PR No: C2909C
-- Q2 net revenues $2.17 billion; gross margin 38.2%; operating margin 9.0%;
net income $160 million
-- H1 net revenues $4.25 billion; gross margin 38.8%; operating margin 9.6%;
net income $338 million
-- Q3 business outlook at mid-point: net revenues up about 15.3% Q/Q and
gross margin of about 37.5%
Geneva, July 25, 2019 - STMicroelectronics (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, 2019. This press release also contains
non-U.S. GAAP measures (see Appendix for additional information).
ST reported second quarter net revenues of $2.17 billion, gross margin
of 38.2%, operating margin of 9.0%, and net income of $160 million or
$0.18 diluted earnings per share.
Jean-Marc Chery, STMicroelectronics President & CEO, commented:
-- "As planned, in the second quarter we returned to sequential revenue
growth. In fact, revenues increased 4.7%, above the mid-point of our
guidance of 2.4%, driven by specialized imaging sensors, RF products for
front end modules, silicon carbide MOSFETs and digital automotive,
partially offset by general purpose analog, microcontrollers and legacy
automotive products. We delivered an operating margin of 9.0%.
-- "During the first half of 2019 we delivered sales and profitability
results in line with our quarterly guidance and we continued to advance
our strategic investments.
-- "Looking at the third quarter, we expect strong sequential revenue growth
of about 15.3% at the mid-point. This growth will be driven by engaged
customer programs and new products in a softer than expected legacy
automotive and industrial market. Gross margin is expected to be about
37.5% at the mid-point, including about 140 basis points of unsaturation
charges.
-- "For the full year 2019, we now expect net revenues to be in the range of
about $9.35 to $9.65 billion. We confirm our investment plan of $1.1 to
$1.2 billion.
Quarterly Financial Summary (U.S. GAAP)
(US$ m, except per share
data) Q2 2019 Q1 2019 Q2 2018 Q/Q Y/Y
--------------------------- ------- ------- ------- --------- ---------
Net Revenues $2,173 $2,076 $2,269 4.7% (4.2)%
--------------------------- ------- ------- ------- --------- ---------
Gross Profit $830 $818 $911 1.6% (8.9)%
--------------------------- ------- ------- ------- --------- ---------
Gross Margin 38.2% 39.4% 40.2% (120) bps (200) bps
--------------------------- ------- ------- ------- --------- ---------
Operating Income $196 $211 $289 (7.0)% (32.0)%
--------------------------- ------- ------- ------- --------- ---------
Operating Margin 9.0% 10.2% 12.7% (120) bps (370) bps
--------------------------- ------- ------- ------- --------- ---------
Net Income $160 $178 $261 (10.2)% (38.7)%
--------------------------- ------- ------- ------- --------- ---------
Diluted Earnings Per Share $0.18 $0.20 $0.29 (10.0)% (37.9)%
--------------------------- ------- ------- ------- --------- ---------
Second Quarter 2019 Summary Review
Net Revenues By Product Group (US$ Q2 Q1 Q2
m) 2019 2019 2018 Q/Q Y/Y
----------------------------------------- -------- -------- -------- -------- ---------
Automotive and Discrete Group (ADG) $885 $903 $870 (2.1)% 1.7%
----------------------------------------- -------- -------- -------- -------- ---------
Analog, MEMS and Sensors Group (AMS) $694 $552 $613 25.7% 13.2%
----------------------------------------- -------- -------- -------- -------- ---------
Microcontrollers and Digital ICs Group
(MDG) $591 $617 $782 (4.2)% (24.4)%
----------------------------------------- -------- -------- -------- -------- ---------
Others $3 $4 $4 - -
----------------------------------------- -------- -------- -------- -------- ---------
Total Net Revenues $2,173 $2,076 $2,269 4.7% (4.2)%
----------------------------------------- -------- -------- -------- -------- ---------
Net revenues totaled $2.17 billion. On a sequential basis revenues
increased 4.7%, 230 basis points better than the mid-point of the
Company's guidance. On a year-over-year basis, second quarter net
revenues decreased 4.2% as the Company recorded lower sales in Analog,
Microcontrollers and Digital ICs, partially offset by growth in
Automotive and Power Discrete, MEMS and Sensors. On a year-over-year
basis, sales to OEMs increased 10.3%, while Distribution decreased 27.0%
due to the ongoing inventory correction.
Gross profit totaled $830 million, representing a year-over-year
decrease of 8.9%. Gross margin of 38.2% decreased 200 basis points
year-over-year, mainly impacted by usual sales price pressure,
unfavorable product mix and unsaturation charges. Second quarter gross
margin was 30 basis points lower than the mid-point of the Company's
guidance, mainly due to unfavorable product mix. Second quarter gross
margin includes 80 basis points of unsaturation charges.
Operating income decreased 32.0% to $196 million, compared to $289
million in the year-ago quarter. The Company's operating margin
decreased 370 basis points on a year-over-year basis to 9.0% of net
revenues, compared to 12.7% in the 2018 second quarter.
By product group, compared with the year-ago quarter:
Automotive and Discrete Group (ADG):
-- Revenue increased in both Automotive and Power Discrete.
-- Operating profit decreased by 13.1% to $73 million. Operating margin was
8.2% compared to 9.7%.
Analog, MEMS and Sensors Group (AMS):
-- Revenue increased in MEMS and Sensors while Analog decreased.
-- Operating profit increased by 15.6% to $74 million. Operating margin was
10.7% compared to 10.5%.
Microcontrollers and Digital ICs Group (MDG):
-- Revenue decreased in both Microcontrollers and Digital ICs.
-- Operating profit decreased by 71.7% to $45 million. Operating margin was
7.6% compared to 20.3%.
Net income and diluted earnings per share decreased to $160 million and
$0.18, respectively, compared to $261 million and $0.29, respectively,
in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
Trailing 12 Months
------------- ------- ------- -----------------------------------------
Q2 Q1 Q2 Q2 Q2 TTM
(US$ m) 2019 2019 2018 2019 2018(1) Change
------------- ------- ------- -------- -------- --------- ----------
Net cash
from
operating
activities $324 $341 $360 $1,694 $1,835 (7.7)%
------------- ------- ------- -------- -------- --------- ----------
Free cash
flow
(non-U.S.
GAAP) $(67) $(67) $(40) $343 $280 22.5%
------------- ------- ------- -------- -------- --------- ----------
(1) Q2 2018 trailing 12 months includes 2017 amounts that have been
adjusted to reflect the reclassification as operating cash flows of the
implied interest paid in the settlement of our convertible bonds.
Capital expenditure payments, net of proceeds from sales, were $372
million in the second quarter. In the year-ago quarter, capital
expenditures, net, were $390 million.
Inventory at the end of the quarter was $1.89 billion, up from $1.77
billion in the prior quarter. Day sales of inventory at quarter-end was
129 days compared to 124 days in the prior quarter.
Free cash flow (non-U.S. GAAP) was negative $67 million in the second
quarter, compared to negative $40 million in the year-ago quarter.
In the second quarter, the Company paid cash dividends totaling $53
million and executed a $64 million share buy-back as part of its ongoing
program.
ST's net financial position (non-U.S. GAAP) was $308 million at June 29,
2019 compared to $510 million at March 30, 2019 and reflected total
liquidity of $2.51 billion and total financial debt of $2.20 billion.
Business Outlook
The Company's guidance for the 2019 third quarter is:
-- Net revenues are expected to increase about 15.3% sequentially, plus or
minus 350 basis points;
-- Gross margin of about 37.5%, plus or minus 200 basis points;
-- This outlook is based on an assumed effective currency exchange rate of
approximately $1.15 = EUR1.00 for the 2019 third quarter and includes the
impact of existing hedging contracts.
-- The third quarter will close on September 28, 2019.
Conference Call and Webcast Information
STMicroelectronics will conduct a conference call with analysts,
investors and reporters to discuss its second quarter 2019 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, http://investors.st.com, and will be available for replay until
August 9, 2019.
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
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