STMicroelectronics Reports 2020 Second Quarter Financial Results
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STMicroelectronics Reports 2020 Second Quarter Financial Results

STMicroelectronics Reports 2020 Second Quarter Financial Results

Geneva, July 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 second quarter ended June 27, 2020. This press release also contains non-U.S. GAAP measures (see Appendix for additional information).

ST reported second quarter net revenues of $2.09 billion, gross margin of 35.0%, operating margin of 5.1%, and net income of $90 million or $0.10 diluted earnings per share.

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

     
                                          Quarterly Financial Summary (U.S. GAAP)

(US$ m, except per share data) Q2 2020 Q1 2020 Q2 2019 Q/Q Y/Y
Net Revenues $2,087 $2,231 $2,173 -6.5% -4.0%
Gross Profit $730 $846 $830 -13.8% -12.2%
Gross Margin 35.0% 37.9% 38.2% -290 bps -320 bps
Operating Income $106 $231 $196 -53.9% -45.8%
Operating Margin 5.1% 10.4% 9.0% -530 bps -390 bps
Net Income $90 $192 $160 -53.1% -43.7%
Diluted Earnings Per Share $0.10 $0.21 $0.18 -52.4% -44.4%

Second Quarter 2020 Summary Review

Net Revenues By Product Group (US$ m) Q2 2020 Q1 2020 Q2 2019 Q/Q Y/Y
Automotive and Discrete Group (ADG) 727 753 885 -3.5% -17.8%
Analog, MEMS and Sensors Group (AMS) 624 852 694 -26.8% -10.1%
Microcontrollers and Digital ICs Group (MDG) 733 623 591 17.7% 24.1%
Others 3 3 3 - -
Total Net Revenues 2,087 2,231 2,173 -6.5% -4.0%

  

Net revenues totaled $2.09 billion, representing a year-over-year decrease of 4.0%. On a year-over-year basis, the Company recorded lower sales in Imaging, Automotive, and MEMS, partially offset by higher sales in Microcontrollers, Digital, Analog and Power Discrete. Year-over-year sales to Distribution increased 9.7% and to OEMs decreased 9.7%. On a sequential basis, net revenues decreased 6.5%, 380 basis points better than the mid-point of the Company’s guidance. By product group, revenues sequentially increased in MDG while ADG and AMS decreased.

Gross profit totaled $730 million, representing a year-over-year decrease of 12.2%. Gross margin of 35.0% decreased 320 basis points year-over-year, mainly due to unsaturation charges, including the impact of COVID-19 workforce related restrictions, and price pressure. Second quarter gross margin was 40 basis points higher than the mid-point of the Company’s guidance.

Operating income decreased 45.8% to $106 million, compared to $196 million in the year-ago quarter. The Company’s operating margin decreased 390 basis points on a year-over-year basis to 5.1% of net revenues, compared to 9.0% in the 2019 second quarter.

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

Automotive and Discrete Group (ADG)

Analog, MEMS and Sensors Group (AMS):

Microcontrollers and Digital ICs Group (MDG):

Unused capacity charges are included under the group “Others”.

Net income and diluted earnings per share decreased to $90 million and $0.10, respectively, compared to $160 million and $0.18, respectively, in the year-ago quarter.

Cash Flow and Balance Sheet Highlights

        Trailing 12 Months
(US$ m) Q2 2020 Q1 2020 Q2 2019 Q2 2020 Q2 2019 TTM Change
Net cash from operating activities 387 399 324 1,990 1,694 17.5%
Free cash flow (non-U.S. GAAP) 28 113 (67) 772 343 125.1%

  

Capital expenditure payments, net of proceeds from sales, were $312 million in the second quarter. In the year-ago quarter, capital expenditures, net, were $372 million.

Inventory at the end of the quarter was $1.96 billion, up from $1.89 billion in the prior year quarter. Day sales of inventory at quarter-end was 129 days, same as in the prior year quarter.
Free cash flow (non-U.S. GAAP) was positive $28 million in the second quarter, compared to negative $67 million in the year-ago quarter.

In the second quarter, the Company paid cash dividends totaling $37 million and executed a $63 million share buy-back as part of its previously announced share repurchase program.

ST’s net financial position (non-U.S. GAAP) was $570 million at June 27, 2020 compared to $668 million at March 28, 2020 and reflected total liquidity of $2.62 billion and total financial debt of $2.05 billion.

Business Outlook

The Company’s guidance, at the mid-point, for the 2020 third quarter is:
 

Conference Call and Webcast Information

STMicroelectronics will conduct a conference call with analysts, investors and reporters to discuss its second quarter 2020 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 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:

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, 2019, as filed with the SEC on February 26, 2020. 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

At ST, we are 46,000 creators and makers of semiconductor technologies mastering the semiconductor supply chain with state-of-the-art manufacturing facilities. An independent device manufacturer, we work with our 100,000 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 5G technology. 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:
Nelly Dimey
Media Communications Director                                    
Tel: + 33 1 58 07 77 85
nelly.dimey@st.com

STMicroelectronics N.V.    
CONSOLIDATED STATEMENTS OF INCOME
 
 
(in millions of U.S. dollars, except per share data ($))    
     
  Three months ended
  June 27, June 29,
  2020 2019
  (Unaudited) (Unaudited)
     
Net sales   2,084   2,160
Other revenues   3   13
NET REVENUES   2,087   2,173
Cost of sales   (1,357)   (1,343)
GROSS PROFIT   730   830
Selling, general and administrative   (259)   (269)
Research and development   (373)   (381)
Other income and expenses, net   12   18
Impairment, restructuring charges and other related closure costs   (4)    (2)
Total operating expenses   (624)   (634)
OPERATING INCOME   106   196
Interest expense, net   (4)   -
Other components of pension benefit costs   (3)   (3)
Income (loss) on equity-method investments   -   -
INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTEREST   99   193
Income tax expense   (8)   (33)
NET INCOME   91   160
Net income attributable to noncontrolling interest   (1)   -
NET INCOME ATTRIBUTABLE TO PARENT COMPANY   90   160
     
EARNINGS PER SHARE (BASIC) ATTRIBUTABLE TO PARENT COMPANY STOCKHOLDERS   0.10   0.18
EARNINGS PER SHARE (DILUTED) ATTRIBUTABLE TO PARENT COMPANY STOCKHOLDERS   0.10   0.18
     
NUMBER OF WEIGHTED AVERAGE SHARES USED IN CALCULATING DILUTED EPS 911.1 901.7
     


STMicroelectronics N.V.    
CONSOLIDATED STATEMENTS OF INCOME    
(in millions of U.S. dollars, except per share data ($))    
     
  Six months ended
  June 27, June 29,
  2020 2019
  (Unaudited) (Unaudited)
     
Net sales   4,312   4,232
Other revenues   6   17
NET REVENUES   4,318   4,249
Cost of sales   (2,743)   (2,601)
GROSS PROFIT   1,575   1,648
Selling, general and administrative   (529)   (540)
Research and development   (748)   (749)
Other income and expenses, net   48   51
Impairment, restructuring charges and other related closure costs   (9)   (2)
Total operating expenses   (1,238)   (1,240)
OPERATING INCOME   337   408
Interest income (expense), net   (3)   2
Other components of pension benefit costs   (6)   (7)
Income (loss) on equity-method investments   -   1
INCOME BEFORE INCOME TAXES AND NONCONTROLLING  INTEREST    328   404
Income tax expense   (47)   (65)
NET INCOME   281   339
Net income attributable to noncontrolling interest   1   (1)
NET INCOME ATTRIBUTABLE TO PARENT COMPANY   282   338
     
EARNINGS PER SHARE (BASIC) ATTRIBUTABLE TO PARENT COMPANY STOCKHOLDERS   0.32   0.38
EARNINGS PER SHARE (DILUTED) ATTRIBUTABLE TO PARENT COMPANY STOCKHOLDERS   0.31   0.37
     
NUMBER OF WEIGHTED AVERAGE SHARES USED IN CALCULATING DILUTED EPS 913.9 902.3
     


       
STMicroelectronics N.V.      
CONSOLIDATED BALANCE SHEETS      
As at June 27, March 28, December 31,
In millions of U.S. dollars 2020 2020 2019
  (Unaudited) (Unaudited) (Audited)
ASSETS      
Current assets:      
Cash and cash equivalents 1,800 2,028 2,597
Restricted cash - 10 10
Short-term deposits 687 537 4
Marketable securities 134 135 133
Trade accounts receivable, net 1,171 1,294 1,380
Inventories 1,963 1,772 1,691
Other current assets 448 500 442
Total current assets 6,203 6,276 6,257
       
Goodwill 197 175 162
Other intangible assets, net 312 298 299
Property, plant and equipment, net 4,194 4,022 4,007
Non-current deferred tax assets 710 694 695
Long-term investments 11 11 11
Other non-current assets 535 454 437
  5,959 5,654 5,611
Total assets 12,162 11,930 11,868
       
LIABILITIES AND EQUITY      
Current liabilities:      
Short-term debt 879 171 173
Trade accounts payable 1,079 960 950
Other payables and accrued liabilities 829 856 831
Dividends payable to stockholders 119 6 58
Accrued income tax 69 63 52
Total current liabilities 2,975 2,056 2,064
       
Long-term debt 1,172 1,871 1,899
Post-employment benefit obligations 447 436 445
Long-term deferred tax liabilities 38 36 19
Other long-term liabilities 339 321 330
  1,996 2,664 2,693
Total liabilities 4,971 4,720 4,757
Commitment and contingencies      
Equity      
Parent company stockholders' equity      
Common stock (preferred stock: 540,000,000 shares authorized, not issued; common stock: Euro 1.04 nominal value, 1,200,000,000 shares authorized, 911,204,420 shares issued, 892,596,726 shares outstanding) 1,157 1,157 1,157
Capital surplus 3,061 3,029 2,992
Retained earnings 2,797 2,938 2,747
Accumulated other comprehensive income 481 410 475
Treasury stock (372) (390) (328)
Total parent company stockholders' equity 7,124 7,144 7,043
Noncontrolling interest 67 66 68
Total equity 7,191 7,210 7,111
Total liabilities and equity 12,162 11,930 11,868
       


       
STMicroelectronics N.V.      
       
SELECTED CASH FLOW DATA      
       
Cash Flow Data (in US$ millions) Q2 2020 Q1 2020 Q2 2019
       
Net Cash from operating activities   387   399   324
Net Cash used in investing activities   (509)   (821)   (391)
Net Cash used in financing activities   (117)   (143)   (123)
Net Cash decrease   (238)   (569)   (188)
       
Selected Cash Flow Data (in US$ millions) Q2 2020 Q1 2020 Q2 2019
       
Depreciation & amortization   223 211 212
Net payment for Capital expenditures   (312)   (266)   (372)
Dividends paid to stockholders   (37)   (53)   (53)
Change in inventories, net   (175)   (96)   (116)
       

                                                                                                             Appendix

                                                                                                       STMicroelectronics
                                                                                          Supplemental Financial Information

  Q2
 2020
Q1
 2020
Q4
 2019
Q3
 2019
Q2
 2019
Net Revenues By Market Channel (%)          
Total OEM 66% 75% 72% 72% 70%
Distribution 34% 25% 28% 28% 30%
           
€/$ Effective Rate 1.10 1.11 1.12 1.14 1.14
           
Product Group Data (US$ m)          
Automotive & Discrete Group (ADG)          
 - Net Revenues 727 753 924 894 885
 - Operating Income 16 23 113 76 73
Analog, MEMS & Sensors Group (AMS)          
 - Net Revenues 624 852 1,085 968 694
 - Operating Income 56 177 281 198 74
Microcontrollers & Digital ICs Group (MDG)          
 - Net Revenues 733 623 742 688 591
 - Operating Income 117 71 119 108 45
Others (a)          
 - Net Revenues 3 3 3 3 3
 - Operating Income (Loss) (83) (40) (53) (46) 4
Total          
 - Net Revenues 2,087 2,231 2,754 2,553 2,173
 - Operating Income 106 231 460 336 196


 

(a) Net revenues of Others includes revenues from sales assembly services and other revenue. Operating income (loss) of Others includes items such as unused capacity charges, including reduced manufacturing activity due to COVID-19, impairment, restructuring charges and other related closure costs, management reorganization costs, phase out and start-up costs, and other unallocated expenses such as: strategic or special research and development programs, certain corporate-level operating expenses, patent claims and litigations, and other costs that are not allocated to product groups, as well as operating earnings of other products. Others includes:


 

(US$ m) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019
Unused Capacity Charges 64 34 29 28 7
Impairment & Restructuring Charges 4 5 3 - 2


 

(Appendix – continued)
STMicroelectronics
Supplemental Non-U.S. GAAP Financial Information
U. S. GAAP – Non-U.S. GAAP Reconciliation

The supplemental non-U.S. GAAP information presented in this press release is unaudited and subject to inherent limitations. Such non-U.S. GAAP information is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for U.S. GAAP measurements. Also, our supplemental non-U.S. GAAP financial information may not be comparable to similarly titled non-U.S. GAAP measures used by other companies. Further, specific limitations for individual non-U.S. GAAP measures, and the reasons for presenting non-U.S. GAAP financial information, are set forth in the paragraphs below. To compensate for these limitations, the supplemental non-U.S. GAAP financial information should not be read in isolation, but only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP.

The Company believes that these non-U.S. GAAP financial measures provide useful information for investors and management because they offer, when read in conjunction with the Company’s U.S. GAAP financials, (i) the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results, (ii) the ability to better identify trends in the Company’s business and perform related trend analysis, and (iii)  to facilitate a comparison of the Company’s results of operations against investor and analyst financial models and valuations, which may exclude these items.

Net Financial Position (non-U.S. GAAP measure)

Net Financial Position, not a U.S. GAAP measure, represents the difference between our total liquidity and our total financial debt. Our total financial resources include cash and cash equivalents, marketable securities, restricted cash and short-term deposits, and our total financial debt includes short-term debt, including bank overdrafts, and long-term debt, as represented in our Consolidated Balance Sheets.

We believe our Net Financial Position provides useful information for investors and management because it gives evidence of our global position either in terms of net indebtedness or net cash by measuring our capital resources based on cash and cash equivalents, restricted cash, short-term deposits and marketable securities and the total level of our financial indebtedness. In addition, our definition of Net Financial Position may differ from definitions used by other companies and therefore comparability may be limited.

(US$ m) Jun 27 2020 Mar 28 2020 Dec 31 2019 Sep 28 2019 Jun 29 2019
Cash and cash equivalents 1,800 2,028 2,597 2,345 2,119
Restricted cash - 10 10 60 60
Short term deposits 687 537 4 - -
Marketable securities 134 135 133 133 333
Total liquidity 2,621 2,710 2,744 2,538 2,512
Short-term debt (879)(1) (171) (173) (171) (174)
Long-term debt (2) (1,172) (1,871) (1,899) (2,019) (2,030)
Total financial debt (2,051) (2,042) (2,072) (2,190) (2,204)
Net Financial Position 570 668 672 348 308

(1) Tranche A of our 2017 convertible bonds was reclassified to short-term debt in line with contractual terms.

(2) Long-term debt contains standard conditions but does not impose minimum financial ratios. Also, committed credit facilities for $1.1 billion equivalent, including a €500 million long-term line with the European Investment Bank, are currently undrawn.

(Appendix – continued)
STMicroelectronics

Free Cash Flow (non-U.S. GAAP measure)

Free Cash Flow, which is a non-U.S. GAAP measure, is defined as (i) net cash from operating activities plus (ii) net cash used in investing activities, excluding payment for purchases of (and proceeds from matured) marketable securities and net investment in short-term deposits, which are considered as temporary financial investments. The result of this definition is ultimately net cash from operating activities plus payment for purchase and proceeds from sale of tangible, intangible and financial assets, proceeds received in the sale of businesses and cash paid for business acquisitions.

We believe Free Cash Flow provides useful information for investors and management because it measures our capacity to generate cash from our operating and investing activities to sustain our operations. Free Cash Flow does not represent total cash flow since it does not include the cash flows generated by or used in financing activities.

Free Cash Flow reconciles with the total cash flow and the net cash increase (decrease) by including the payment for purchases of (and proceeds from matured) marketable securities and net investment in short-term deposits, the net cash from (used in) financing activities and the effect of changes in exchange rates. In addition, our definition of Free Cash Flow may differ from definitions used by other companies.

(US$ m) Q2
 2020
Q1
 2020
Q4
 2019
Q3
 2019
Q2
 2019
Net cash from operating activities 387 399 775 429 324
Net cash used in investing activities (509) (821) (314) (59) (391)
Payment for purchase of (and proceeds from matured) marketable securities and net investment in short-term deposits 150 535 -  

(200)
 

-
Free Cash Flow 28 113 461 170 (67)

 

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