen, almost in line with the forecast, and down 1.1% quarter-on-quarter. On a year-on-year basis, semiconductor sales increased by 29.6%, which can be attributed mainly to: the solid growth of the Renesas standalone sales, which excludes the sales of Intersil from the entire Renesas Group sales; 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 16.9% 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 18.5% and 21.1%, respectively, mainly due to the strong demand for factory automation, home appliance and analog semiconductor devices.
Non-GAAP gross margin was 47.7%, 2.3 points above the Company’s guidance, mainly due to the increased production. On a sequential basis, gross margin increased by 2.1 points and improved by 5.2 points year-on-year, benefiting from the significant increase in both sales and production as well as integration of Intersil.
Non-GAAP R&D (7) expenses in the third quarter were 31.2 billion yen, compared to 33.5 billion yen and 25.5 billion yen in the sequential and year-ago quarter. Third quarter R&D ratio to net sales was 16.0%.
Non-GAAP SG&A (8) expenses in the third quarter were 26.2 billion yen, compared to 28.0 billion yen and 22.9 billion yen in the sequential and year-ago quarter. Third quarter SG&A ratio to net sales was 13.4%.
Excluding seasonal headwinds, 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 35.9 billion yen, equivalent to 18.4% of net sales in the third quarter, showing an improvement of 6.9 billion yen (3.7 points) from the 29.0 billion yen and 14.6% of net sales in the 2017 second quarter. On a year-on-year basis, non-GAAP operating income improved by 19.4 billion yen (7.5 points) mainly due to sales increases and continued OPEX discipline.
Non-GAAP net income attributable to shareholders of parent company in the third quarter was 32.7 billion yen.
Net cash provided by operating activities in the third quarter was 44.0 billion yen and net cash used in investing activities was 26.2 billion yen. These resulted in positive free cash flows of 17.8 billion yen.
Capital expenditures for property, plant, equipment (manufacturing equipment) and intangible assets, were 10.0 billion yen in the third quarter. These expenditures are based on the amount of investment decisions made and does not refer to the cash outlays in the cash flow statement.
Equity ratio was 46.7% as of September 30, 2017, against 44.2% as of June 30, 2017. Debt/equity ratio (gross) was 0.49 as of September 30, 2017.
| (7) | R&D: Research & Development |
| (8) | SG&A: Selling, general and administrative expenses |
Outlook for Fourth Quarter and Full-Year 2017
In the fourth quarter of the 2017, Renesas expects semiconductor sales of 197.6 billion yen, up 22.4% year-on-year. Despite the increased sales, non-GAAP gross margin will decrease by 1.5 points quarter-on-quarter, due to increased depreciation expense, but will increase by 0.7 point, resulting in at 46.3% on a year-on-year basis. Non-GAAP operating margin is expected to decrease by 5.5 points quarter-on-quarter, mainly due to seasonal cost increase in the year-end, and decrease by 0.8 point year-on year to 12.9%. The forecasts for the fourth quarter ending December 31, 2017 are calculated at the rate of 110 yen per USD and 125 yen per Euro.
Capital expenditures are based on the amount of investment decisions made for property, plant and equipment (manufacturing equipment) and intangible assets during the fourth quarter, and are expected to be 11.4% of net revenue.
For the full year ending December 31, 2017, Renesas expects semiconductor sales of 756.7 billion yen, up 22.0% year-on-year. Non-GAAP gross margin is expected to come in at 46.3%, up 2.7 points year-on-year, and non-GAAP operating margin is expected to come in at 15.5%, up 3.3 points year-on-year.
Capital expenditures are based on the amount of investment decisions
made for property, plant and equipment (manufacturing equipment) and
intangible assets during the full year ending December 31, 2017, and are
expected to be 11.4% of net revenue.
