· Q2 net revenues $3.23 billion; gross margin 40.1%; operating margin 11.6%; net income $353 million
· H1 net revenues $6.70 billion; gross margin 40.9 %; operating margin 13.8%; net income $865 million
· Business outlook at mid-point: Q3 net revenues of $3.25 billion and gross margin of 38%
Geneva, July 25, 2024 – STMicroelectronics N.V. (“ST”) (NYSE: STM), a global semiconductor leader serving customers across the spectrum of electronics applications, reported U.S. GAAP financial results for the second quarter ended June 29, 2024. This press release also contains non-U.S. GAAP measures (see Appendix for additional information).
ST reported second quarter net revenues of $3.23 billion, gross margin of 40.1%, operating margin of 11.6%, and net income of $353 million or $0.38 diluted earnings per share.
Jean-Marc Chery, ST President & CEO, commented:
· “Q2 net revenues were above the midpoint of our business outlook range driven by higher revenues in Personal Electronics, partially offset by lower than expected revenues in Automotive. Gross margin was in line with expectations.”
· “First half net revenues decreased 21.9% year-over-year, mainly driven by a decrease in Microcontrollers and Power and Discrete segments. Operating margin was 13.8% and net income was $865 million.”
· “During the quarter, contrary to our prior expectations, customer orders for Industrial did not improve and Automotive demand declined.”
· “Our third quarter business outlook, at the mid-point, is for net revenues of $3.25 billion, decreasing year-over-year by 26.7% and increasing sequentially by 0.6%; gross margin is expected to be about 38%, impacted by about 350 basis points of unused capacity charges.”
· “We will now drive the Company based on a plan for FY24 revenues in the range of $13.2 billion to $13.7 billion. Within this plan, we expect a gross margin of about 40%.”
Quarterly Financial Summary (U.S. GAAP)
| (US$ m, except per share data) | Q2 2024 | Q1 2024 | Q2 2023 | Q/Q | Y/Y |
| Net Revenues | $3,232 | $3,465 | $4,326 | -6.7% | -25.3% |
| Gross Profit | $1,296 | $1,444 | $2,119 | -10.2% | -38.9% |
| Gross Margin | 40.1% | 41.7% | 49.0% | -160 bps | -890 bps |
| Operating Income | $375 | $551 | $1,146 | -32.0% | -67.3% |
| Operating Margin | 11.6% | 15.9% | 26.5% | -430 bps | -1,490 bps |
| Net Income | $353 | $513 | $1,001 | -31.2% | -64.8% |
| Diluted Earnings Per Share | $0.38 | $0.54 | $1.06 | -29.6% | -64.2% |
Second Quarter 2024 Summary Review
Reminder: On January 10, 2024, ST announced a new organization which implied a change in segment reporting starting Q1 2024. Comparative periods have been adjusted accordingly. See Appendix for more detail.
| Net Revenues by Reportable Segment (US$ m) | Q2 2024 | Q1 2024 | Q2 2023 | Q/Q | Y/Y |
| Analog products, MEMS and Sensors (AM&S) segment | 1,165 | 1,217 | 1,293 | -4.3% | -10.0% |
| Power and discrete products (P&D) segment | 747 | 820 | 989 | -8.8% | -24.4% |
| Subtotal: Analog, Power & Discrete, MEMS and Sensors (APMS) Product Group | 1,912 | 2,037 | 2,282 | -6.1% | -16.2% |
| Microcontrollers (MCU) segment | 800 | 950 | 1,482 | -15.7% | -46.0% |
| Digital ICs and RF Products (D&RF) segment | 516 | 475 | 558 | 8.6% | -7.6% |
| Subtotal: Microcontrollers, Digital ICs and RF products (MDRF) Product Group | 1,316 | 1,425 | 2,040 | -7.6% | -35.5% |
| Others | 4 | 3 | 4 | – | – |
| Total Net Revenues | 3,232 | 3,465 | 4,326 | -6.7% | -25.3% |
Net revenues totaled $3.23 billion, representing a year-over-year decrease of 25.3%. Year-over-year net sales to OEMs and Distribution decreased 14.9% and 43.7%, respectively. On a sequential basis, net revenues decreased 6.7%, 90 basis points better than the mid-point of ST’s guidance.
Gross profit totaled $1.30 billion, representing a year-over-year decrease of 38.9%. Gross margin of 40.1%, in line with the mid-point of ST’s guidance, decreased 890 basis points year-over-year, mainly due to the combination of product mix and sales price and higher unused capacity charges.
Operating income decreased 67.3% to $375 million, compared to $1.15 billion in the year-ago quarter. ST’s operating margin decreased 1,490 basis points on a year-over-year basis to 11.6% of net revenues, compared to 26.5% in the second quarter of 2023.
By reportable segment[1], compared with the year-ago quarter:
In Analog, Power & Discrete, MEMS and Sensors (APMS) Product Group:
Analog products, MEMS and Sensors (AM&S) segment:
- Revenue decreased 10.0% mainly due to a decrease in Imaging.
- Operating profit decreased by 44.5% to $144 million. Operating margin was 12.4% compared to 20.0%.
Power and Discrete products (P&D) segment:
- Revenue decreased 24.4%.
- Operating profit decreased by 57.9% to $110 million. Operating margin was 14.7% compared to 26.4%.
In Microcontrollers, Digital ICs and RF products (MDRF) Product Group:
Microcontrollers (MCU) segment:
- Revenue decreased 46.0% mainly due to a decrease in GP MCU.
- Operating profit decreased by 87.1% to $72 million. Operating margin was 8.9% compared to 37.2%.
Digital ICs and RF products (D&RF) segment:
- Revenue decreased 7.6% due to a decrease in ADAS which more than offset the increase in RF Communications.
- Operating profit decreased by 23.8% to $150 million. Operating margin was 29.1% compared to 35.2%.
Net income and diluted Earnings Per Share decreased to $353 million and $0.38 respectively compared to $1.00 billion and $1.06 respectively in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
| Trailing 12 Months | ||||||
| (US$ m) | Q2 2024 | Q1 2024 | Q2 2023 | Q2 2024 | Q2 2023 | TTM Change |
| Net cash from operating activities | 702 | 859 | 1,311 | 4,922 | 5,832 | -15.6% |
| Free cash flow (non-U.S. GAAP)[2] | 159 | (134) | 209 | 1,384 | 1,694 | -18.3% |
Net cash from operating activities was $702 million in the second quarter compared to $1.31 billion in the year-ago quarter.
Net Capex (non-U.S. GAAP)1 was $528 million in the second quarter compared to $1.07 billion in the year-ago quarter.
Free cash flow(non-U.S. GAAP)1 was $159 million in the second quarter, compared to $209 million in the year-ago quarter.
Inventory at the end of the second quarter was $2.81 billion, compared to $2.69 billion in the previous quarter and $3.05 billion in the year-ago quarter. Days sales of inventory at quarter-end was 130 days compared to 122 days in the previous quarter and 126 days in the year-ago quarter.
In the second quarter, ST paid cash dividends to its stockholders totaling $73 million and executed a $88 million share buy-back, completing its $1,040 million share repurchase program launched on July 1, 2021. On June 21, 2024, ST announced the launch of a new share buy-back plan comprising two programs totalling up to $1,100 million to be executed within a 3-year period.
ST’s net financial position (non-U.S. GAAP)1 was $3.20 billion as of June 29, 2024, compared to $3.13 billion as of March 30, 2024 and reflected total liquidity of $6.29 billion and total financial debt of $3.09 billion. Adjusted net financial position (non-U.S. GAAP)1, taking into consideration the effect on total liquidity of advances from capital grants for which capital expenditures have not been incurred yet, stood at $2.80 billion as of June 29, 2024.
Business Outlook
ST’s guidance, at the mid-point, for the 2024 third quarter is:
- Net revenues are expected to be $3.25 billion, an increase of 0.6% sequentially, plus or minus 350 basis points.
- Gross margin of 38%, plus or minus 200 basis points.
- This outlook is based on an assumed effective currency exchange rate of approximately $1.07 = €1.00 for the 2024 third quarter and includes the impact of existing hedging contracts.
- The third quarter will close on September 28, 2024.
Conference Call and Webcast Information
ST will conduct a conference call with analysts, investors and reporters to discuss its second quarter 2024 financial results and current business outlook today at 9:30 a.m. Central European Time (CET) / 3:30 a.m. U.S. Eastern Time (ET). A live webcast (listen-only mode) of the conference call will be accessible at ST’s website, https://investors.st.com, and will be available for replay until August 9, 2024.
Use of Supplemental Non-U.S. GAAP Financial Information
This press release contains supplemental non-U.S. GAAP financial information.
Readers are cautioned that these measures are unaudited and not prepared in accordance with U.S. GAAP and should not be considered as a substitute for U.S. GAAP financial measures. In addition, such non-U.S. GAAP financial measures may not be comparable to similarly titled information from other companies. To compensate for these limitations, the supplemental non-U.S. GAAP financial information should not be read in isolation, but only in conjunction with ST’s consolidated financial statements prepared in accordance with U.S. GAAP.
See the Appendix of this press release for a reconciliation of ST’s non-U.S. GAAP financial measures to their corresponding U.S. GAAP financial measures.
