Renesas Electronics (6723) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was ¥345.3B, down 9.0% year-over-year and 3.8% sequentially, with gross margin at 55.9% and operating margin at 28.5% (non-GAAP); Altium acquisition completed and consolidated from August 2024.

• Automotive segment grew 10.3% YoY in Q3, while Industrial/Infrastructure/IoT declined 24.3% YoY; nine-month revenue was ¥1,055.9B, down 4.7% YoY.

• Channel inventory increased more than expected due to weaker end demand, prompting plans for significant inventory reduction in Q4.

• Major acquisitions included Altium Limited and Transphorm, Inc., expanding the portfolio and digitalization strategy.

• Q4 guidance anticipates a revenue decline of nearly 20% QoQ, with about a quarter of this due to FX impact.

Financial highlights

• Net income for Q3 was ¥86.0B; EBITDA was ¥121.4B; non-GAAP operating profit for Q3 was ¥98.4B, down from ¥132.3B YoY.

• Free cash flow was negative in Q3 due to tax, bonus payments, and one-time foundry prepayments; nine-month free cash flow was negative ¥1,006.1B, mainly due to large acquisition outflows.

• Interest-bearing liabilities rose to ¥1,511.6B, with a debt-to-equity ratio of 0.71.

• Cash and cash equivalents at period end were ¥239.1B.

• EBITDA margin for Q3 2024 was 35.2% (non-GAAP), down 5.0pts YoY.

Outlook and guidance

• Q4 2024 revenue forecast midpoint is ¥278.5B, down 19.3% QoQ and 23.1% YoY; full-year 2024 revenue forecast is ¥1,334.4B, down 9.2% YoY.

• Q4 gross margin expected at 52.5% and operating margin at 22.5% (non-GAAP); revenue decline attributed to yen appreciation, inventory reduction, and sell-thru decline.

• Management remains cautious for Q1 next fiscal year, expecting continued bottoming trends and no strong recovery.

• No interim or year-end dividend is planned for 2024.