EX-99.1 2 q4-2019earningsrelease.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1

Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95054-1549
earningsintellogobwa13.jpg
News Release


Intel Reports Fourth-Quarter and Full-Year 2019 Financial Results
Announces Five Percent Increase to Quarterly Cash Dividend


News Summary:
Record Fourth-quarter revenue was $20.2 billion, up 8 percent year-over-year (YoY). Full-year revenue set an all-time record of $72.0 billion, up 2 percent YoY on data-centric growth*.
Delivered outstanding fourth-quarter earnings per share (EPS) of $1.58 ($1.52 on a non-GAAP basis).
In 2019, Intel generated a record $33.1 billion cash from operations and $16.9 billion of free cash flow, and returned approximately $19.2 billion to shareholders.
Expecting record 2020 revenue of approximately $73.5 billion and first-quarter revenue of approximately $19.0 billion.

SANTA CLARA, Calif., January 23, 2020 -- Intel Corporation today reported fourth-quarter and full-year 2019 financial results. The company also announced that its board of directors approved a five percent cash dividend increase to $1.32 per share on an annual basis. The board declared a quarterly dividend of $0.33 per share on the company’s common stock, which will be payable on March 1 to shareholders of record on February 7.

“In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data,” said Bob Swan, Intel CEO. “One year into our long-term financial plan, we have outperformed our revenue and EPS expectations. Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns."


Q4 2019 Financial Highlights
 
GAAP
 
Non-GAAP
 
Q4 2019
Q4 2018
vs. Q4 2018
 
Q4 2019
Q4 2018
vs. Q4 2018
Revenue ($B)
$20.2
$18.7
up 8%
 
$20.2^
$18.7^
up 8%
Gross Margin
58.8%
60.2%
down 1.4 pts
 
60.1%
61.7%
down 1.6 pts
R&D and MG&A ($B)
$4.9
$5.0
down 1%
 
$4.9^
$5.0^
down 1%
Operating Income ($B)
$6.8
$6.2
up 9%
 
$7.2
$6.6
up 10%
Tax Rate
14.4%
7.8%
up 6.6 pts
 
13.6%
8.8%
up 4.8 pts
Net Income ($B)
$6.9
$5.2
up 33%
 
$6.7
$5.9
up 13%
Earnings Per Share
$1.58
$1.12
up 40%
 
$1.52
$1.28
up 19%
In the fourth quarter, the company generated approximately $9.9 billion in cash from operations, paid dividends of $1.4 billion and used $3.5 billion to repurchase 63 million shares of stock.


* Data-centric businesses include DCG, IOTG, Mobileye, NSG, PSG and All Other
^ No adjustment on a non-GAAP basis




Exhibit 99.1


Full-Year 2019 Financial Highlights

Intel achieved record revenue while investing $13.4 billion in research and development and reducing spending to 27 percent of total revenue.
 
GAAP
 
Non-GAAP
 
2019
2018
vs. 2018
 
2019
2018
vs. 2018
Revenue ($B)
$72.0
$70.8
up 2%
 
$72.0^
$70.8^
up 2%
Gross Margin
58.6%
61.7%
down 3.2 pts
 
60.1%
63.3%
down 3.2 pts
R&D and MG&A ($B)
$19.5
$20.3
down 4%
 
$19.5^
$20.3^
down 4%
Operating Income ($B)
$22.0
$23.3
down 5%
 
$23.8
$24.5
down 3%
Tax Rate
12.5%
9.7%
up 2.8 pts
 
12.2%
11.0%
up 1.2 pts
Net Income ($B)
$21.0
$21.1
flat
 
$21.8
$21.5
up 1%
Earnings Per Share
$4.71
$4.48
up 5%
 
$4.87
$4.58
up 6%

For the full year, the company generated a record $33.1 billion cash from operations, paid dividends of $5.6 billion and used $13.6 billion to repurchase 272 million shares of stock.

Business Unit Summary

 
Key Business Unit Revenue and Trends
 
 
 
 
 
Q4 2019
vs. Q4 2018
2019
vs. 2018
Data-centric
DCG
$7.2 billion
up
19%
$23.5 billion
up
2%
Internet of Things
 
 
 
 
 
 
IOTG
$920 million
up
13%
$3.8 billion
up
11%
Mobileye
$240 million
up
31%
$879 million
up
26%
NSG
$1.2 billion
up
10%
$4.4 billion
up
1%
PSG
$505 million
down
17%
$2.0 billion
down
6%
 
 
up
15%*
 
up
3%*
PC-centric
CCG
$10.0 billion
up
2%
$37.1 billion
flat

Fourth-quarter revenue set an all-time quarterly record of $20.2 billion, which was $1 billion higher than October guidance led by record data-centric revenue, up 15 percent YoY. PC-centric revenue was up 2 percent YoY.
Intel's collection of data-centric businesses achieved record revenue in the fourth quarter, led by record Data Center Group (DCG) revenue. DCG revenue grew 19 percent YoY in the fourth quarter, driven by robust demand from cloud service provider customers and a continued strong mix of high-performance 2nd-Generation Intel® Xeon® Scalable processors. Intel acquired Habana Labs in the fourth quarter, strengthening its artificial intelligence portfolio for the data center. Internet of Things Group (IOTG) revenue was up 13 percent on strength in retail and transportation. Mobileye achieved record revenue, up 31 percent YoY on increasing ADAS adoption. Intel's memory business (NSG) was up 10 percent YoY on continued NAND and Intel® Optane™ bit growth. PSG fourth-quarter revenue was down 17 percent YoY.
In the fourth quarter, the PC-centric business (CCG) was up 2 percent on higher modem sales and desktop platform volumes. Major PC manufacturers have introduced 44 systems featuring the new, 10nm-based 10th Gen Intel® Core™ processors (previously referred to as "Ice Lake"), and momentum continues to build for Project Athena. Project Athena-verified devices have been tuned, tested and verified to deliver fantastic system-level innovation and benefits spanning battery life, consistent responsiveness, instant wake, application compatibility and more. Intel has verified 26 Project Athena designs to date.
Additional information regarding Intel’s results can be found in the Q4'19 Earnings Presentation available at: www.intc.com/results.cfm.

* Data-centric businesses include DCG, IOTG, Mobileye, NSG, PSG and All Other
^ No adjustment on a non-GAAP basis




Intel/Page 3

Business Outlook
    
Intel's guidance for the first-quarter and full-year 2020 includes both GAAP and non-GAAP estimates. Reconciliations between these GAAP and non-GAAP financial measures are included below.
Q1 2020
GAAP
 
Non-GAAP
 
Approximately
 
Approximately
Revenue
$19.0 billion
 
$19.0 billion^
Operating margin
33%
 
35%
Tax rate
13%
 
13%^
Earnings per share
$1.23
 
$1.30
Full-Year 2020
GAAP
 
Non-GAAP
 
Approximately
 
Approximately
Revenue
$73.5 billion
 
$73.5 billion^
Operating margin
31%
 
33%
Tax rate
13%
 
13%^
Earnings per share
$4.71
 
$5.00
Cash from operations
$33.5 billion
 
N/A
Full-year capital spending
$17.0 billion
 
$17.0 billion^
Free cash flow
N/A
 
$16.5 billion

Intel's Business Outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments and other significant transactions that may be completed after January 23, 2020. Actual results may differ materially from Intel’s Business Outlook as a result of, among other things, the factors described under “Forward-Looking Statements” below.

Earnings Webcast

Intel will hold a public webcast at 2:00 p.m. PDT today to discuss the results for its fourth quarter of 2019. The live public webcast can be accessed on Intel's Investor Relations website at www.intc.com/results.cfm. The Q4'19 Earnings Presentation, webcast replay, and audio download will also be available on the site.

Intel plans to report its earnings for the first quarter of 2020 on April 23, 2020 promptly after close of market, and related materials will be available at www.intc.com/results.cfm. A public webcast of Intel’s earnings conference call will follow at 2:00 p.m. PDT at www.intc.com.




^ No adjustment on a non-GAAP basis

Intel/Page 4

Forward-Looking Statements

Intel’s Business Outlook and other statements in this release that refer to future plans and expectations are forward-looking statements that involve a number of risks and uncertainties. Words such as "anticipates," "expects," "intends," "goals," "plans," "guidance," "believes," "seeks," "estimates," "continues," "may," "will," "would," "should," "could," and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to total addressable market (TAM) or market opportunity, future products and technology and the expected availability and benefits of such products and technology, and anticipated trends in our businesses or the markets relevant to them, also identify forward-looking statements. All forward-looking statements included in this release are based on management's expectations as of the date of this release and, except as required by law, Intel disclaims any obligation to update these forward-looking statements to reflect future events or circumstances. Forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Intel presently considers the following to be among the important factors that can cause actual results to differ materially from the company's expectations.

Demand for Intel's products is highly variable and can differ from expectations due to factors including changes in business and economic conditions; customer confidence or income levels, and the levels of customer capital spending; the introduction, availability and market acceptance of Intel's products, products used together with Intel products, and competitors' products; competitive and pricing pressures, including actions taken by competitors; supply constraints and other disruptions affecting customers; changes in customer order patterns including order cancellations; changes in customer needs and emerging technology trends; and changes in the level of inventory and computing capacity at customers.
Intel's results can vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; segment product mix; the timing and execution of the manufacturing ramp and associated costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; and product manufacturing quality/yields. Variations in results can also be caused by the timing of Intel product introductions and related expenses, including marketing programs, and Intel's ability to respond quickly to technological developments and to introduce new products or incorporate new features into existing products, as well as decisions to exit product lines or businesses, which can result in restructuring and asset impairment charges.
Intel's results can be affected by adverse economic, social, political and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including recession or slowing growth, military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns, fluctuations in currency exchange rates, sanctions and tariffs, political disputes, and continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad, including the United Kingdom's vote to withdraw from the European Union. Results can also be affected by the formal or informal imposition by countries of new or revised export and/or import and doing-business regulations, which can be changed without prior notice.
Intel operates in highly competitive industries and its operations have high costs that are either fixed or difficult to reduce in the short term. In addition, in connection with our strategic transformation to a data-centric company, we have entered new areas and introduced adjacent products, where we face new sources of competition and uncertain market demand or acceptance of our products, and these new areas and products do not always grow as projected.
The amount, timing and execution of Intel's stock repurchase program fluctuate based on Intel's priorities for the use of cash for other purposessuch as investing in our business, including operational and capital spending, acquisitions, and returning cash to our stockholders as dividend paymentsand because of changes in cash flows, tax laws and other laws, or the market price of our common stock.



Intel/Page 5

Intel's expected tax rate is based on current tax law, including current interpretations of the Tax Cuts and Jobs Act of 2017 (”TCJA”), and current expected income and can be affected by evolving interpretations of TCJA; changes in the volume and mix of profits earned across jurisdictions with varying tax rates; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties; and the ability to realize deferred tax assets.
Intel's results can be affected by gains or losses from equity securities and interest and other, which can vary depending on gains or losses on the change in fair value, sale, exchange, or impairments of equity and debt investments, interest rates, cash balances, and changes in fair value of derivative instruments.
Product defects or errata (deviations from published specifications) can adversely impact our expenses, revenues and reputation.
We or third parties regularly identify security vulnerabilities with respect to our processors and other products as well as the operating systems and workloads running on them. Security vulnerabilities and any limitations of, or adverse effects resulting from, mitigation techniques can adversely affect our results of operations, financial condition, customer relationships, prospects, and reputation in a number of ways, any of which may be material, including incurring significant costs related to developing and deploying updates and mitigations, writing down inventory value, a reduction in the competitiveness of our products, defending against product claims and litigation, responding to regulatory inquiries or actions, paying damages, addressing customer satisfaction considerations, or taking other remedial steps with respect to third parties. Adverse publicity about security vulnerabilities or mitigations could damage our reputation with customers or users and reduce demand for our products and services. A detailed description of these risks is set forth in the "Risk Factors" section of our most recent reports on Forms 10-K and 10-Q.
Intel's results can be affected by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust, commercial, disclosure and other issues. An unfavorable ruling can include monetary damages or an injunction prohibiting Intel from manufacturing or selling one or more products, precluding particular business practices, impacting Intel's ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property.
Intel's results can be affected by the timing of closing of acquisitions, divestitures and other significant transactions. In addition, these transactions do not always achieve our financial or strategic objectives and can disrupt our ongoing business and adversely impact our results of operations. We may not realize the expected benefits of portfolio decisions due to numerous risks, including unfavorable prices and terms; changes in market conditions; limitations due to regulatory or governmental approvals, contractual terms, or other conditions; and potential continued financial obligations associated with such transactions.
Detailed information regarding these and other factors that could affect Intel's business and results is included in Intel's SEC filings, including the company's most recent reports on Forms 10-K and 10-Q, particularly the "Risk Factors" sections of those reports. Copies of these filings may be obtained by visiting our Investor Relations website at www.intc.com or the SEC's website at www.sec.gov.


About Intel

Intel (NASDAQ: INTC), a leader in the semiconductor industry, is shaping the data-centric future with computing and communications technology that is the foundation of the world’s innovations. The company’s engineering expertise is helping address the world’s greatest challenges as well as helping secure, power and connect billions of devices and the infrastructure of the smart, connected world - from the cloud to the network to the edge and everything in between. Find more information about Intel at newsroom.intel.com and intel.com.


© Intel Corporation. Intel, the Intel logo, and other Intel marks are trademarks of Intel Corporation or its subsidiaries. Other names and brands may be claimed as the property of others.





Intel/Page 6

INTEL CORPORATION
CONSOLIDATED SUMMARY STATEMENT OF INCOME DATA AND OTHER INFORMATION

 
 
Three Months Ended
 
Twelve Months Ended
(In Millions, Except Per Share Amounts; Unaudited)
 
Dec 28,
2019
 
Dec 29,
2018
 
Dec 28,
2019
 
Dec 29,
2018
NET REVENUE
 
$
20,209

 
$
18,657

 
$
71,965

 
$
70,848

Cost of sales
 
8,331

 
7,430

 
29,825

 
27,111

GROSS MARGIN
 
11,878

 
11,227

 
42,140

 
43,737

Research and development (R&D)
 
3,384

 
3,433

 
13,362

 
13,543

Marketing, general and administrative (MG&A)
 
1,542

 
1,520

 
6,150

 
6,750

R&D AND MG&A
 
4,926

 
4,953

 
19,512

 
20,293

Restructuring and other charges
 
105

 

 
393

 
(72
)
Amortization of acquisition-related intangibles
 
50

 
50

 
200

 
200

OPERATING EXPENSES
 
5,081

 
5,003

 
20,105

 
20,421

OPERATING INCOME
 
6,797

 
6,224

 
22,035

 
23,316

Gains (losses) on equity investments, net
 
617

 
(490
)
 
1,539

 
(125
)
Interest and other, net
 
654

 
(99
)
 
484

 
126

INCOME BEFORE TAXES
 
8,068

 
5,635

 
24,058

 
23,317

Provision for taxes
 
1,163

 
440

 
3,010

 
2,264

NET INCOME
 
$
6,905

 
$
5,195

 
$
21,048

 
$
21,053

 
 
 
 
 
 
 
 
 
EARNINGS PER SHARE - BASIC
 
$
1.60

 
$
1.14

 
$
4.77

 
$
4.57

EARNINGS PER SHARE - DILUTED
 
$
1.58

 
$
1.12

 
$
4.71

 
$
4.48

 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
 
 
 
 
 
 
 
 
BASIC
 
4,319

 
4,549

 
4,417

 
4,611

DILUTED
 
4,373

 
4,619

 
4,473

 
4,701


 
 
Three Months Ended
(In Millions)
 
Dec 28,
2019
 
Dec 29,
2018
 
 
 
 
 
EARNINGS PER SHARE OF COMMON STOCK INFORMATION:
 
 
 
 
Weighted average shares of common stock outstanding – basic
 
4,319

 
4,549

Dilutive effect of employee equity incentive plans
 
42

 
43

Dilutive effect of convertible debt
 
12

 
27

Weighted average shares of common stock outstanding – diluted
 
4,373

 
4,619

 
 
 
 
 
STOCK BUYBACK:
 
 
 
 
Shares repurchased
 
63

 
51

Cumulative shares repurchased (in billions)
 
5.5

 
5.2

Remaining dollars authorized for buyback (in billions)
 
$
23.7

 
$
17.3

 
 
 
 
 
OTHER INFORMATION:
 
 
 
 
Employees (in thousands)
 
110.8

 
107.4






Intel/Page 7

INTEL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEET DATA

(In Millions)
 
Dec 28,
2019
 
Dec 29,
2018
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
$
4,194

 
$
3,019

Short-term investments
 
1,082

 
2,788

Trading assets
 
7,847

 
5,843

Total cash investments
 
13,123

 
11,650

Accounts receivable
 
7,659

 
6,722

Inventories
 
 
 
 
Raw materials
 
840

 
813

Work in process
 
6,225

 
4,511

Finished goods
 
1,679

 
1,929

 
 
8,744

 
7,253

Other current assets
 
1,713

 
3,162

TOTAL CURRENT ASSETS
 
31,239

 
28,787

 
 
 
 
 
Property, plant and equipment, net
 
55,386

 
48,976

Equity investments
 
3,967

 
6,042

Other long-term investments
 
3,276

 
3,388

Goodwill
 
26,276

 
24,513

Identified intangible assets, net
 
10,827

 
11,836

Other long-term assets
 
5,553

 
4,421

TOTAL ASSETS
 
$
136,524

 
$
127,963

 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Short-term debt
 
$
3,693

 
$
1,261

Accounts payable
 
4,128

 
3,824

Accrued compensation and benefits
 
3,853

 
3,622

Other accrued liabilities
 
10,636

 
7,919

TOTAL CURRENT LIABILITIES
 
22,310

 
16,626

 
 
 
 
 
Debt
 
25,308

 
25,098

Contract liabilities
 
1,368

 
2,049

Income taxes payable, non-current
 
4,919

 
4,897

Deferred income taxes
 
2,044

 
1,665

Other long-term liabilities
 
2,916

 
2,646

 
 
 
 
 
TEMPORARY EQUITY
 
155

 
419

 
 
 
 
 
Stockholders' equity
 
 
 
 
Preferred stock
 

 

Common stock and capital in excess of par value
 
25,261

 
25,365

Accumulated other comprehensive income (loss)
 
(1,280
)
 
(974
)
Retained earnings
 
53,523

 
50,172

TOTAL STOCKHOLDERS' EQUITY
 
77,504

 
74,563

TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
 
$
136,524

 
$
127,963





Intel/Page 8

INTEL CORPORATION
CONSOLIDATED SUMMARY STATMENT OF CASH FLOWS
 
 
Twelve Months Ended
(In Millions)
 
Dec 28,
2019
 
Dec 29,
2018
 
 
 
 
 
Cash and cash equivalents, beginning of period
 
$
3,019

 
$
3,433

Cash flows provided by (used for) operating activities:
 
 
 
 
Net income
 
21,048

 
21,053

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation
 
9,204

 
7,520

Share-based compensation
 
1,705

 
1,546

Amortization of intangibles
 
1,622

 
1,565

(Gains) losses on equity investments, net
 
(892
)
 
155

(Gains) losses on divestitures
 
(690
)
 
(497
)
Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
(935
)
 
(1,714
)
Inventories
 
(1,481
)
 
(214
)
Accounts payable
 
696

 
211

Accrued compensation and benefits
 
91

 
(260
)
Customer deposits and prepaid supply agreements
 
(782
)
 
1,367

Income taxes
 
885

 
(1,601
)
Other assets and liabilities
 
2,674

 
301

Total adjustments
 
12,097

 
8,379

Net cash provided by operating activities
 
33,145

 
29,432

Cash flows provided by (used for) investing activities:
 
 
 
 
Additions to property, plant and equipment
 
(16,213
)
 
(15,181
)
Acquisitions, net of cash acquired
 
(1,958
)
 
(190
)
Purchases of available-for-sale debt investments
 
(2,268
)
 
(3,843
)
Sales of available-for-sale debt investments
 
238

 
195

Maturities of available-for-sale debt investments
 
3,988

 
2,968

Purchases of trading assets
 
(9,162
)
 
(9,503
)
Maturities and sales of trading assets
 
7,178

 
12,111

Purchases of equity investments
 
(522
)
 
(874
)
Sales of equity investments
 
2,688

 
2,802

Proceeds from divestitures
 
911

 
548

Other investing
 
715

 
(272
)
Net cash used for investing activities
 
(14,405
)
 
(11,239
)
Cash flows provided by (used for) financing activities:
 
 
 
 
Issuance of long-term debt, net of issuance costs
 
3,392

 
423

Repayment of debt and debt conversion
 
(2,627
)
 
(3,026
)
Proceeds from sales of common stock through employee equity incentive plans
 
750

 
555

Repurchase of common stock
 
(13,576
)
 
(10,730
)
Payment of dividends to stockholders
 
(5,576
)
 
(5,541
)
Other financing
 
72

 
(288
)
Net cash provided by (used for) financing activities
 
(17,565
)
 
(18,607
)
Net increase (decrease) in cash and cash equivalents
 
1,175

 
(414
)
Cash and cash equivalents, end of period
 
$
4,194

 
$
3,019





Intel/Page 9

INTEL CORPORATION
SUPPLEMENTAL OPERATING SEGMENT RESULTS
 
 
Three Months Ended
 
Twelve Months Ended
(In Millions)
 
Dec 28,
2019
 
Dec 29,
2018
 
Dec 28,
2019
 
Dec 29,
2018
Net Revenue
 
 
 
 
 
 
 
 
Data Center Group
 
 
 
 
 
 
 
 
Platform
 
6,587

 
5,594

 
21,441

 
21,155

Adjacency
 
626

 
475

 
2,040

 
1,836

 
 
7,213

 
6,069

 
23,481

 
22,991

Internet of Things
 
 
 
 
 
 
 
 
IOTG
 
920

 
816

 
3,821

 
3,455

Mobileye
 
240

 
183

 
879

 
698

 
 
1,160

 
999

 
4,700

 
4,153

 
 
 
 
 
 
 
 
 
Non-Volatile Memory Solutions Group
 
1,217

 
1,107

 
4,362

 
4,307

Programmable Solutions Group
 
505

 
612

 
1,987

 
2,123

Client Computing Group
 
 
 
 
 
 
 
 
Platform
 
$
8,553

 
$
8,531

 
$
32,681

 
$
33,234

Adjacency
 
1,457

 
1,291

 
4,465

 
3,770

 
 
10,010

 
9,822

 
37,146

 
37,004

All Other
 
104

 
48

 
289

 
270

TOTAL NET REVENUE
 
$
20,209

 
$
18,657

 
$
71,965

 
$
70,848

 
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
 
Data Center Group
 
3,471

 
3,055

 
10,227

 
11,476

Internet of Things
 
 
 
 
 
 
 
 
IOTG
 
243

 
189

 
1,097

 
980

Mobileye
 
57

 
37

 
245

 
143

 
 
300

 
226

 
1,342

 
1,123

 
 
 
 
 
 
 
 
 
Non-Volatile Memory Solutions Group
 
(96
)
 
(19
)
 
(1,176
)
 
(5
)
Programmable Solutions Group
 
85

 
162

 
318

 
466

Client Computing Group
 
$
4,088

 
$
3,665

 
$
15,202

 
$
14,222

All Other
 
(1,051
)
 
(865
)
 
(3,878
)
 
(3,966
)
TOTAL OPERATING INCOME
 
$
6,797

 
$
6,224

 
$
22,035

 
$
23,316

Revenue for our reportable and non-reportable operating segments is primarily related to the following product lines:
DCG includes workload-optimized platforms and related products designed for cloud, enterprise, and communication infrastructure market segments.
IOTG includes high-performance compute solutions for targeted verticals and embedded applications in market segments such as retail, industrial, smart infrastructure, and vision.
Mobileye includes computer vision and machine learning-based sensing, data analysis, localization mapping and driving policy technology for advanced driver assistance systems (ADAS) and autonomous driving
NSG includes memory and storage products like Intel® Optane™ technology and Intel® 3D NAND technology, primarily used in SSDs.
PSG includes programmable semiconductors, primarily FPGAs and structured ASICs, and related products for communications, cloud and enterprise, and embedded market segments.
CCG includes platforms designed for end-user form factors, focusing on higher growth segments of 2-in-1, thin-and-light, commercial and gaming, and growing adjacencies such as connectivity, graphics, and memory.
We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments.
All other category includes revenue, expenses, and charges such as:
results of operations from non-reportable segments not otherwise presented;
historical results of operations from divested businesses;
results of operations of start-up businesses that support our initiatives, including our foundry business;
amounts included within restructuring and other charges;
a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and
acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
A substantial majority of our revenue is generated from the sale of platform products. Platform products incorporate various components and technologies, including a CPU and chipset, an SoC, or a multichip package, based on Intel® architecture. Our non-platform, or adjacent products, can be combined with platform products to form comprehensive platform solutions to meet customer needs.



Intel/Page 10

INTEL CORPORATION
SUPPLEMENTAL PLATFORM REVENUE INFORMATION
 
 
Q4 2019
 
Q4 2019
 
YTD 2019
 
 
compared to
Q3 2019
 
compared to
Q4 2018
 
compared to
YTD 2018
Data Center Group Platform
 
 
 
 
 
 
Unit volumes
 
15%
 
12%
 
(3)%
Average selling prices
 
(2)%
 
5%
 
5%
 
 
 
 
 
 
 
Client Computing Group Platform
 
 
 
 
 
 
Notebook platform volumes
 
(1)%
 
(1)%
 
(5)%
Notebook platform average selling prices
 
—%
 
—%
 
5%
Desktop platform volumes
 
11%
 
7%
 
(6)%
Desktop platform average selling prices
 
(3)%
 
(4)%
 
3%









Intel/Page 11

INTEL CORPORATION
EXPLANATION OF NON-GAAP MEASURES

In addition to disclosing financial results in accordance with U.S. GAAP, this document contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance.
Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects where applicable. Income tax effects have been calculated using an appropriate tax rate for each adjustment. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated.
Acquisition-related adjustments: Acquisition-related adjustments exclude charges related to amortization of acquisition-related intangible assets.
Amortization of acquisition-related intangible assets consists of amortization of intangible assets such as developed technology, brands, and customer relationships acquired in connection with business combinations. Charges related to the amortization of these intangibles are recorded within both cost of sales and operating expenses in our U.S. GAAP financial statement and are primarily associated with the acquisitions of Mobileye in 2017 and Altera in 2016. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions.
Our non-GAAP adjustments exclude these charges to facilitate a better evaluation of our current operating performance and comparison to our past operating performance.
Restructuring and other charges: Restructuring charges are costs associated with a formal restructuring plan and are primarily related to employee severance and benefit arrangements. Other charges include asset impairments, pension charges, and costs associated with the exit of the 5G smartphone modem business. We exclude restructuring and other charges, including any adjustments to charges recorded in prior periods, for purposes of calculating certain non-GAAP measures. These costs do not reflect our current operating performance. Consequently, our non-GAAP adjustments exclude these charges to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.
Gains or losses from divestiture: We divested our 5G smartphone modem business in 2019 and Wind River in 2018. We exclude gains or losses and related tax impacts resulting from divestitures when calculating certain non-GAAP measures. These adjustments facilitate a better evaluation of our current operating performance and comparisons to our past operating performance.
Ongoing mark-to-market on marketable equity securities: When calculating certain non-GAAP measures, we exclude gains and losses resulting from ongoing mark-to-market adjustments of our marketable equity securities after the initial mark-to-market adjustment is recorded upon a security becoming marketable, as we do not believe this volatility correlates to our core operational performance. Consequently, our non-GAAP earnings per share figures exclude these impacts to facilitate an evaluation of our current performance and comparisons to our past operating performance.
Tax Reform adjustment: We recognized a higher income tax expense in Q4 2017 as a result of Tax Reform and made adjustments to the original estimate during 2018. We exclude the provisional tax estimate and adjustments when calculating certain non-GAAP measures. These adjustments facilitate a better evaluation of our current operating performance and comparisons to past operating results.
Free cash flow: We reference a non-GAAP financial measure of free cash flow, which is used by management when assessing our sources of liquidity, capital resources, and quality of earnings. This non-GAAP financial measure is helpful to investors in understanding our capital requirements and provides an additional means to reflect the cash flow trends of our business.




Intel/Page 12

INTEL CORPORATION
SUPPLEMENTAL RECONCILIATIONS OF GAAP OUTLOOK TO NON-GAAP OUTLOOK
Set forth below are reconciliations of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measures disclosed by the company have limitations and should not be considered a substitute for, or superior to, the financial measures prepared in accordance with GAAP, and the financial outlook prepared in accordance with GAAP and the reconciliations from this Business Outlook should be carefully evaluated. Please refer to "Explanation of Non-GAAP Measures" in this document for a detailed explanation of the adjustments made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.
 
 
Q1 2020 Outlook
 
Full-Year 2020
 
 
 
 
 
 
 
Approximately
 
Approximately
GAAP OPERATING MARGIN
 
33
%
 
31
%
Acquisition-related adjustments
 
2
%
 
2
%
NON-GAAP OPERATING MARGIN
 
35
%
 
33
%
 
 
 
 
 
GAAP DILUTED EARNINGS PER COMMON SHARE
 
$
1.23

 
$
4.71

Acquisition-related adjustments
 
0.08

 
0.33

Income tax effect
 
(0.01
)
 
(0.04
)
NON-GAAP DILUTED EARNINGS PER COMMON SHARE
 
$
1.30

 
$
5.00

(In Billions)
 
Full-Year 2020
 
 
 
GAAP CASH FROM OPERATIONS
 
$
33.5

Additions to property, plant and equipment
 
(17.0
)
FREE CASH FLOW
 
$
16.5




Intel/Page 13

INTEL CORPORATION
SUPPLEMENTAL RECONCILIATIONS OF GAAP ACTUALS TO NON-GAAP ACTUALS
Set forth below are reconciliations of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measure disclosed by the company has limitations and should not be considered a substitute for, or superior to, the financial measure prepared in accordance with GAAP, and the reconciliations from GAAP to Non-GAAP actuals should be carefully evaluated. Please refer to "Explanation of Non-GAAP Measures" in this document for a detailed explanation of the adjustments made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.
 
Three Months Ended
 
Twelve Months Ended
(In Millions, Except Per Share Amounts)
Dec 28,
2019
 
Dec 29,
2018
 
Dec 28,
2019
 
Dec 29,
2018
GAAP GROSS MARGIN
$
11,878

 
$
11,227

 
$
42,140

 
$
43,737

Acquisition-related adjustments
268

 
279

 
1,124

 
1,105

NON-GAAP GROSS MARGIN
$
12,146

 
$
11,506

 
$
43,264

 
$
44,842

 
 
 
 
 
 
 
 
GAAP GROSS MARGIN PERCENTAGE
58.8
 %
 
60.2
%
 
58.6
 %
 
61.7
%
Acquisition-related adjustments
1.3
 %
 
1.5
%
 
1.6
 %
 
1.6
%
NON-GAAP GROSS MARGIN PERCENTAGE
60.1
 %
 
61.7
%
 
60.1
 %
 
63.3
%
 
 
 
 
 
 
 
 
GAAP OPERATING INCOME
$
6,797

 
$
6,224

 
$
22,035

 
$
23,316

Acquisition-related adjustments
318

 
329

 
1,324

 
1,305

Restructuring and other charges
105

 

 
393

 
(72
)
NON-GAAP OPERATING INCOME
$
7,220

 
$
6,553

 
$
23,752

 
$
24,549

 
 
 
 
 
 
 
 
GAAP TAX RATE
14.4
 %
 
7.8
%
 
12.5
 %
 
9.7
%
Other
(0.8
)%
 
1.0
%
 
(0.3
)%
 
1.3
%
NON-GAAP TAX RATE
13.6
 %
 
8.8
%
 
12.2
 %
 
11.0
%
 
 
 
 
 
 
 
 
GAAP NET INCOME
$
6,905

 
$
5,195

 
$
21,048

 
$
21,053

Acquisition-related adjustments
318

 
329

 
1,324

 
1,305

Restructuring and other charges
105

 

 
393

 
(72
)
(Gains) losses from divestiture
(690
)
 

 
(690
)
 
(494
)
Ongoing mark-to-market on marketable equity securities
(89
)
 
508

 
(277
)
 
129

Tax Reform

 

 

 
(294
)
Income tax effect
114

 
(130
)
 
(14
)
 
(102
)
NON-GAAP NET INCOME
$
6,663

 
$
5,902

 
$
21,784

 
$
21,525

 
 
 
 
 
 
 
 
GAAP DILUTED EARNINGS PER COMMON SHARE
$
1.58

 
$
1.12

 
$
4.71

 
$
4.48

Acquisition-related adjustments
0.07

 
0.07

 
0.29

 
0.28

Restructuring and other charges
0.02

 

 
0.09

 
(0.02
)
(Gains) losses from divestiture
(0.16
)
 

 
(0.16
)
 
(0.11
)
Ongoing mark-to-market on marketable equity securities
(0.02
)
 
0.11

 
(0.06
)
 
0.03

Tax Reform

 

 

 
(0.06
)
Income tax effect
0.03

 
(0.02
)
 

 
(0.02
)
NON-GAAP DILUTED EARNINGS PER COMMON SHARE
$
1.52

 
$
1.28

 
$
4.87

 
$
4.58

 
Twelve Months Ended
(In Millions)
Dec 28,
2019
 
 
GAAP CASH FROM OPERATIONS
$
33,145

Additions to property, plant and equipment
(16,213
)
FREE CASH FLOW
$
16,932

 
 
GAAP CASH USED FOR INVESTING ACTIVITIES
$
(14,405
)
GAAP CASH USED FOR FINANCING ACTIVITIES
$
(17,565
)