STMicroelectronics N.V. Q1 2024 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated April 25, 2024, reports the unaudited U.S. GAAP financial results for STMicroelectronics N.V. for the first quarter ended March 30, 2024. The company is a global semiconductor leader serving automotive, industrial, and personal electronics markets. Effective Q1 2024, the company adopted a new organizational structure, changing segment reporting from three to four reportable segments.
Key Financial Metrics
| Metric | Q1 2024 | Q1 2023 | Q4 2023 |
|---|---|---|---|
| Net Revenues | $3.47 billion | $4.25 billion | $4.28 billion |
| Gross Margin | 41.7% | 49.7% | 45.5% |
| Operating Income | $551 million | $1.20 billion | $1.02 billion |
| Operating Margin | 15.9% | 28.3% | 23.9% |
| Net Income | $513 million | $1.04 billion | $1.08 billion |
| Diluted EPS | $0.54 | $1.10 | $1.14 |
| Free Cash Flow (Non-GAAP) | $(134) million | $206 million | $652 million |
| Net Capex (Non-GAAP) | $967 million | $1.09 billion | $798 million |
| Total Liquidity | $6.24 billion | $4.52 billion | $6.08 billion |
| Total Financial Debt | $3.11 billion | $2.66 billion | $2.93 billion |
Material Changes vs. Prior Periods
- Revenue Decline: Net revenues decreased 18.4% year-over-year (YoY) and 19.1% sequentially. The decline was driven by lower demand in Automotive and Industrial sectors, partially offset by higher revenues in Personal Electronics.
- Margin Compression: Gross margin decreased 800 basis points YoY to 41.7%, attributed to sales price/mix changes, unused capacity charges, and reduced manufacturing efficiencies. Operating margin fell 1,240 basis points YoY to 15.9%.
- Profitability Drop: Net income decreased 50.9% YoY to $513 million. Operating income dropped 54.1% YoY.
- Cash Flow Shift: Free cash flow turned negative at $(134) million in Q1 2024 compared to positive $206 million in Q1 2023, primarily due to high capital expenditures ($967 million) and lower operating cash flow.
- Segment Performance:
- MCU Segment: Revenue fell 34.4% YoY, primarily due to a decrease in General Purpose (GP) MCU.
- AM&S Segment: Revenue fell 13.1% YoY, driven by decreases in MEMS and Imaging.
- P&D Segment: Revenue fell 9.8% YoY, mainly due to a decrease in Discrete products.
Guidance, Outlook, and Risks
Revised FY24 Outlook: Management revised the full-year 2024 revenue guidance to a range of $14 billion to $15 billion, with an expected gross margin in the low 40s. Net Capex for FY24 is maintained at approximately $2.5 billion.
Q2 2024 Guidance (Mid-point):
- Net revenues: $3.2 billion (down 26.0% YoY, down 7.6% sequentially).
- Gross margin: Approximately 40%.
Management Commentary: CEO Jean-Marc Chery noted that Automotive semiconductor demand has entered a deceleration phase and the Industrial correction has accelerated. Q1 results came in below the midpoint of the previous business outlook range.
Risks and Contingencies: The filing highlights risks including global trade policy changes, macroeconomic trends, supply chain fluctuations, customer demand variability, geopolitical conflicts, and cybersecurity threats. Inventory levels remain elevated at $2.69 billion (122 days sales of inventory).
Key Investor Verification Points
- Inventory Levels: Verify the trajectory of inventory reduction given the 122 days sales of inventory and the ongoing industrial correction.
- Automotive Demand: Monitor the severity and duration of the deceleration in Automotive semiconductor demand, which significantly impacted Q1 results.
- Capital Expenditure Efficiency: Assess the impact of the $2.5 billion FY24 Capex plan on future margins and free cash flow generation.
- Segment Mix: Track the recovery of the MCU segment, which saw the steepest revenue decline (34.4% YoY) due to GP MCU weakness.
- Unused Capacity Charges: Review the reconciliation of non-GAAP measures to understand the specific impact of unused capacity charges on operating income.