-- Q4 net revenues $2.75 billion; gross margin 39.3%; operating margin 16.7%; net income $392 million -- FY net revenues $9.56 billion; gross margin 38.7%; operating margin 12.6%; net income $1,032 million -- Business outlook at mid-point: Q1 net revenues of $2.36 billion and gross margin of 38.0% Geneva, January 23, 2020 - STMicroelectronics (NYSE: STM), a global semiconductor leader serving customers across the spectrum of electronics applications, reported U.S. GAAP financial results for the fourth quarter ended December 31, 2019. This press release also contains non-U.S. GAAP measures (see Appendix for additional information). ST reported fourth quarter net revenues of $2.75 billion, gross margin of 39.3%, operating margin of 16.7%, and net income of $392 million or $0.43 diluted earnings per share. Jean-Marc Chery, STMicroelectronics President & CEO, commented: -- "We closed 2019 with a solid fourth quarter sales and financial performance. Net revenues grew 7.9% sequentially, above the mid-point of our guidance of 5.0%, with all product groups contributing to the growth. Our gross margin was 39.3%, 110 basis points higher than the mid-point of our guidance, mainly due to better than expected manufacturing efficiencies and improved product mix. On a sequential basis, our operating margin was up 360 basis points to 16.7% and free cash flow increased to $461 million in the fourth quarter. -- "Our 2019 financial performance, with net revenues of $9.56 billion and an operating margin of 12.6%, is aligned with the full year expectations we provided in April 2019. -- "ST's first quarter outlook, at the mid-point, is for net revenues of $2.36 billion, increasing year-over-year by 13.7% and decreasing sequentially by 14.3%; gross margin is expected to be 38.0%, including about 80 basis points of unsaturation charges. -- "For 2020, we plan to invest about $1.5 billion in CAPEX to support our strategic initiatives and revenue growth to progress towards our mid-term revenue ambition of $12 billion." Quarterly Financial Summary (U.S. GAAP) (US$ m, except per share data) Q4 2019 Q3 2019 Q4 2018 Q/Q Y/Y --------------------------- ------- ------- ------- ------- -------- Net Revenues $2,754 $2,553 $2,648 7.9% 4.0% --------------------------- ------- ------- ------- ------- -------- Gross Profit $1,081 $967 $1,059 11.8% 2.0% --------------------------- ------- ------- ------- ------- -------- Gross Margin 39.3% 37.9% 40.0% 140 bps (70) bps --------------------------- ------- ------- ------- ------- -------- Operating Income $460 $336 $443 37.1% 3.7% --------------------------- ------- ------- ------- ------- -------- Operating Margin 16.7% 13.1% 16.8% 360 bps (10) bps --------------------------- ------- ------- ------- ------- -------- Net Income $392 $302 $418 29.9% (6.2)% --------------------------- ------- ------- ------- ------- -------- Diluted Earnings Per Share $0.43 $0.34 $0.46 26.5% (6.5)% --------------------------- ------- ------- ------- ------- -------- Annual Financial Summary (U.S. GAAP) (US$ m, except earnings per share data) FY2019 FY2018 Y/Y ---------------------------------- ------ ------ --------- Net Revenues $9,556 $9,664 (1.1)% ---------------------------------- ------ ------ --------- Gross Profit $3,696 $3,861 (4.3)% ---------------------------------- ------ ------ --------- Gross Margin 38.7% 40.0% (130) bps ---------------------------------- ------ ------ --------- Operating Income $1,203 $1,400 (14.0)% ---------------------------------- ------ ------ --------- Operating Margin 12.6% 14.5% (190) bps ---------------------------------- ------ ------ --------- Net Income $1,032 $1,287 (19.8)% ---------------------------------- ------ ------ --------- Diluted Earnings Per Share $1.14 $1.41 (19.1)% ---------------------------------- ------ ------ --------- Fourth Quarter 2019 Summary Review Net Revenues By Product Group (US$ Q4 Q3 Q4 m) 2019 2019 2018 Q/Q Y/Y ----------------------------------------- ------- ------- ------- ------- -------- Automotive and Discrete Group (ADG) 924 894 967 3.3% (4.5)% ----------------------------------------- ------- ------- ------- ------- -------- Analog, MEMS and Sensors Group (AMS) 1,085 968 988 12.1% 9.9% ----------------------------------------- ------- ------- ------- ------- -------- Microcontrollers and Digital ICs Group (MDG) 742 688 689 7.9% 7.6% ----------------------------------------- ------- ------- ------- ------- -------- Others 3 3 4 - - ----------------------------------------- ------- ------- ------- ------- -------- Total Net Revenues 2,754 2,553 2,648 7.9% 4.0% ----------------------------------------- ------- ------- ------- ------- -------- Net revenues totaled $2.75 billion. On a sequential basis, revenues increased 7.9%, 290 basis points better than the mid-point of the Company's guidance. On a year-over-year basis, fourth quarter net revenues increased 4.0% as the Company recorded higher sales in Analog, Microcontrollers, Imaging and MEMS partially offset by lower Automotive sales. On a year-over-year basis, sales to OEMs increased 8.9%, while Distribution decreased 6.9%. Gross profit totaled $1.08 billion, representing a year-over-year increase of 2.0%. Gross margin of 39.3% decreased 70 basis points year-over-year, mainly impacted by price pressure and unsaturation charges. Fourth quarter gross margin was 110 basis points higher than the mid-point of the Company's guidance, mainly due to better than expected manufacturing efficiencies and improved product mix. Fourth quarter gross margin included about 100 basis points of unsaturation charges. Operating income increased 3.7% to $460 million, compared to $443 million in the year-ago quarter. The Company's operating margin decreased 10 basis points on a year-over-year basis to 16.7% of net revenues, compared to 16.8% in the 2018 fourth quarter. By product group, compared with the year-ago quarter: Automotive and Discrete Group (ADG): -- Revenue decreased in both Automotive and Power Discrete. -- Operating profit decreased by 19.9% to $113 million. Operating margin was 12.2% compared to 14.6%. Analog, MEMS and Sensors Group (AMS): -- Revenue increased in Analog, Imaging and MEMS. -- Operating profit increased by 39.1% to $281 million. Operating margin was 25.9% compared to 20.5%. Microcontrollers and Digital ICs Group (MDG): -- Revenue increased in Microcontrollers and was substantially flat in Digital ICs. -- Operating profit decreased by 2.5% to $119 million. Operating margin was 16.0% compared to 17.7%. Net income and diluted earnings per share decreased to $392 million and $0.43, respectively, compared to $418 million and $0.46, respectively, in the year-ago quarter. Cash Flow and Balance Sheet Highlights Trailing 12 Months ------------- -------- -------- --------- -------------------------------- Q4 Q3 TTM (US$ m) 2019 2019 Q4 2018 Q4 2019 Q4 2018 Change ------------- -------- -------- --------- --------- --------- ---------- Net cash from operating activities 775 429 656 1,869 1,845 1.3% ------------- -------- -------- --------- --------- --------- ---------- Free cash flow (non-U.S. GAAP) 461 170 363 497 533 (6.8)% ------------- -------- -------- --------- --------- --------- ---------- Capital expenditure payments, net of proceeds from sales, were $236 million in the fourth quarter and $1.17 billion for 2019. In the year-ago quarter, capital expenditures, net, were $279 million. Inventory at the end of the fourth quarter was $1.69 billion, down from $1.79 billion in the prior quarter. Day sales of inventory at quarter-end was 90 days compared to 100 days in the prior quarter. Free cash flow (non-U.S. GAAP) was $461 million in the fourth quarter and $497 million for 2019. The Company paid cash dividends totaling $53 million in the fourth quarter and $214 million for 2019. In addition, ST executed a $63 million and $250 million share buy-back in the fourth quarter and full year, respectively, as part of its previously announced share repurchase program. ST's net financial position (non-U.S. GAAP) was $672 million at December 31, 2019 compared to $348 million at September 28, 2019 and reflected total liquidity of $2.74 billion and total financial debt of $2.07 billion. Business Outlook The Company's guidance, at the mid-point, for the 2020 first quarter is: -- Net revenues are expected to be $2.36 billion, a decrease of 14.3% sequentially, plus or minus 350 basis points; -- Gross margin of 38.0%, plus or minus 200 basis points;
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