Intel Corporation (INTC) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Yusuf George, Managing Director of Corporate Engagement at JUST Capital, and we are very excited that you are joining us for our latest quarterly JUST call. If you haven't joined us before, quarterly JUST call series is a platform where CEOs engage in conversation around nonfinancial metrics and the ways in which they are creating values for all of their stakeholders. Now with the backdrop of all that's happening in this country, I think it remains critically important, perhaps now more than ever, that we understand how companies are serving the needs of their employees, their customers and communities. And today, we'll be talking about just that. I'm pleased to introduce Martin Whittaker, the CEO of JUST Capital; and Bob Swan, the CEO of Intel. Just a few housekeeping notes before we get started, today's call will be recorded, and you'll be able to replay it later on demand. It will also be featured on JUST Capital's website. [Operator Instructions] You should see a module to the right side of your screen. I will do my best to answer as many questions and to get to them as we can during the Q&A section of the call. And with that, I hand it over to Martin Whittaker, our CEO.

Great. Thanks, Yusuf. Hi, everybody, and good afternoon. And Bob, special thanks to you, again, for your leadership on JUST issues and for joining us today, and I can't wait to get into our discussion. As Yusuf said, for those of you on the call that are new to JUST, just by way of a quick intro. We are an independent nonprofit with a mission to build a more just economy that works for all Americans. We believe in market solutions to major societal challenges. And we do that by helping companies improve how they serve all of their stakeholders, their workers, customers, communities, the environment and, of course, their shareholders. And we created this quarterly JUST call to give CEOs the chance to talk to their shareholders and other stakeholders about what exactly they're doing and how they're doing it and also maybe even why they're doing it. And these issues have become so much more important over the last 3 months. At least these are things that Intel does especially well. Now in recent months, our country has obviously faced a huge amount of turmoil of the devastating toll of the global pandemic, economic fallout from that. We've seen over 100,000 lives lost here in the U.S., unprecedented levels of unemployment in the last couple of weeks. Following killing of George Floyd, protest and unrest across the country focused on ending systemic racism, protests that I know are now spreading around the world. So it seems like the impacts of these events are happening moment by moment. Obviously, what the future holds, we don't know. But one thing is very clear right now, which is that we need a more just, equitable and inclusive economic system if we're going to move forward together. Now let's go through -- and I'm very happy to walk you through the [ profile ] performance, the conversation we're going to have today and cover many aspects of Intel's leadership. Intel has been a leader, on top of the JUST 100 for many years, actually, since we began our rankings. And especially right now, this is important because of Intel's leadership on diversity and inclusion. We'll get to that in a minute. But Bob, I wanted to ask you, first of all, well, to say welcome. The last 2 decades or more, Intel has been a leader, committed to stakeholder performance and at the forefront of transparency, measuring their progress for a long time. Let's talk about why that's so important to your company.

Well, Martin, first, thanks for giving me the opportunity. First, I would say at the -- maybe at the most macro level, Intel has always been a purpose-driven company. We believe that corporate social responsibility is good for business, and it's the right thing to do. So at the most macro level, it checks maybe the 3 most important boxes. If I just drill down a little bit, our purpose as a company has been to create world-changing technologies that enriches the lives of every person on Earth. So with a purpose like that, how we've defined that over time is not just through 1 or 2 simple lenses, but the constituents that we have to serve today are the 5 that you teed up on your chart to begin with. It's not -- it's investors, it's customers, it's communities, it's employees, it's regulators. So the constituents that we have to serve today are much broader. And we feel that we can bring together a role that a large tech company like ours can play in having a real impact on our society because it helps us deal with what our constituencies are looking for from us today. It's not simply the products that we deliver. They want to know how are we delivering, how are we manufacturing them and how are they improving society as a whole? So using those 3 criteria are how we kind of develop our goals and our objectives for what we will do on these critical non-financial metrics over a period of time. And then just values-wise, we embrace truth and transparency. So we use how we manage the business internally. We set metrics, we manage them internally, we report them not only in terms to just show the progress that we're making, but also to hold ourselves accountable to continue to improve as we go.

Great. Thank you. We'll get into some of the hows and the whys and the details in a second. Let's switch to commitment of employees or commitment to your employees and inclusion matters in particular. I know it's at the beginning of 2019, you announced achieving global gender pay equity, which you've done well ahead of schedule. I know you've set the goal of doubling the number of women and people of color in leadership positions by 2030 as well. Could you talk a little bit about your commitment to inclusion as well as racial and gender equity, especially because this seems to have been a challenge for the tech sector more broadly?

Yes. Well, again, I'll go back to our purpose, if -- to enrich the lives of every person on Earth means it's going to be helpful to understand the lives of every person on earth in terms of the makeup of the employee base that you have. And then you make up your employee base that represents the world in which you serve, that's diversity. And then inclusion is how do you make sure you create an environment for those employees so they can come to work and deliver to their fullest. So that's the purposeful connection of why diversity and inclusion is so important to our company. And in terms of the accomplishments, we flagged a year ago that really started back in 2015, where the company stepped up at a time when diversity in the tech industry has been very hard to come by. So my predecessor stepped up and set some very bold goals at the time. We put a lot of investment behind those goals. And in essence, they were twofold. That we -- here in the U.S., that we would have full representation of women and underrepresented minorities and that we would have global pay equity across the world. So what we announced 2 years early was we met our ambitious goals of full representation in the U.S. and last year, we hit our global pay equity requirement. So again, it's very tightly connected to the purpose of the company, the ambitions we have, the role we believe we can play. And then fundamentally, that a diverse and inclusive workforce is a key enabler for us to achieve our ambitions and to achieve our dreams.

Thank you. I want to talk a little bit about -- and I love this next chart because it showcases Intel's leadership in particular. If those on the call don't know about Intel's unique position, this sort of explains where they are incredibly well. So in 2019, you became the first company in our entire universe to release an EEO-1 component through survey, which showcases data by wage, by gender, ethnicity and occupational group for your entire U.S. workforce. So only 32 companies release EEO-1 data, which had counted the employees by gender and ethnicity, by occupational group. But you went the extra mile and disclosed wage stated by demographics. That's an exceptional commitment to transparency. Could you talk a little bit about that? Why did you make the decision to release that level of information?

Well, first, in our global diversity and inclusion initiative, that's how we measure it internally. We set these ambitious goals. We're a company that --- BKMs or best-known methods is a critical component of how we operate. So we cascade these macro goals down to more micro goals, and in essence, what we report is how we measure it internally. And again, it goes back to a fundamental value for us, which is set ambitious goals, be truthful and transparent in how you communicate your performance against those goals. And we want to be able to both measure our progress but also hold ourselves accountable to set the bar for ourselves, but also hopefully set the bar for the rest of the industry so others will follow. Because it's an area where we think the more we're working together with other players in the industry, the bigger the impact that we can have going forward. And to a certain extent, Martin, it's exemplified a little bit in our most recent goal-setting, if you will. We talked about creating a global inclusion index, a way for us to measure ourselves but also to engage the industry to define a metric not simply for Intel, but for the industry, aligned around that metric in hopes that, again, we can collectively set some big ambitious goals for the industry to address a fundamental challenge that we have in the tech industry, which is to improve the diversity of the workforce.

Yes. Yes. And I know that you have a lot going on throughout the organization to try and promote that. What -- let's just dwell on that subject of industry-wide disclosure. I think that's crucial. We see initiatives around the world through the World Economic Forum, we've seen the Business Roundtable commit to rate of disclosure and an embrace of a sense, a new purpose of a corporation. What argument are you making to your industry peers right now that even though we're in this period of great change and turmoil, that they shouldn't pull back from disclosure, but actually go the opposite direction and lean into it even more?

Well, I think it's a trend that I think is going to be increasingly important. And increasingly, I think, me, my peers, we realize that this is the role and the responsibility we have where our constituents are much, much broader going forward. So I think everybody is increasingly aligned around the need to take action, to measure our performance, to monitor our performance. And in times of crisis, it's probably more time to lean into the things that are increasingly important rather than pull back. And I think that's what we're seeing with our peer base is an opportunity to lean in and not pull back to accelerate trends, not to try to slow trends down.

So you're seeing good receptivity to that?

The dialogues, whether it's initiated by COVID a few months ago, the terrible injustices in the last few weeks, it's more -- it's driving more and more dialogue. CEOs were jumping on the phone, we're talking about what kind of issues does this create for us? How are we going to lead through this? And I think increasingly, there's a realization that we need to play a more active role on the things that are happening in the society around us. And our employee bases are looking for us to play a more active role. So yes, in the times of crisis, I think we're engaging more across the industry. And then from industry to industry because we're all wrestling some of the same issues, and we all increasingly realize the role that we play to have a real impact.

We definitely see that across all the companies that we're tracking right now. So let's just come back to this idea of the tracker. So since March, now we -- we have been essentially tracking the actions of America's largest employers across a range of issues on how they're reacting to COVID-19, the response, the economic fallout. And we're hoping to invest in and continue to do that. And we're -- this sort of primary data on -- simply, I'm just recording what's happening and the private sector has been tremendously valuable to many stakeholders. You can see some of the issues in the chart here if you can read that, I apologize, the font is a little small. But it's everything from adjusted hours of operations to whether companies are making customer accommodations? What are they doing on paid sick leave? How are they addressing executive pay cuts, things like that, where, as I said, investing and expanding both the number of companies and the number of issues? So let's just talk a little bit about Intel's response to COVID-19, if we can, Bob. You have made a very big announcement, $50 million for pandemic response commitment to communities, and especially around your technology. Could you talk a little bit about that, please?

Yes. I may have to think first. You had a couple, if I read the chart right, you had a few bars on there. One was March 24 and then was simply a week later. And we followed your pattern a little bit. I think right when -- because we have a relatively large presence in China, we had to deal with our operations in China in the early stage. And somewhat, we didn't anticipate how it would spread around the world, but at least it informed our thinking about how we would deal with things in the event that they did. So right out of the gate, probably before your March 24 date, we said that first and -- we had kind of 3 priorities: first and foremost, the safety and wellbeing of our employees; second, to ensure we're delivering for our customers at a time when the demand for our products, it was probably required more than ever; and then third, make sure that in the midst of the crisis that we're helping our community. So we laid out those 3 priorities right out of the gate. And at the time in the early stages, people couldn't get a hold of PPE. And it just so happens that in our facilities, people wear PPE. So we immediately -- early on, our foundation set aside $10 million and 1 million PPE at a time for the front line players in the -- in hospitals in the communities in which we operate as we quickly got access to our excess inventory and went out into the industry to find what else existed. So that was the first stage of our commitment. Shortly thereafter, we stepped up another $50 million. And really, we call that our pandemic response initiative, and it really had 3 different components. One was how do we use our technology to accelerate analysis and trends to determine when pandemics could occur? So we went out and worked with a variety of different customers on using our technology, artificial intelligence, machine learning, high analytics to diagnose, to test, to analyze. The second aspect was how do we ensure that underprivileged kids, who are now moving home to study, have access to the computers and the tools that were required. So that was the second big component. And then the third component is we set aside a fund. And it was, in essence, a $10 million fund. And the reason we did that is we were getting so many good ideas from our partners in the industry, from our employees, from our Intel capital portfolio companies, really good ideas of people who really wanted to have an impact in a variety of different ways. And the idea of the $10 million fund is we isolated it, we gave it to a small group of people, so that we could be extremely fast and responsive for ideas that come up from partners, employees and/or portfolio companies. So that was the magnitude of the first $10 million, 1 million PPE, additional $50 million step-up our responsibility. And on top of that, we also did a series of things with our employees to ensure that while those that were coming to the office were safe, we also were giving them additional benefits for how they deal with the additional inconvenience of having kids at home and/or elderlies that they had to take care of at a very, very challenging time frame. So protect the safety and well-being of our employees, ensure we're delivering for our customers and giving back to our community by setting up this fund where, again, we could have an impact across multiple dimensions.

That's great. I would commend you if you -- we have time just to show the slides on our polling because actually you've been following the playbook of the American people. It's exactly in terms of the issues that throughout our polling over the last couple of months, we've been asking American people what should companies be doing right now. And you can see some of the results here. Across all those issues, I would say, you've followed that playbook pretty well. And so congratulations to that. I think it's just hugely important, especially now as we head into sort of a reopening that we keep all of these issues in mind. I am conscious of time, and I do want to get to another important element of your leadership, which is on environment. Intel has been a leader on this topic for a long time. You can see here your scores relative to those in the sector. It's hugely impressive. Could you talk about what drives this basic commitment?

Yes. Well, again, energy, we have massive fabs in assembly and test operations around the world, so -- and social challenges, issues that are important to us. So when we think about massive fabs, ensuring that we deploy energy efficiency concepts and techniques. We reduce the usage of water, a variety of different things and the sustainability of operations because left unchecked, we would be a contributor. Socially, it's important to us. And as I said earlier, in a big operation like this, it's good for business. Energy efficiency, tools and technique are a much more efficient way to operate. So again, this is one of those classic cases where not only is it purpose-driven and good for business, but it's the right thing to do. So energy efficiency, water utilization and our big operations allows us to have a real impact. And increasingly, Martin, this is another example where these are not just important to in how we approach things, but increasingly, they're on the radar screen of our customers because our technology is employed in essentially 95% of the global digital infrastructure. Our customers increasingly are looking for people in the supply chain, players in the supply chain, to set high bars for themselves. And our employees are just much more conscious about the implications that large operations like us can have on the environment, and the things that we can do reduce any negative implications on the environment ourselves. So sustainability is one of those common threads throughout our CSR initiatives over time, and we've been able to have a real impact not just within our 4 walls, but on the rest of the industry as a whole.

That's great. And we're obviously, we're -- we believe that because we're tracking it. I do want to ask about the financials. Yusuf, do we have time just to talk about returns and should we...

Absolutely. Yes. We should definitely bring that up.

Great. So let's just go to that slide. Where the rubber hits the road for investors is here. Companies need to lead on stakeholder performance. They also have to be -- those have to perform financially, generate returns. So how do you think about those 2 things together? How do you talk to your investors? I know you've set long-term goals now. I was reading about it most of the day, your 2030 objectives, something that's hugely impressive. What's the conversation with your shareholders like? Could you give us a glimpse a little bit behind the scenes on why that's important and how that takes place?

Well, it's interesting. I think the -- first, the frequency and the intensity of the dialogue from our shareholders is growing, which I think is good because this has been important for our company for a long time. And they -- the questions that we get now are specific to the metrics that we set aside. And then how do we establish them? How do we create them? But most importantly maybe of late is how -- what's different now? What's going to be different about this next 10-year journey on your social responsibility commitments and how it impacts your business? And the beauty is these are not decoupled. We -- our goals that we set are -- they mitigate inherent risk in our operations, they enhance our brand, they save us money and they may -- and they help us recruit more customers and recruit more employees. So the interplay going forward of the initiatives we set on a variety of constituents make our social responsibility, goals and objectives, tightly coupled to how we operate the business. So they're not a sideshow, they're integral to what we do. And I think increasingly, as we think about the impact that large tech plays on the industry as a whole, we're just trying to elevate our commitments and our accountability and report on how well we're doing and where we're falling short and what we're doing about it. But also in doing so, try to raise the responsibility of the industry as a whole.

You mentioned risk factors. Are there other elements that Intel uses to evaluate the ROI of corporate responsibility in your initiatives?

Yes. I mean one is inherent risk. We look at a multiyear profile. We look at the risk, the implications of that risk and other ways to mitigate it. And the mitigation of those risks are economic value. The second one I flagged is just lower cost, energy efficiency. Green energy is a more efficient source of energy. That is a cost reducer. The third, which is a little harder to measure in terms of ROI, but we know it's the right thing to do, and it's consistent with our purpose of things that we think are brand enhancing. And we don't get too preoccupied with deep analytical ROIs, brand-enhancing things. We know when we can talk about things we're doing that are good for society, and it helps us recruit the best people because it's important to them. We know that, in turn, will help us build better products that meet our customers' needs. So risk mitigation, real cost savings and then more brand-enhancing things, all that go down to how we end up trying to expand the role we play in the industry at large.

We've seen -- our data backs all of that up. All of our major indices are outperforming the benchmarks. But interestingly, talk about long-term value creation, companies that have shown that they do best on investing in their workforce, just over the last 3 months, have substantially outperformed their peers on ROE and market indices. So I assume that doesn't come as a surprise to you. Do you tell that story often? Do you point to the connection, the financial connection of some returns but other accounting metrics of financial performance when you talk about your stakeholder leadership?

Absolutely. I mean it's -- again, in our -- we issued our CSR report research, Martin, and we had a chance to talk about it a little bit before it came online. But in essence, looked at how do we do against the goals we set a decade ago. Some were -- that are financial in nature, some that are nonfinancial in nature. And then for the next decades, how are we going to remember the goals that we're setting for ourselves. And those goals, again, of responsibility and technology in the products that we build, metrics for diversity and inclusion, metrics for sustainability and then the role we play and enable in the tech industry, all those come in a set of kind of financial and nonfinancial kind of metrics that we use to explain why this is important to us as a company. Why the constituents we serve, whether it's investors, whether it's customers, whether it's our employees, whether it's the communities in which we operate, they increasingly look for corporations that are going to play an active role on all these multiple dimensions. And from that, we are -- again, we engage in this because we're a purpose-driven company, because we're a metrics-driven company, and we want to measure our performance. And we do find it as a basis for improving on things that matter most for the constituents in which we serve.

Well, I have a lot more questions, but it looks like we've run out of time. I just wanted to thank you both again for your time, Bob, again, and Martin. For everyone who's on the phone, this will be -- this was recorded, and it will be replayed back. In the coming days, you'll get an e-mail from JUST Capital about it with the link. And so thank you both.

Yusuf, Martin, thank you very much. Pleasure. And thanks for all your doing.

Bye-bye.