News Intel 1Q23 Earnings

[Doug S]

So for 2022, they spent way more than they brought in, reduced their cash position and went further into debt. Yet, if you rely on retained earnings, you would never know this. Now look at Q123 where they had just under -9B in free cash flow and increased their debt ~33% to 50B in just the first three months of the year. Their retained earnings are gone, they've been tied up in assets that will have to actually start producing meaningful revenue sooner than later (meaning the next couple of years) or else you'll start to see that retained earnings evaporate rapidly.

And a lot of this big investment push they have been making is catching up from years of underinvestment. Partially because of years of being stuck on 10nm so they didn't have any new processes to invest in and partially because they felt they were dominating the industry and would rather use that money for buybacks (which increases share price and EPS helping exec bonuses and stock options!)

Since AMD became competitive and Apple told them 'see ya' Wall Street started punishing them for their dysfunction. Intel management realizes they are in a make or break moment for the company over the next couple years. The people trying to paint a false rosy picture of Intel's current position and results are either ignorant or knowingly lying. Intel's leadership knows they have to spend a lot to catch up on those years of underinvestment to outfit fabs for the new processes they've announced, so the high rate of cash burn is necessary.

If they are able to deliver on their promises they'll be fine. If they run into more issues like they had with 10nm they will be in serious trouble. They will still be able to borrow money to feed more cash into the furnaces but rates are higher today and Intel would no doubt have its credit downgraded further increasing borrowing cost. That leads to a kind of death spiral where companies borrow more and more money at higher and higher rates until they can't make the debt service payments and need to file for bankruptcy protection. I don't think it is likely this will happen - they'd need to be unable to deliver on their new processes at all rather than just be unable to meet their aggressive roadmap. But it is most definitely not outside the realm of possibility, regardless of what the rah-rah Intel folk here would like to believe.

 

[TheELF]

So, in your mind, in 2022 Intel increased ~$2B in net cash. But let's look at how much cash on hand they actually have:

If you add up all of these numbers you end up with 12,874
if you subtract the 5,865 you started with you get to 7,009
if you subtract the 4,827 you want to start the next quarter with then guess what you are left with...
2,182 ,that's 2 billions that they put aside at the end of 2021 and became retained earnings in 2022.

Long term debt is a completely different thing.

Intel Corporation

Consolidated Condensed Statements of Cash Flows​

		Twelve Months Ended​
(In Millions; unaudited)		Dec 25, 2021​		Dec 26, 2020​
Cash and cash equivalents, beginning of period		$ 5,865​		$ 4,194​
Cash flows provided by (used for) operating activities:
Net income		19,868​		20,899​
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		9,953​		10,482​
Share-based compensation		2,036​		1,854​
Restructuring and other charges		2,626​		198​
Amortization of intangibles		1,839​		1,757​
(Gains) losses on equity investments, net		(1,458)​		(1,757)​
Changes in assets and liabilities:
Accounts receivable		(2,674)​		883​
Inventories		(2,339)​		(687)​
Accounts payable		1,190​		405​
Accrued compensation and benefits		515​		348​
Prepaid supply agreements		(1,583)​		(181)​
Income taxes		(441)​		1,620​
Other assets and liabilities		459​		(437)​
Total adjustments		10,123​		14,485​
Net cash provided by operating activities		29,991​		35,384​
Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment		(18,733)​		(14,259)​
Additions to held for sale NAND property, plant and equipment		(1,596)​		(194)​
Acquisitions, net of cash acquired		(209)​		(837)​
Purchases of available-for-sale debt investments		(5,051)​		(6,862)​
Maturities and sales of available-for-sale debt investments		6,467​		6,781​
Purchases of trading assets		(35,503)​		(22,377)​
Maturities and sales of trading assets		28,832​		15,377​
Purchases of equity investments		(613)​		(720)​
Sales of equity investments		581​		910​
Other investing		658​		1,385​
Net cash used for investing activities		(25,167)​		(20,796)​
Cash flows provided by (used for) financing activities:
Issuance of long-term debt, net of issuance costs		4,974​		10,247​
Repayment of debt and debt conversion		(2,500)​		(4,525)​
Proceeds from sales of common stock through employee equity incentive plans		1,020​		897​
Repurchase of common stock		(2,415)​		(14,229)​
Payment of dividends to stockholders		(5,644)​		(5,568)​
Other financing		(1,297)​		261​
Net cash provided by (used for) financing activities		(5,862)​		(12,917)​
Net increase (decrease) in cash and cash equivalents		(1,038)​		1,671​
Cash and cash equivalents, end of period		$ 4,827​		$ 5,865​

 

[Hitman928]

If you add up all of these numbers you end up with 12,874
if you subtract the 5,865 you started with you get to 7,009
if you subtract the 4,827 you want to start the next quarter with then guess what you are left with...
2,182 ,that's 2 billions that they put aside at the end of 2021 and became retained earnings in 2022.

Long term debt is a completely different thing.

Intel Corporation

Consolidated Condensed Statements of Cash Flows​

		Twelve Months Ended​
(In Millions; unaudited)		Dec 25, 2021​		Dec 26, 2020​
Cash and cash equivalents, beginning of period		$ 5,865​		$ 4,194​
Cash flows provided by (used for) operating activities:
Net income		19,868​		20,899​
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		9,953​		10,482​
Share-based compensation		2,036​		1,854​
Restructuring and other charges		2,626​		198​
Amortization of intangibles		1,839​		1,757​
(Gains) losses on equity investments, net		(1,458)​		(1,757)​
Changes in assets and liabilities:
Accounts receivable		(2,674)​		883​
Inventories		(2,339)​		(687)​
Accounts payable		1,190​		405​
Accrued compensation and benefits		515​		348​
Prepaid supply agreements		(1,583)​		(181)​
Income taxes		(441)​		1,620​
Other assets and liabilities		459​		(437)​
Total adjustments		10,123​		14,485​
Net cash provided by operating activities		29,991​		35,384​
Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment		(18,733)​		(14,259)​
Additions to held for sale NAND property, plant and equipment		(1,596)​		(194)​
Acquisitions, net of cash acquired		(209)​		(837)​
Purchases of available-for-sale debt investments		(5,051)​		(6,862)​
Maturities and sales of available-for-sale debt investments		6,467​		6,781​
Purchases of trading assets		(35,503)​		(22,377)​
Maturities and sales of trading assets		28,832​		15,377​
Purchases of equity investments		(613)​		(720)​
Sales of equity investments		581​		910​
Other investing		658​		1,385​
Net cash used for investing activities		(25,167)​		(20,796)​
Cash flows provided by (used for) financing activities:
Issuance of long-term debt, net of issuance costs		4,974​		10,247​
Repayment of debt and debt conversion		(2,500)​		(4,525)​
Proceeds from sales of common stock through employee equity incentive plans		1,020​		897​
Repurchase of common stock		(2,415)​		(14,229)​
Payment of dividends to stockholders		(5,644)​		(5,568)​
Other financing		(1,297)​		261​
Net cash provided by (used for) financing activities		(5,862)​		(12,917)​
Net increase (decrease) in cash and cash equivalents		(1,038)​		1,671​
Cash and cash equivalents, end of period		$ 4,827​		$ 5,865​

Can you be a little more clear than add up "these" numbers? Are you adding up the entire column of 2021 and coming to a conclusion that for 2021 they had $2.182B in retained earnings for the year?

 

[TheELF]

Can you be a little more clear than add up "these" numbers? Are you adding up the entire column of 2021 and coming to a conclusion that for 2021 they had $2.182B in retained earnings for the year?

Yup, you add up everything but exclude the money that came from the previous year (beginning of period) and the money that is transferred to the next year (end of period)


Logic says it should result in zero but it is either money left over that goes to retained earnings or there is money "magically" appearing because it was taken from the retained earnings.

 

[Hitman928]

Yup, you add up everything but exclude the money that came from the previous year (beginning of period) and the money that is transferred to the next year (end of period)


Logic says it should result in zero but it is either money left over that goes to retained earnings or there is money "magically" appearing because it was taken from the retained earnings.

Can you show your accounting then how your calculated $2B in retained earnings for 2021 is different than Intel's $12B in retained earnings for 2021?

Additionally, if Intel's retained earnings of close to $70B really is a net cash amount that they can just pull from if times get tough as you suggest, where on Intel's balance sheet can one find this banked money that Intel can pull from?

 

[TheELF]

Can you show your accounting then how your calculated $2B in retained earnings for 2021 is different than Intel's $12B in retained earnings for 2021?

Additionally, if Intel's retained earnings of close to $70B really is a net cash amount that they can just pull from if times get tough as you suggest, where on Intel's balance sheet can one find this banked money that Intel can pull from?

Retained earnings

68,265​

Where did you see Intel having 12B for retained earnings in 2021?!

This is the only mention of retained earnings in their report for full 2021.
And that's also the answer to your second question, this is where they show it.

Retained earnings

68,265​

 

[Hitman928]

Retained earnings

68,265​

Where did you see Intel having 12B for retained earnings in 2021?!

This is the only mention of retained earnings in their report for full 2021.
And that's also the answer to your second question, this is where they show it.

Retained earnings

68,265​

Intel ended 2020 with $56B in retained earnings. They ended 2021 with $68B in retained earnings. So in 2021, they had a positive retained earnings of $12B dollars. You are saying that by your calculations, it is $2B for 2021. Why the discrepancy?

You are correct that retained earnings is reported on the balance sheet. What I meant though, was, if they have $65B in retained earnings, where does that come from on the balance sheet that leads you to believe it is a stockpile of cash? They report cash and cash equivalents separately and it is a much smaller number. So if Intel is saying they only have $8B in cash and cash equivalents, how do you rationalize that there is an additional $57B in cash somewhere that they could use as needed?

 

[Timorous]

Yup, you add up everything but exclude the money that came from the previous year (beginning of period) and the money that is transferred to the next year (end of period)


Logic says it should result in zero but it is either money left over that goes to retained earnings or there is money "magically" appearing because it was taken from the retained earnings.

The only way I get to a total of 12,874 is to take the start position of 5,865 and then add/subtract each line item apart from the end of period position of 4,827. This is just wrong, it does not work like that at all, there are intermediate calculations within that column.

Net Cash of operations = Net Income + Total Adjustments which is 19,868 + 10,123 = 29,991

Net change = Net cash of operations + Net cash of investing + Net Cash of finance which is 29,991 + (25,167) + (5,862) = (1,038)

Start position + net change = end position or 5,865 + (1,038) = 4,827

 

[TheELF]

The only way I get to a total of 12,874 is to take the start position of 5,865 and then add/subtract each line item apart from the end of period position of 4,827. This is just wrong, it does not work like that at all, there are intermediate calculations within that column.

Net Cash of operations = Net Income + Total Adjustments which is 19,868 + 10,123 = 29,991

Net change = Net cash of operations + Net cash of investing + Net Cash of finance which is 29,991 + (25,167) + (5,862) = (1,038)

Start position + net change = end position or 5,865 + (1,038) = 4,827

Hey, do we have an accountant in the house?!
So can you make any sense of this and figure out where the retained earnings number comes from?!
Also do you know if it's money the company can use or if it's just an imaginary number?

 

[Timorous]

Hey, do we have an accountant in the house?!
So can you make any sense of this and figure out where the retained earnings number comes from?!
Also do you know if it's money the company can use or if it's just an imaginary number?

Not an accountant, did some basic training as I work in a finance function.

Retained earnings is just net profit less dividend payout and cumulates over time. It is separate from the cash position. In the above you can see there is about 20B of net income and about 6B of cash dividend paid which would be 14B of retained earnings but we know from their submissions they only have 12B so there is probably a 2B stock dividend somewhere but that won't appear on the statement of cash flows.

Looking at their retained earnings vs cash it seems like most of it is tied up in other assets so Intel can probably borrow against it (if they are not doing that already) or they could sell those assets but they can't treat it like cash on hand.

 

[Hitman928]

@Saylick I think you have the wrong thread

 

[Saylick]

@Saylick I think you have the wrong thread

Oh crap. You're right. Deleting now and moving them over to the AMD ER thread.

 

[IEC]

Tech layoffs continue with confirmed Intel layoffs (unsure of scope and headcount yet):
New layoffs and budget cuts coming per TH

Context:
This is the worst PC market in 30 years - worst in x86 history per some

 

[DAPUNISHER]

Tech layoffs continue with confirmed Intel layoffs (unsure of scope and headcount yet):
New layoffs and budget cuts coming per TH

Context:
This is the worst PC market in 30 years - worst in x86 history per some

I don't know how they did not anticipate this, when even casuals like myself knew it was inevitable. I wrote here over a year ago about how approximately 750 million PCs were sold in 20-21. Everyone that needed a PC bought one.

I think all of these projections for H2 are also too optimistic.

 

[jpiniero]

I think all of these projections for H2 are also too optimistic.

I think the assumption by the Tech companies is that the Money Printer will be turned back on by then.

 

[TheELF]

I wrote here over a year ago about how approximately 750 million PCs were sold in 20-21. Everyone that needed a PC bought one.

You could have said that almost every year for each of the years,
every year since 2009 except for 2013 and 2015 was the highest annual revenue ever,
so every year you could have said "Everyone that needed a PC bought one." based on it being the highest revenue the company ever had. 2022 was the first year that revenue decreased by a lot but that's also because 2021 was very high.
Truth is nobody knows what the annual need for new systems is, people are born every year PCs break down every year, companies are opened every year, and every year these number get bigger because the world population gets bigger.

Even if everybody had bought a PC in 2021 and revenue would have been like 2 or 3 times higher than the ~80bil that it was, upgrades to already existing PCs aren't the only PCs that get sold.

Intel Revenue 2010-2023 | INTC

Intel annual/quarterly revenue history and growth rate from 2010 to 2023. Revenue can be defined as the amount of money a company receives from its customers in exchange for the sales of goods or services. Revenue is the top line item on an income statement from which all costs and expenses are...

www.macrotrends.net

Intel Annual Revenue (Millions of US $)
2022	$63,054
2021	$79,024
2020	$77,867
2019	$71,965
2018	$70,848
2017	$62,761
2016	$59,387
2015	$55,355
2014	$55,870
2013	$52,708
2012	$53,341
2011	$53,999
2010	$43,623
2009	$35,127

 

[AdamK47]

I think the assumption by the Tech companies is that the Money Printer will be turned back on by then.

 

[Saylick]

I think the assumption by the Tech companies is that the Money Printer will be turned back on by then.

Not just tech companies. A large swath of investors are banking on the Fed cutting interest rates before the end of the year. Heck, some predictions are that the Fed starts easing up in the summer.

I just don't see it happening. I think the Fed is going to drag out the pain for as long as they need until they feel comfortable they've killed inflation in its crib.

 

[DrMrLordX]

I think the assumption by the Tech companies is that the Money Printer will be turned back on by then.

Pay careful attention to the positions that Intel is (apparently) cutting. From what I've seen, people in the fabs and/or IFS were spared.

 

[A///]

Pay careful attention to the positions that Intel is (apparently) cutting. From what I've seen, people in the fabs and/or IFS were spared.

one'd hope hr is not that dumb. intel's expenses another issue they have on pay roll is their damn useless marketing department. they all deserve a swift kick in the ass and told to stay away. intel and amd for that matter need to start from scratch. I bet the same dumb dumb who came up with amd's mobile junk naming scheme went over to intel to propose their ultra crap.

 

[DrMrLordX]

one'd hope hr is not that dumb. intel's expenses another issue they have on pay roll is their damn useless marketing department. they all deserve a swift kick in the ass and told to stay away. intel and amd for that matter need to start from scratch. I bet the same dumb dumb who came up with amd's mobile junk naming scheme went over to intel to propose their ultra crap.

My understanding is that some of the design engineers did get sacked. It wasn't just marketing folks.

 

[AdamK47]

Not just tech companies. A large swath of investors are banking on the Fed cutting interest rates before the end of the year. Heck, some predictions are that the Fed starts easing up in the summer.

I just don't see it happening. I think the Fed is going to drag out the pain for as long as they need until they feel comfortable they've killed inflation in its crib.

The Fed needs to get the general public to change their mindset on how money is spent. There needs to be pushback from consumers on the ever-increasing prices for goods that companies are continually doing in order to grow profit margins.

I'd happily accept a deeper recession and high unemployment if they could get that to happen.

Consumers are already not buying new PCs and components. Let's see how that plays out price-wise.

 

[TheELF]

The Fed needs to get the general public to change their mindset on how money is spent. There needs to be pushback from consumers on the ever-increasing prices for goods that companies are continually doing in order to grow profit margins.

I'd happily accept a deeper recession and high unemployment if they could get that to happen.

Consumers are already not buying new PCs and components. Let's see how that plays out price-wise.

Meanwhile back in reality the average price of every category of CPUs has dropped, less so for intel but still.

https://pcpartpicker.com/trends/price/cpu/

 

[AdamK47]

Meanwhile back in reality the average price of every category of CPUs has dropped, less so for intel but still.

https://pcpartpicker.com/trends/price/cpu/

Those are all old previous generation CPUs. Any data on anything released within the last couple of years?

 

[Doug S]

Not just tech companies. A large swath of investors are banking on the Fed cutting interest rates before the end of the year. Heck, some predictions are that the Fed starts easing up in the summer.

I just don't see it happening. I think the Fed is going to drag out the pain for as long as they need until they feel comfortable they've killed inflation in its crib.

I don't see why they would cut them at all, unless we enter a recession and inflation has been beaten. And then it should be a temporary measure and they should be raised again when things have turned around.

We've been needing to get to more typical interest rates for two decades, so now that we've finally accomplished it everyone is looking to when we get back to 3% commercial loans and 4% mortgages. We shouldn't go back there, that's proven to be very unhealthy for our economy in terms of causing asset inflation - that's why home prices are so much more unaffordable today vs average incomes than they were 25 years ago (let alone 50 years ago) All the hedge funds etc. borrowing money for nothing allows asset speculation and they run out of things to invest in so they buy a bunch of houses to rent out, buy useless scam products like bitcoin and NFTs, and totally distort the whole VC/startup industry to where founders don't even care about making their products work they just want to get rich and become a parasite on the economy borrowing money to buy up assets themselves.