• Q3 net revenues $2.55 billion; gross margin 37.9%; operating margin 13.1%; net income $302 million
  • YTD net revenues $6.80 billion; gross margin 38.4%; operating margin 10.9%; net income $640 million
  • Business outlook at mid-point: Q4 net revenues up about 5.0% Q/Q and gross margin of about 38.2%

STMicroelectronics, a global semiconductor leader serving customers across the spectrum of electronics applications, reported U.S. GAAP financial results for the third quarter ended September 28, 2019. This press release also contains non-U.S. GAAP measures.

ST reported third quarter net revenues of $2.55 billion, gross margin of 37.9%, operating margin of 13.1%, and net income of $302 million or $0.34 diluted earnings per share.

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

  • “Third quarter net revenues grew 17.5% sequentially, above the mid-point of our guidance of 15.3%, driven by engaged customer programs and new products in, as expected, a soft legacy automotive and industrial market.
  • “Our third quarter operating margin was 13.1% and we returned to positive free cash flow while investing in key programs for our growth over the mid-term.
  • “ST’s fourth quarter outlook, at the mid-point, is for net revenues to grow sequentially about 5.0%, translating into year-over-year growth of about 1.2%; gross margin is expected to be about 38.2%, including about 120 basis points of unsaturation charges.
  • “For the full year 2019, we expect net revenues at the mid-point to be about $9.48 billion, accompanied by a double-digit operating margin performance.”

Quarterly Financial Summary (U.S. GAAP)

ST Q3

Third Quarter 2019 Summary Review

ST Q3 2

Net revenues totaled $2.55 billion. On a sequential basis revenues increased 17.5%, 220 basis points better than the mid-point of the Company’s guidance. On a year-over-year basis, third quarter net revenues increased 1.2% as the Company recorded higher sales in Imaging, Analog, Power Discrete and MEMS largely offset by lower Digital ICs, Automotive and Microcontrollers sales. On a year-over-year basis, sales to OEMs increased 7.2%, while Distribution decreased 11.6%.

Gross profit totaled $967 million, representing a year-over-year decrease of 3.6%. Gross margin of 37.9% decreased 190 basis points year-over-year, mainly impacted by price pressure and unsaturation charges. Third quarter gross margin was 40 basis points higher than the mid-point of the Company’s guidance, mainly due to a lower level of unsaturation charges. Third quarter gross margin includes about 110 basis points of unsaturation charges.

Operating income decreased 15.6% to $336 million, compared to $398 million in the year-ago quarter. The Company’s operating margin decreased 270 basis points on a year-over-year basis to 13.1% of net revenues, compared to 15.8% in the 2018 third quarter.

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

Automotive and Discrete Group (ADG):

  • Revenue increased in Power Discrete and decreased in Automotive.
  • Operating profit decreased by 34.5% to $76 million. Operating margin was 8.5% compared to 12.8%.

Analog, MEMS and Sensors Group (AMS):

  • Revenue increased in Imaging, Analog and MEMS.
  • Operating profit increased by 26.1% to $198 million. Operating margin was 20.5% compared to 17.5%.

Microcontrollers and Digital ICs Group (MDG):

  • Revenue decreased in both Microcontrollers and Digital ICs.
  • Operating profit decreased by 9.2% to $108 million. Operating margin was 15.7% compared to 16.6%.

Net income and diluted earnings per share decreased to $302 million and $0.34, respectively, compared to $369 million and $0.41, respectively, in the year-ago quarter.

Cash Flow and Balance Sheet Highlights

ST Q3 3

Capital expenditure payments, net of proceeds from sales, were $244 million in the third quarter and $937 million for the year-to-date period. In the year-ago quarter, capital expenditures, net, were $242 million.

Inventory at the end of the quarter was $1.79 billion, down from $1.89 billion in the prior quarter. Day sales of inventory at quarter-end was 100 days compared to 129 days in the prior quarter.

Free cash flow (non-U.S. GAAP) was $170 million in the third quarter and $36 million for the year-to-date period.

In the third quarter, the Company paid cash dividends totaling $54 million and executed a $62 million share buy-back as part of its ongoing program.

ST’s net financial position (non-U.S. GAAP) was $348 million at September 28, 2019 compared to $308 million at June 29, 2019 and reflected total liquidity of $2.54 billion and total financial debt of $2.19 billion.

Business Outlook

The Company’s guidance for the 2019 fourth quarter is:

  • Net revenues are expected to increase about 5.0% sequentially, plus or minus 350 basis points;
  • Gross margin of about 38.2%, plus or minus 200 basis points;
  • This outlook is based on an assumed effective currency exchange rate of approximately $1.12 = €1.00 for the 2019 fourth quarter and includes the impact of existing hedging contracts.
  • The fourth quarter will close on December 31, 2019.