STMicroelectronics reported U.S. GAAP financial results for the second quarter ended July 3, 2021. This press release also contains non-U.S. GAAP measures (see Appendix for additional information).
ST reported second quarter net revenues of $2.99 billion, gross margin of 40.5%, operating margin of 16.3%, and net income of $412 million or $0.44 diluted earnings per share.
Jean-Marc Chery, STMicroelectronics President & CEO, commented:
· “Q2 net revenues and gross margin came in at the high-end of our business outlook range driven by continued strong demand globally.
· “On a year-over-year basis, Q2 net revenues increased 43.4%. Q2 gross margin of 40.5% and operating margin of 16.3% improved 550 and 1,120 basis points, respectively, and net income increased 357.2% to $412 million.
· “First half net revenues increased 39.1% year-over-year, driven by growth in all product groups, except the RF Communications sub-group. Operating margin was 15.5% and net income $776 million.
· “ST’s third quarter outlook, at the mid-point, is for net revenues of $3.20 billion, increasing year-over-year and sequentially by 20.0% and 7.0%, respectively; gross margin is expected to be about 41.0%.
· “We will now drive the Company based on a plan for FY21 revenues of $12.5 billion, plus or minus $100 million, a year-over-year increase of 22.3% at the mid-point. This growth is expected to be driven by strong dynamics in all the end markets we address and our engaged customer programs. Our CAPEX plan will now be about $2.1 billion for 2021.”
Quarterly Financial Summary (U.S. GAAP)
|(US$ m, except per share data)||Q2 2021||Q1 2021||Q2 2020||Q/Q||Y/Y|
|Gross Margin||40.5%||39.0%||35.0%||150 bps||550 bps|
|Operating Margin||16.3%||14.6%||5.1%||170 bps||1,120 bps|
|Diluted Earnings Per Share||$0.44||$0.39||$0.10||12.8%||340.0%|
Second Quarter 2021 Summary Review
|Net Revenues By Product Group (US$ m)||Q2 2021||Q1 2021||Q2 2020||Q/Q||Y/Y|
|Automotive and Discrete Group (ADG)||1,077||1,043||727||3.3%||48.2%|
|Analog, MEMS and Sensors Group (AMS)||1,013||1,083||624||-6.5%||62.3%|
|Microcontrollers and Digital ICs Group (MDG)||897||886||733||1.2%||22.3%|
|Total Net Revenues||2,992||3,016||2,087||-0.8%||43.4%|
Net revenues totaled $2.99 billion, a year-over-year increase of 43.4%. On a year-over-year basis, the Company recorded higher net sales in all product groups except the RF Communications sub-group. Year-over-year net sales to OEMs and Distribution increased 38.4% and 53.1%, respectively. On a sequential basis, net revenues decreased 0.8% but were 300 basis points above the mid-point of the Company’s guidance. ADG and MDG reported increases in net revenues on a sequential basis while AMS decreased.
Gross profit totaled $1.21 billion, a year-over-year increase of 66.1%. Gross margin of 40.5% increased 550 basis points year-over-year, mainly driven by lower unloading charges, manufacturing efficiencies, favorable pricing and improved product mix partially offset by negative currency effects, net of hedging. Second quarter gross margin was 100 basis points above the mid-point of the Company’s guidance mainly due to more favorable pricing and improved product mix.
Operating income increased 358.8% to $489 million, compared to $106 million in the year-ago quarter. The Company’s operating margin increased 1,120 basis points on a year-over-year basis to 16.3% of net revenues, compared to 5.1% in the 2020 second quarter.
By product group, compared with the year-ago quarter:
Automotive and Discrete Group (ADG):
· Revenue increased in both Automotive and in Power Discrete.
· Operating profit increased by 523.8% to $102 million. Operating margin was 9.5% compared to 2.3%.
Analog, MEMS and Sensors Group (AMS):
· Revenue increased in Analog, MEMS and Imaging.
· Operating profit increased by 234.2% to $189 million. Operating margin was 18.6% compared to 9.0%.
Microcontrollers and Digital ICs Group (MDG):
· Revenue increased in Microcontrollers and decreased in RF Communications.
· Operating profit increased by 76.5% to $206 million. Operating margin was 22.9% compared to 15.9%.
Net income and diluted earnings per share increased to $412 million and $0.44, respectively, compared to $90 million and $0.10, respectively, in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
|Trailing 12 Months|
|(US$ m)||Q2 2021||Q1 2021||Q2 2020||Q2 2021||Q2 2020||TTM Change|
|Net cash from operating activities||602||682||387||2,591||1,990||30.2%|
|Free cash flow (non-U.S. GAAP)||125||261||28||873||772||13.1%|
Capital expenditure payments, net of proceeds from sales, were $438 million in the second quarter. In the year-ago quarter, capital expenditures, net, were $312 million.
Inventory at the end of the second quarter was $1.97 billion, compared to $1.96 billion in the year-ago quarter. Day sales of inventory at quarter-end was 101 days compared to 130 days in the year-ago quarter.
Free cash flow(non-U.S. GAAP) was $125 million in the second quarter, up from $28 million in the year-ago quarter.
In the second quarter, the Company paid cash dividends to its shareholders totaling $52 million and executed a $156 million share buy-back, completing its $750 million share repurchase program launched on November 5, 2018. On July 1, 2021, the Company announced the launch of a new share buy-back program of up to $1,040 million to be executed within a 3-year period.
ST’s net financial position (non-U.S. GAAP) was $1.08 billion at July 3, 2021 compared to $1.19 billion at April 3, 2021 and reflected total liquidity of $4.25 billion and total financial debt of $3.17 billion.
During the second quarter, ST exercised the call option for the early redemption of its 2024 Tranche B of the convertible bond issued in 2017. The settlement of the $750 million principal amount bond is expected to be completed in the third quarter.
The Company’s guidance, at the mid-point, for the 2021 third quarter is:
- Net revenues are expected to be $3.20 billion, an increase of 7.0% sequentially, plus or minus 350 basis points;
- Gross margin of about 41.0%, plus or minus 200 basis points;
- This outlook is based on an assumed effective currency exchange rate of approximately $1.19 = €1.00 for the 2021 third quarter and includes the impact of existing hedging contracts.
- The third quarter will close on October 2, 2021.
Conference Call and Webcast Information
STMicroelectronics will conduct a conference call with analysts, investors and reporters to discuss its second quarter 2021 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 13, 2021.
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. 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.
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.