STMicroelectronics Reports 2023 Second Quarter Financial Results

• Q2 net revenues $4.33 billion; gross margin 49.0%; operating margin 26.5%; net income $1.00 billion
• H1 net revenues $8.57 billion; gross margin 49.3%; operating margin 27.4%; net income $2.05 billion
• Business outlook at mid-point: Q3 net revenues of $4.38 billion and gross margin of 47.5%

STMicroelectronics, a global semiconductor leader serving customers across the spectrum of electronics applications, reported U.S. GAAP financial results for the second quarter ended July 1, 2023. This press release also contains non-U.S. GAAP measures (see Appendix for additional information).

ST reported second-quarter net revenues of $4.33 billion, a gross margin of 49.0%, operating margin of 26.5%, and net income of $1.00 billion or $1.06 diluted earnings per share.

Jean-Marc Chery, STMicroelectronics President & CEO, commented:

• “Q2 net revenues of $ 4.33 billion came in above the midpoint of our business outlook range, and Q2 gross margin of 49.0% was in line with guidance.”
• “Q2 net revenues increased 12.7% year-over-year. The revenue performance continued to be driven by growth in Automotive and Industrial, partially offset by lower revenues in Personal Electronics.”
• “On a year-over-year basis, gross margin increased to 49.0% from 47.4%, operating margin increased to 26.5%from 26.2% and net income increased 15.5% to $1.00 billion.”
• “First half net revenues increased 16.1% year-over-year, driven by growth in all product sub-groups except the Analog and MEMS sub-groups. Operating margin was 27.4% and net income was $2.05 billion.”
• “Our third quarter business outlook, at the mid-point, is for net revenues of $4.38 billion, increasing year-over-year by 1.2% and increasing sequentially by 1.1%; gross margin is expected to be about 47.5%.”
• “We will drive the Company based on a plan for FY23 revenues of $17.4 billion, plus or minus $150 million, and a gross margin exceeding 48.0%.”

Quarterly Financial Summary (U.S. GAAP)

Second Quarter 2023 Summary Review

Net revenues totaled $4.33 billion, representing a year-over-year increase of 12.7%. On a year-over-year basis, ADG and MDG revenues increased 34.4% and 13.0%, respectively, while AMS decreased 15.7%. Year-over-year net sales to OEMs and Distribution increased 9.8% and 18.3%, respectively. On a sequential basis, net revenues increased 1.9%, 110 basis points better than the mid-point of the Company’s guidance. ADG and MDG both reported an increase in net revenues on a sequential basis, while AMS decreased, as expected.

Gross profit totaled $2.12 billion, representing a year-over-year increase of 16.5%. Gross margin of 49.0% increased 160 basis points year-over-year, mainly due to product mix, favorable pricing, positive currency effects, net of hedging, partially offset by higher manufacturing costs.

Operating income increased 14.2% to $1.15 billion, compared to $1.00 billion in the year-ago quarter. In the second quarter of 2023, net operating expenses included negative non-recurring non-cash items amounting to $34 million. The Company’s operating margin increased 30 basis points on a year-over-year basis to 26.5% of net revenues, compared to 26.2% in the 2022 second quarter.

By product group, compared with the year-ago quarter:

Automotive and Discrete Group (ADG):

• Revenue increased for both Automotive and Power Discrete.
• Operating profit increased by 73.8% to $624 million. Operating margin was 31.9% compared to 24.7%.

Analog, MEMS, and Sensors Group (AMS):

• Revenue decreased in Analog, in Imaging, and in MEMS.
• Operating profit decreased by 48.3% to $139 million. Operating margin was 14.8% compared to 24.1%.

Microcontrollers and Digital ICs Group (MDG):

• Revenue increased for both Microcontrollers and RF Communications.
• Operating profit increased by 19.0% to $505 million. Operating margin was 35.4% compared to 33.6%.

Net income and diluted earnings per share increased to $1.00 billion and $1.06 respectively, compared to $0.87 billion and $0.92 respectively, in the year-ago quarter.

Cash Flow and Balance Sheet Highlights

Net cash from operating activities was $1.31 billion in the second quarter compared to $1.06 billion in the year-ago quarter.

Capital expenditure payments, net of proceeds from sales, capital grants and other contributions, were $1.07 billion in the second quarter. In the year-ago period, capital expenditures, net, were $0.81 billion.

Free cash flow (non-U.S. GAAP) was $209 million compared to $230 million in the year-ago quarter.

Inventory at the end of the second quarter was $3.05 billion, compared to $2.31 billion in the year-ago quarter. Days sales of inventory at quarter-end was 126 days compared to 104 days in the year-ago quarter.

In the second quarter, the Company paid cash dividends to its stockholders totaling $50 million and executed a $86 million share buy-back as part of its current share repurchase program.

ST’s net financial position (non-U.S. GAAP) was $1.91 billion as of July 1, 2023, compared to $1.86 billion as of April 1, 2023, and reflected total liquidity of $4.56 billion and total financial debt of $2.65 billion.

Corporate Developments

During the quarter, Orio Bellezza, President, Quality, Manufacturing, Technology and Supply Chain, and Member of the Company’s Executive Committee, announced his retirement from the Company.  Mr. Bellezza will remain Managing Director of the Company’s Italian subsidiary, STMicroelectronics Srl, until the expiration of his mandate as member of its Board of Directors, which will occur following shareholder approval of its 2023 financial statements.

Fabio Gualandris, the Company’s Executive Vice President, Head of Back-End Manufacturing & Technology, and Deputy to Mr. Bellezza, is appointed President, Quality, Manufacturing, and Technology. Upon the proposal of the Company’s President & CEO, Jean-Marc Chery, the Company’s Supervisory Board approved the appointment of Mr. Gualandris to the Company’s Executive Committee.

Business Outlook

The Company’s guidance, at the mid-point, for the 2023 third quarter is:

• Net revenues are expected to be $ 4.38 billion, an increase of 1.1% sequentially, plus or minus 350 basis points.
• Gross margin of 47.5%, plus or minus 200 basis points.
• This outlook is based on an assumed effective currency exchange rate of approximately $1.10= €1.00 for the 2023 third quarter and includes the impact of existing hedging contracts.
• The third quarter will close on September 30, 2023.