STMicroelectronics Announces Third Quarter 2021 Financial Results

China, October 29, 2021 – STMicroelectronics (ST; NYSE: STM), a global leader in semiconductors serving multiple Electronic applications Third quarter earnings on October 2, 2021. This press release also contains non-GAAP financial data (see the Appendix for details).

STMicroelectronics’ third-quarter net revenue was $3.2 billion, gross profit margin was 41.6%, operating profit margin was 18.9%, net profit was $474 million, and diluted earnings per share was 0.51 yuan.

Jean-Marc Chery, President and CEO of STMicroelectronics, commented:

“Third quarter net revenue was largely in line with the midpoint of our business outlook, increasing 6.9% sequentially and 19.9% ​​year-over-year. Revenue growth was driven by strong global market demand and our customer partnership program in the personal electronics market. Secondly, due to the impact of the epidemic, the production reduction in our Malaysian factory was more severe than expected, resulting in lower-than-expected revenue from automotive products, offsetting some of the increase in overall revenue.

“Gross margin in the third quarter was 41.6%, 60 basis points higher than the median forecast. Operating margin improved to 18.9% in the third quarter from 12.3% a year earlier, and net income nearly doubled to $474 million.

“Net revenue for the first nine months increased by 31.8% year-on-year, with sales growth in all product segments except the RF Communications sub-business. Operating margin was 16.7% and net profit was $1.25 billion.

“ST’s fourth-quarter median net revenue is expected to be $3.4 billion, up 6.3% sequentially. Gross margin is expected to be approximately 43.0%.

“For full year 2021, we expect median net revenue to be approximately $12.6 billion, up 23.3% year over year. This year’s revenue growth plan reflects strong demand in all end markets we serve, and our client engagement program is very active.

STMicroelectronics Announces Third Quarter 2021 Financial Results

Net revenue totaled $3.2 billion, up 19.9% ​​year over year. Compared to the same period last year, all of the company’s product segments, with the exception of the RF communications sub-business, achieved year-over-year net sales growth. Revenue from the OEM and agency channels increased by 9.9% and 48.6% year-on-year, respectively. Net revenue rose 6.9% sequentially in the third quarter, roughly in line with the midpoint of the company’s guidance. Net income of the AMS and MDG divisions improved month-on-month; due to the impact of the epidemic, the production reduction in our Malaysian manufacturing plant was more severe than expected, resulting in a decline in the revenue of the ADG product division.

Gross profit totaled $1.33 billion, up 38.7% year over year. Gross profit margin was 41.6%, an increase of 560 basis points year-on-year, mainly due to improved product mix, improved manufacturing efficiency, optimized product prices, and lower idle capacity expenses, partially offset by the adverse impact of foreign exchange factors after deducting currency hedging. Third-quarter gross margin was 60 basis points above the company’s median guidance, primarily due to product mix improvements.

Operating profit increased 84.0% to $605 million, compared to $329 million in the same period last year. The company’s operating margin increased 660 basis points year over year to 18.9% of net revenue, compared to 12.3% in the third quarter of 2020.

Product segment financial results year-on-year:

Automotive and Discrete Products Group (ADG)

· Sales of automotive and power discrete devices both increased.

· Operating profit increased 120.6% to a total of $108 million. Operating profit margin was 10.8%, compared with 5.8% in the same period last year.

Analog Devices, MEMS and Sensor Products Division (AMS)

· Sales revenue growth of analog, MEMS and imaging products.

· Operating profit increased 73.8% to a total of $304 million. Operating profit margin was 24.0%, compared with 17.5% in the same period last year.

Microcontroller and Digital IC Products Group (MDG)

· Microcontroller revenue growth, RF communications revenue declines.

· Operating profit increased 54.9% to a total of $220 million. Operating profit margin was 23.9%, compared with 17.4% in the same period last year.

Net income and diluted earnings per share were $474 million and $0.51, respectively, compared with $242 million and $0.26 a year earlier.

STMicroelectronics Announces Third Quarter 2021 Financial Results

Inventories at the end of the third quarter were $1.97 billion, up from $1.93 billion a year earlier. Quarter-end inventory turnover days were 96 days, down from 103 days a year earlier.

During the quarter, STMicroelectronics exercised its redemption option to early redeem the 2024 Class B convertible notes issued in 2017. As a result, the bondholders exercised conversion rights on the Class B convertible bonds totaling $750 million in principal. In the third quarter, STMicroelectronics fully settled the Class B convertible bonds, delivered about 5.8 million treasury shares, and paid $1.26 billion in cash, including $750 million in principal.

Free cash flow (non-GAAP) in the third quarter was $420 million, compared to -$25 million in the same period last year.

In the third quarter, the company paid a cash dividend of $55 million and repurchased $87 million of company stock in accordance with a previously announced stock repurchase program.

ST’s net financial position (non-GAAP) was $798 million on October 2, 2021, compared to $1.08 billion on July 3, 2021; total current assets were $3.46 billion and total liabilities were $2.66 billion One hundred million U.S. dollars.

Business Outlook

Q4 2021 median company guidance:

· Net revenue is expected to be $3.4 billion, an increase of approximately 6.3% sequentially, plus or minus 350 basis points;

· Gross profit margin is approximately 43.0%, plus or minus 200 basis points;

· This forward-looking assumes an effective USD/EUR exchange rate of approximately USD 1.18 = EUR 1.00 in Q4 2021, including the impact of current hedging contracts.

The closing date for the fourth quarter is December 31, 2021.

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