Press Release: STMicroelectronics Reports 2022 Second Quarter Financial Results
PR No: C3108C
STMicroelectronics Reports 2022 Second Quarter Financial Results
-- Q2 net revenues $3.84 billion; gross margin 47.4%; operating margin 26.2%; net income $867 million -- H1 net revenues $7.38 billion; gross margin 47.1%; operating margin 25.5%; net income $1.61 billion -- Business outlook at the mid-point: Q3 net revenues of $4.24 billion and gross margin of 47.0%
Geneva, July 28, 2022 - 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 July 2, 2022. This press release also contains non-U.S. GAAP measures (see Appendix for additional information).
ST reported second quarter net revenues of $3.84 billion, gross margin of 47.4%, operating margin of 26.2%, and net income of $867 million or $0.92 diluted earnings per share.
Jean-Marc Chery, STMicroelectronics President & CEO, commented:
-- "Q2 net revenues and gross margin came in above the mid-point of our business outlook range driven by continued strong demand for our product portfolio. -- "On a year-over-year basis, Q2 net revenues increased 28.3%, operating margin increased to 26.2% from 16.3% and net income doubled to $867 million. -- "First half net revenues increased 22.9% year-over-year, driven by growth in all product groups and sub-groups. Operating margin was 25.5% and net income was $1.61 billion. -- "ST's third quarter outlook, at the mid-point, is for net revenues of $4.24 billion, increasing year-over-year by 32.6% and sequentially by 10.5%; gross margin is expected to be about 47.0%. -- "We will now drive the Company based on a plan for FY22 revenues in the range of $15.9 billion to $16.2 billion and gross margin to be about 47.0%."
Quarterly Financial Summary (U.S. GAAP)
(US$ m, except per share data) Q2 2022 Q1 2022 Q2 2021 Q/Q Y/Y -------------------------------- ------- ------- ------- ------- ------- Net Revenues $3,837 $3,546 $2,992 8.2% 28.3% -------------------------------- ------- ------- ------- ------- ------- Gross Profit $1,819 $1,655 $1,212 10.0% 50.2% -------------------------------- ------- ------- ------- ------- ------- Gross Margin 47.4% 46.7% 40.5% 70 bps 690 bps -------------------------------- ------- ------- ------- ------- ------- Operating Income $1,004 $877 $489 14.4% 105.4% -------------------------------- ------- ------- ------- ------- ------- Operating Margin 26.2% 24.7% 16.3% 150 bps 990 bps -------------------------------- ------- ------- ------- ------- ------- Net Income (a) $867 $747 $412 16.1% 110.4% -------------------------------- ------- ------- ------- ------- ------- Diluted Earnings Per Share ((b) () $0.92 $0.79 $0.44 16.5% 109.1% -------------------------------- ------- ------- ------- ------- -------
(a) Following a change in U.S. GAAP reporting guidance effective January 1, 2022, Q1 and Q2 2022 net income does not include phantom interests associated with convertible bonds. Prior periods have not been restated.
(b) Q1 and Q2 2022 diluted earnings per share includes the full dilutive effect of our outstanding convertible debt upon adoption on January 1, 2022 of the new U.S. GAAP reporting guidance. Prior periods have not been restated.
Second Quarter 2022 Summary Review
Net Revenues By Product Group (US$ Q2 Q1 Q2 m) 2022 2022 2021 Q/Q Y/Y ----------------------------------------- ------- ------- ------- ------- ------- Automotive and Discrete Group (ADG) 1,454 1,256 1,077 15.8% 35.1% ----------------------------------------- ------- ------- ------- ------- ------- Analog, MEMS and Sensors Group (AMS) 1,127 1,087 1,013 3.7% 11.3% ----------------------------------------- ------- ------- ------- ------- ------- Microcontrollers and Digital ICs Group (MDG) 1,251 1,198 897 4.4% 39.5% ----------------------------------------- ------- ------- ------- ------- ------- Others 5 5 5 - - ----------------------------------------- ------- ------- ------- ------- ------- Total Net Revenues 3,837 3,546 2,992 8.2% 28.3% ----------------------------------------- ------- ------- ------- ------- -------
Net revenues totaled $3.84 billion, a year-over-year increase of 28.3%. On a year-over-year basis, the Company recorded higher net sales in its product groups and all sub-groups. Year-over-year net sales to OEMs and Distribution increased 31.7% and 22.2%, respectively. On a sequential basis, net revenues increased 8.2%, 240 basis points above the mid-point of the Company's guidance. All product groups reported increases in net revenues on a sequential basis.
Gross profit totaled $1.82 billion, a year-over-year increase of 50.2%. Gross margin of 47.4% increased 690 basis points year-over-year, principally due to favorable pricing and improved product mix partially offset by inflation of manufacturing input costs and was 140 basis points above the mid-point of the Company's guidance.
Operating income increased 105.4% to $1.0 billion, compared to $489 million in the year-ago quarter. The Company's operating margin increased 990 basis points on a year-over-year basis to 26.2% of net revenues, compared to 16.3% in the 2021 second quarter.
By product group, compared with the year-ago quarter:
Automotive and Discrete Group (ADG):
-- Revenue increased in both Automotive and in Power Discrete. -- Operating profit increased by 251.1% to $359.2 million. Operating margin was 24.7% compared to 9.5%.
Analog, MEMS and Sensors Group (AMS):
-- Revenue increased in Analog, in MEMS and in Imaging. -- Operating profit increased by 42.1% to $268.4 million. Operating margin was 23.8% compared to 18.6%.
Microcontrollers and Digital ICs Group (MDG):
-- Revenue increased in both Microcontrollers and in RF Communications. -- Operating profit increased by 106.6% to $424.7 million. Operating margin was 34.0% compared to 22.9%
Net income increased to $867 million and diluted earnings per share to $0.92 compared to $412 million and $0.44, respectively, in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
Trailing 12 Months
------------- -------- -------- --------- --------------------------------
Q2 Q1 TTM
(US$ m) 2022 2022 Q2 2021 Q2 2022 Q2 2021 Change
------------- -------- -------- --------- --------- --------- ----------
Net cash
from
operating
activities 1,056 945 602 3,777 2,591 45.8%
------------- -------- -------- --------- --------- --------- ----------
Free cash
flow
(non-U.S.
GAAP) 230 82 125 1,046 873 19.8%
------------- -------- -------- --------- --------- --------- ----------
Capital expenditure payments, net of proceeds from sales, were $809 million in the second quarter. In the year-ago quarter, capital expenditures, net, were $438 million.
Inventory at the end of the second quarter was $2.31 billion, compared to $1.97 billion in the year-ago quarter. Day sales of inventory at quarter-end was 104 days compared to 101 days in the year-ago quarter.
Free cash flow (non-U.S. GAAP) was $230 million in the second quarter, compared to $125 million in the year-ago quarter.
In the second quarter, the Company paid cash dividends to its stockholders totaling $54 million and executed a $87 million share buy-back as part of its current share repurchase program.
ST's net financial position (non-U.S. GAAP) was $924 million at July 2, 2022 compared to $840 million at April 2, 2022 and reflected total liquidity of $3.44 billion and total financial debt of $2.52 billion.
Business Outlook
The Company's guidance, at the mid-point, for the 2022 third quarter is:
-- Net revenues are expected to be $4.24 billion, an increase of 10.5% sequentially, plus or minus 350 basis points; -- Gross margin of 47.0%, plus or minus 200 basis points; -- This outlook is based on an assumed effective currency exchange rate of approximately $1.09 = EUR1.00 for the 2022 third quarter and includes the impact of existing hedging contracts; and -- The third quarter will close on October 1, 2022.
Conference Call and Webcast Information
STMicroelectronics will conduct a conference call with analysts, investors and reporters to discuss its second quarter 2022 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 12, 2022.
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 the Company's consolidated financial statements prepared in accordance with U.S. GAAP.
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.
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 (such as inflation and
fluctuations in supply chains), which may impact production capacity and
end-market demand for our products;
-- 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, public health, labor, political, or
infrastructure conditions in the locations where we, our customers, or
our suppliers operate, including as a result of macroeconomic or regional
events, military conflicts, (including the military conflict between
Russia and the Ukraine), 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;
-- legal, political and economic uncertainty surrounding Brexit may be a
continued source of instability in international markets and currency
exchange rate volatility and may adversely affect business activity,
political stability and economic conditions 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;
-- 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 (including increasing costs resulting from
inflation);
-- 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 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, the effects of climate change, health
risks and epidemics such as the COVID-19 pandemic in locations where we,
our customers or our suppliers operate;
-- increased regulation and initiatives in our industry, including those
concerning climate change and sustainability matters and our commitment
to be carbon neutral by 2027;
-- potential loss of key employees and potential inability to recruit and
retain qualified employees as a result of the COVID-19 pandemic,
remote-working arrangements and the corresponding limitation on social
and professional interaction;
-- the duration and the severity of the global outbreak of COVID-19 may
continue to negatively impact the global economy in a significant manner
for an extended period of time, and could also materially adversely
affect our business and operating results;
-- 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 risks 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, 2021 as filed with the SEC on February 24, 2022. 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 press 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.
Unfavorable changes in the above or other risks or uncertainties listed under "Item 3. Key Information -- Risk Factors"
from time to time in our Securities and Exchange Commission filings, could have a material adverse effect on our business
and/or financial condition.
About STMicroelectronics
At ST, we are 48,000 creators and makers of semiconductor technologies mastering the semiconductor supply chain with state-of-the-art manufacturing facilities. An integrated device manufacturer, we work with more than 200,000 customers and thousands of partners to design and build products, solutions, and ecosystems that address their challenges and opportunities, and the need to support a more sustainable world. Our technologies enable smarter mobility, more efficient power and energy management, and the wide-scale deployment of the Internet of Things and connectivity. ST is committed to becoming carbon neutral by 2027. 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
MEDIA RELATIONS:
Alexis Breton
Corporate External Communications
Tel: + 33 6 59 16 79 08
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