Press Release: STMicroelectronics Reports Q4 and FY 2019 Financial Results
-- 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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-- This outlook is based on an assumed effective currency exchange rate of
approximately $1.12 = EUR1.00 for the 2020 first quarter and includes the
impact of existing hedging contracts;
-- The first quarter will close on March 28, 2020.
Recent Corporate Developments
-- On December 2, 2019, ST announced the closing of the full acquisition of
Swedish silicon carbide (SiC) wafer manufacturer Norstel AB ("Norstel").
ST exercised its option to acquire the remaining 45% stake, following the
initial transaction announced in February 2019. The total consideration
for the acquisition of Norstel was $137.5 million, funded with available
cash.
-- In December 2019, Philippe Brun, President, Human Resources and Corporate
Social Responsibility, left the Company.
Conference Call and Webcast Information
STMicroelectronics will conduct a conference call with analysts,
investors and reporters to discuss its fourth 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
February 7, 2020.
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.
See the Appendix of this press release for a reconciliation of the
Company's non-U.S. GAAP financial measures to their corresponding U.S.
GAAP financial measures. To compensate for these limitations, the
supplemental non-U.S. GAAP financial information should not be read in
isolation, but only in conjunction with the Company's consolidated
financial statements prepared in accordance with U.S. GAAP.
Forward-looking Information
Some of the statements contained in this release that are not historical
facts are statements of future expectations and other forward-looking
statements (within the meaning of Section 27A of the Securities Act of
1933 or Section 21E of the Securities Exchange Act of 1934, each as
amended) that are based on management's current views and assumptions,
and are conditioned upon and also involve known and unknown risks and
uncertainties that could cause actual results, performance, or events to
differ materially from those anticipated by such statements, due to,
among other factors:
-- Changes in global trade policies, including the adoption and expansion of
tariffs and trade barriers, that could affect the macro-economic
environment and adversely impact the demand for our products;
-- Uncertain macro-economic and industry trends, which may impact end-market
demand for our products;
-- The Brexit vote and impact of the withdrawal of the U.K. may adversely
affect business activity, political stability and economic conditions in
the U.K., the Eurozone, the EU and elsewhere. The date set for the U.K.
withdrawal from the EU is January 31, 2020 and the U.K. majority
government is expected to complete Brexit even if no formal withdrawal
agreement is in place with the EU by the end of the transition period
running until December 31, 2020. The specific terms of the U.K.
withdrawal from the EU are still uncertain and while we do not have
material operations in the U.K. and have not experienced any material
impact from Brexit on our underlying business to date, we cannot predict
its future implications;
-- Customer demand that differs from projections;
-- The ability to design, manufacture and sell innovative products in a
rapidly changing technological environment;
-- Changes in economic, social, labor, political, or infrastructure
conditions in the locations where we, our customers, or our suppliers
operate, including as a result of macro-economic or regional events,
military conflicts, social unrest, labor actions, or terrorist
activities;
-- Unanticipated events or circumstances, which may impact our ability to
execute our plans and/or meet the objectives of our R&D and manufacturing
programs, which benefit from public funding;
-- Financial difficulties with any of our major distributors or significant
curtailment of purchases by key customers;
-- The loading, product mix, and manufacturing performance of our production
facilities and/or our required volume to fulfill capacity reserved with
suppliers or third party manufacturing providers;
-- Availability and costs of equipment, raw materials, utilities,
third-party manufacturing services and technology, or other supplies
required by our operations;
-- The functionalities and performance of our IT systems, which are subject
to cybersecurity threats and which support our critical operational
activities including manufacturing, finance and sales, and any breaches
of our IT systems or those of our customers or suppliers;
-- Theft, loss, or misuse of personal data about our employees, customers,
or other third parties, and breaches of global and local privacy
legislation, including the EU's General Data Protection Regulation
("GDPR");
-- The impact of intellectual property ("IP") claims by our competitors or
other third parties, and our ability to obtain required licenses on
reasonable terms and conditions;
-- Changes in our overall tax position as a result of changes in tax rules,
new or revised legislation, the outcome of tax audits or changes in
international tax treaties which may impact our results of operations as
well as our ability to accurately estimate tax credits, benefits,
deductions and provisions and to realize deferred tax assets;
-- Variations in the foreign exchange markets and, more particularly, the
U.S. dollar exchange rate as compared to the Euro and the other major
currencies we use for our operations;
-- The outcome of ongoing litigation as well as the impact of any new
litigation to which we may become a defendant;
-- Product liability or warranty claims, claims based on epidemic or
delivery failure, or other claims relating to our products, or recalls by
our customers for products containing our parts;
-- Natural events such as severe weather, earthquakes, tsunamis, volcano
eruptions or other acts of nature, health risks and epidemics in
locations where we, our customers or our suppliers operate;
-- Industry changes resulting from vertical and horizontal consolidation
among our suppliers, competitors, and customers; and
-- The ability to successfully ramp up new programs that could be impacted
by factors beyond our control, including the availability of critical
third party components and performance of subcontractors in line with our
expectations.
Such forward-looking statements are subject to various risks and
uncertainties, which may cause actual results and performance of our
business to differ materially and adversely from the forward-looking
statements. Certain forward-looking statements can be identified by the
use of forward looking terminology, such as "believes," "expects," "may,
" "are expected to," "should," "would be," "seeks" or "anticipates" or
similar expressions or the negative thereof or other variations thereof
or comparable terminology, or by discussions of strategy, plans or
intentions.
Some of these risk factors are set forth and are discussed in more
detail in "Item 3. Key Information -- Risk Factors" included in our
Annual Report on Form 20-F for the year ended December 31, 2018, as
filed with the SEC on February 28, 2019. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described
in this release as anticipated, believed, or expected. We do not intend,
and do not assume any obligation, to update any industry information or
forward-looking statements set forth in this release to reflect
subsequent events or circumstances.
About STMicroelectronics
ST is a global semiconductor leader delivering intelligent and
energy-efficient products and solutions that power the electronics at
the heart of everyday life. ST's products are found everywhere today,
and together with our customers, we are enabling smarter driving and
smarter factories, cities and homes, along with the next generation of
mobile and Internet of Things devices.
By getting more from technology to get more from life, ST stands for
life.augmented.
In 2019, the Company's net revenues were $9.56 billion, serving more
than 100,000 customers worldwide.
Further information can be found at www.st.com.
For further information, please contact:
INVESTOR RELATIONS:
Céline Berthier
Group VP, Investor Relations
Tel: +41 22 929 58 12
celine.berthier@st.com
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MEDIA RELATIONS:
Alexis Breton
Corporate External Communications
STMicroelectronics
Tel: + 33 6 59 16 79 08
alexis.breton@st.com
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STMicroelectronics N.V.
CONSOLIDATED STATEMENTS OF INCOME
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