STMicroelectronics N.V. Q1 2019 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated April 24, 2019, reports the unaudited U.S. GAAP financial results for STMicroelectronics N.V. for the first quarter ended March 30, 2019. The company is a global semiconductor leader serving Industrial, Automotive, and Personal Electronics markets. The reporting period reflects softened market dynamics and seasonal trends.
Key Financial Metrics
| Metric | Q1 2019 | Q4 2018 | Q1 2018 |
|---|---|---|---|
| Net Revenues | $2.08 billion | $2.65 billion | $2.23 billion |
| Gross Margin | 39.4% | 40.0% | 39.9% |
| Operating Income | $211 million | $443 million | $269 million |
| Operating Margin | 10.2% | 16.8% | 12.1% |
| Net Income | $178 million | $418 million | $239 million |
| Diluted EPS | $0.20 | $0.46 | $0.26 |
| Free Cash Flow (Non-GAAP) | ($67) million | $363 million | $95 million |
| Net Financial Position (Non-GAAP) | $510 million | $686 million | $522 million |
| Total Liquidity | $2.70 billion | $2.60 billion | $2.23 billion |
| Total Financial Debt | $2.19 billion | $1.91 billion | $1.71 billion |
Material Changes vs. Prior Periods
- Revenue Decline: Net revenues decreased 21.6% sequentially and 6.7% year-over-year (YoY). All product groups declined sequentially.
- Profitability Compression: Operating income fell 52.4% sequentially and 21.6% YoY. Operating margin contracted 660 basis points sequentially and 190 basis points YoY.
- Product Group Performance:
- Automotive and Discrete (ADG): Revenue down 6.6% sequentially but up 10.5% YoY. Operating profit increased 6.2% YoY.
- Analog, MEMS and Sensors (AMS): Revenue down 44.1% sequentially and 15.7% YoY. Operating profit dropped 33.4% YoY.
- Microcontrollers and Digital ICs (MDG): Revenue down 10.5% sequentially and 17.7% YoY. Operating profit dropped 43.6% YoY.
- Cash Flow Impact: Free cash flow turned negative ($67 million) due to a $76 million cash outflow for the acquisition of 55% of Norstel's share capital and increased inventory levels.
- Inventory Build: Inventory rose to $1.77 billion (up from $1.56 billion in Q4), resulting in days sales of inventory increasing to 124 days from 88 days.
Guidance, Outlook, and Management Commentary
- Q2 2019 Outlook: Management expects net revenues to increase approximately 2.4% sequentially (plus or minus 350 basis points) and a gross margin of about 38.5% (plus or minus 200 basis points).
- Full Year 2019 Guidance: Net revenues expected in the range of $9.45 billion to $9.85 billion, anticipating strong sequential growth in the second half across Industrial, Automotive, and Personal Electronics.
- Capital Expenditures: 2019 CAPEX plan moderated to $1.1 - $1.2 billion, down from the initial $1.2 - $1.3 billion.
- Dividends and Buybacks: Proposed cash dividend of $0.24 per share for 2019. In Q1, the company paid $54 million in dividends and executed a $61 million share buyback.
- Risks: Key risks include global trade policies/tariffs, macro-economic trends, customer demand volatility, currency fluctuations (specifically USD/EUR), and supply chain constraints.
Investor Verification Checklist
- Verify the sustainability of the inventory build (124 days) and its impact on future working capital requirements.
- Confirm the execution of the Norstel acquisition and its integration timeline.
- Monitor the sequential revenue growth in Q2 to validate the return to growth trajectory.
- Assess the impact of currency exchange rates (assumed $1.14 = €1.00 for Q2) on future margins.
- Review the specific drivers for the significant decline in the AMS and MDG product groups.