- Net Revenues: $3.23 billion for Q2 2024, a decrease of 25.3% year-over-year and 6.7% sequentially.
- Gross Margin: 40.1% for Q2 2024, down from 49% year-over-year.
- Operating Margin: 11.6% for Q2 2024, down from 26.5% year-over-year.
- Net Income: $353 million for Q2 2024, a decrease of 64.8% year-over-year.
- Earnings Per Share (EPS): $0.38 for Q2 2024, down from $1.06 year-over-year.
- Net Cash from Operating Activities: $702 million for Q2 2024, down from $1.31 billion year-over-year.
- Net CapEx: $528 million for Q2 2024, down from $1.07 billion year-over-year.
- Free Cash Flow: $159 million for Q2 2024, down from $209 million year-over-year.
- Inventory: $2.81 billion at the end of Q2 2024, compared to $3.05 billion year-over-year.
- Days Sales of Inventory: 130 days at the end of Q2 2024, compared to 122 days in the previous quarter and 126 days year-over-year.
- Dividends Paid: $73 million in Q2 2024.
- Share Buyback: $88 million in Q2 2024, completing a $1.04 billion share repurchase program.
- Net Financial Position: $3.2 billion as of June 29, 2024, with total liquidity of $6.29 billion and total financial debt of $3.09 billion.
- Q3 2024 Revenue Outlook: Approximately $3.25 billion, a year-over-year decline of 26.7% and a sequential growth of 0.6%.
- Q3 2024 Gross Margin Outlook: About 38%, impacted by 350 basis points of unused capacity charges.
- Full-Year 2024 Revenue Outlook: $13.2 billion to $13.7 billion, a decline of about 22% at the midpoint compared to 2023.
- Full-Year 2024 Gross Margin Outlook: About 40%, impacted by 270 basis points of unused capacity charges.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- STMicroelectronics NV (STM, Financial) reported Q2 2024 net revenues of $3.23 billion, which were above the midpoint of their business outlook range.
- The company announced a new share buyback plan totaling up to $1.1 billion to be executed within a three-year period.
- STMicroelectronics NV (STM) continues to execute its strategy in automotive, with multiple wins in power discrete technologies and a long-term silicon carbide supply agreement with Geely Auto.
- The company is investing in a new high-volume 200mm silicon carbide manufacturing facility in Catania, Italy, supported by EUR2 billion from the State of Italy under the European Union Chips Act.
- STMicroelectronics NV (STM) is focusing on Edge AI enablement, launching the ST Edge AI Suite to simplify and accelerate Edge AI application development.
Negative Points
- Q2 2024 net revenues decreased 25.3% year-over-year, driven by declines in industrial and automotive segments.
- Gross margin decreased to 40.1% from 49% year-over-year, and operating margin decreased to 11.6% from 26.5%.
- Net income for Q2 2024 decreased 64.8% to $353 million compared to the same quarter last year.
- Customer orders for industrial did not improve as expected, and automotive demand declined, leading to a revised lower revenue forecast for the full year 2024.
- Inventory levels remain high, with days sales of inventory at 130 days, indicating slower inventory turnover.
Q & A Highlights
Q: Could you update us on the pricing environment for industrial and automotive sectors?
A: The pricing environment remains consistent with last quarter. There is some pressure, particularly in industrial, where prices are in the mid-single digits, while automotive remains in the low single digits.
Q: How are you addressing overcapacity in terms of CapEx and manufacturing ramp-up?
A: We are adjusting working hours in manufacturing and cutting discretionary costs. We confirm a CapEx of $2.5 billion for the year, focusing on converting to 12-inch wafers and expanding silicon carbide production.
Q: Why is the industrial downturn sharper for STMicroelectronics compared to peers?
A: Our wide product portfolio and exposure to short-cycle businesses, which have fluctuated significantly, have led to a longer inventory correction period. Additionally, our non-cancelable order policy until March 2023 contributed to higher inventory levels.
Q: What is happening in the automotive sector, and what are your expectations for the full year?
A: Automotive demand declined due to reduced consignment stock pull-outs and lower forecasts from Tier 1 suppliers. We expect a 4% growth in H2, driven by components related to electric vehicles, despite a lower-than-expected increase in silicon carbide revenue.
Q: Can you provide visibility on the engaged customer program and expectations for the second half?
A: We exceeded Q2 revenue guidance due to personal electronics and our main customer. Q3 has a solid forecast, but Q4 is expected to decrease. The content of ST in our main customer's devices will increase starting H2 2025.
Q: How should we model OpEx for Q3 and the rest of 2024?
A: For Q3, we estimate OpEx between $905 million and $915 million. For the full year, we expect a modest increase in expenses compared to last year, with a positive impact from seasonal vacation in Europe.
Q: What are the revenue dynamics for Q3 by divisions or verticals?
A: Automotive is expected to grow 4% sequentially, industrial to decrease by 17%, personal electronics to grow by 17%, and communication equipment and computer peripherals to decrease by 8%. By segment, analog, MEMS, and sensors will be flat, power and discrete will increase by 12.9%, MCUs will slightly increase by 1.3%, and digital and RF will decrease by 17.8%.
Q: Is it prudent to maintain high CapEx levels given the current downturn?
A: We are committed to converting to 300mm for silicon-based technology and 200mm for silicon carbide. We are assessing the baseline to understand the speed of revenue recovery and will adjust CapEx levels accordingly.
Q: How are you addressing geopolitical risks and the need for local capacity in the US?
A: We are building an ecosystem in China and believe our European-based manufacturing is adequate for the US market. We are open to partnerships but do not intend to build a new fab in the US.
Q: What is the status of channel inventory and its impact on the rest of the year?
A: Channel inventory levels remain similar to Q1, with no significant improvement. We expect mild improvement in Q3 and more material improvement in Q4. Inventory in our balance sheet is expected to decrease in Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
