STMicroelectronics reported U.S. GAAP financial results for the third quarter ended October 2, 2021. This press release also contains non-U.S. GAAP measures (see Appendix for additional information).
ST reported third quarter net revenues of $3.20 billion, gross margin of 41.6%, operating margin of 18.9%, and net income of $474 million or $0.51 diluted earnings per share.
Jean-Marc Chery, STMicroelectronics President & CEO, commented:
- “Q3 net revenues came in substantially at the mid-point of our business outlook range, up 6.9% sequentially and up 19.9% on a year-over-year basis. The revenue performance was driven by strong global demand and by our engaged customer programs in Personal Electronics. This was partially offset by lower than expected revenues in Automotive, caused by more severe than anticipated reduced operations at our Malaysian manufacturing facility due to the pandemic.
- “Q3 gross margin of 41.6% came in 60 basis points higher than the mid-point. On a year-over-year basis, Q3 operating margin of 18.9% improved from 12.3%, and net income nearly doubled to $474 million.
· “First nine months net revenues increased 31.8% year-over-year, driven by growth in all product groups, except the RF Communications sub-group. Operating margin was 16.7% and net income $1.25 billion.
· “ST’s fourth quarter outlook, at the mid-point, is for net revenues of $3.40 billion, increasing sequentially by 6.3%; gross margin is expected to be about 43.0%.
· “For the full year 2021, we now expect net revenues at the mid-point to be about $12.6 billion, translating into 23.3% year-over-year growth. The revenue growth planned for this year reflects continuing strong dynamics in all the end markets we address and our engaged customer programs.”
Quarterly Financial Summary (U.S. GAAP)
| (US$ m, except per share data) | Q3 2021 | Q2 2021 | Q3 2020 | Q/Q | Y/Y |
| Net Revenues | $3,197 | $2,992 | $2,666 | 6.9% | 19.9% |
| Gross Profit | $1,330 | $1,212 | $959 | 9.8% | 38.7% |
| Gross Margin | 41.6% | 40.5% | 36.0% | 110 bps | 560 bps |
| Operating Income | $605 | $489 | $329 | 23.9% | 84.0% |
| Operating Margin | 18.9% | 16.3% | 12.3% | 260 bps | 660 bps |
| Net Income | $474 | $412 | $242 | 15.1% | 95.6% |
| Diluted Earnings Per Share | $0.51 | $0.44 | $0.26 | 15.9% | 96.2% |
Third Quarter 2021 Summary Review
| Net Revenues By Product Group (US$ m) | Q3 2021 | Q2 2021 | Q3 2020 | Q/Q | Y/Y |
| Automotive and Discrete Group (ADG) | 1,005 | 1,077 | 851 | -6.7% | 18.1% |
| Analog, MEMS and Sensors Group (AMS) | 1,268 | 1,013 | 997 | 25.2% | 27.1% |
| Microcontrollers and Digital ICs Group (MDG) | 920 | 897 | 815 | 2.6% | 12.9% |
| Others | 4 | 5 | 3 | – | – |
| Total Net Revenues | 3,197 | 2,992 | 2,666 | 6.9% | 19.9% |
Net revenues totaled $3.20 billion, a year-over-year increase of 19.9%. 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 9.9% and 48.6%, respectively. On a sequential basis, net revenues increased 6.9%, substantially in line with the mid-point of the Company’s guidance. AMS and MDG reported increases in net revenues on a sequential basis while ADG decreased, caused by more severe than anticipated reduced operations at our Malaysian manufacturing facility due to the pandemic.
Gross profit totaled $1.33 billion, a year-over-year increase of 38.7%. Gross margin of 41.6% increased 560 basis points year-over-year, mainly driven by improved product mix, manufacturing efficiencies, favorable pricing and lower unloading charges, partially offset by negative currency effects, net of hedging. Third quarter gross margin was 60 basis points above the mid-point of the Company’s guidance mainly due to product mix.
Operating income increased 84.0% to $605 million, compared to $329 million in the year-ago quarter. The Company’s operating margin increased 660 basis points on a year-over-year basis to 18.9% of net revenues, compared to 12.3% in the 2020 third 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 120.6% to $108 million. Operating margin was 10.8% compared to 5.8%.
Analog, MEMS and Sensors Group (AMS):
· Revenue increased in Analog, MEMS and Imaging.
· Operating profit increased by 73.8% to $304 million. Operating margin was 24.0% compared to 17.5%.
Microcontrollers and Digital ICs Group (MDG):
· Revenue increased in Microcontrollers and decreased in RF Communications.
· Operating profit increased by 54.9% to $220 million. Operating margin was 23.9% compared to 17.4%.
Net income and diluted earnings per share increased to $474 million and $0.51, respectively, compared to $242 million and $0.26, respectively, in the year-ago quarter.
Cash Flow and Balance Sheet Highlights
| Trailing 12 Months | ||||||
| (US$ m) | Q3 2021 | Q2 2021 | Q3 2020 | Q3 2021 | Q3 2020 | TTM Change |
| Net cash from operating activities | 895 | 602 | 385 | 3,101 | 1,946 | 59.4% |
| Free cash flow (non-U.S. GAAP) | 420 | 125 | (25) | 1,318 | 577 | 128.4% |
Capital expenditure payments, net of proceeds from sales, were $437 million in the third quarter and $1.28 billion for the year-to-date period. In the year-ago quarter, capital expenditures, net, were $319 million.
Inventory at the end of the third quarter was $1.97 billion, compared to $1.93 billion in the year-ago quarter. Day sales of inventory at quarter-end was 96 days compared to 103 days in the year-ago quarter.
ST exercised the call option for the early redemption of its 2024 Tranche B of the convertible bond issued in 2017. As a consequence, bondholders exercised their conversion rights on the total of $750 million principal amount of the Tranche B convertible bond. In the third quarter, ST fully settled the Tranche B convertible bond, delivering about 5.8 million treasury shares and paying $1.26 billion in cash, which includes the $750 million principal amount.
Free cash flow(non-U.S. GAAP) was $420 million in the third quarter, up from negative $25 million in the year-ago quarter.
In the third quarter, the Company paid cash dividends to its shareholders totaling $55 million and executed a $87 million share buy-back as part of its share repurchase program launched on July 1, 2021.
ST’s net financial position (non-U.S. GAAP) was $798 million at October 2, 2021 compared to $1.08 billion at July 3, 2021 and reflected total liquidity of $3.46 billion and total financial debt of $2.66 billion.
Business Outlook
The Company’s guidance, at the mid-point, for the 2021 fourth quarter is:
- Net revenues are expected to be $3.40 billion, an increase of 6.3% sequentially, plus or minus 350 basis points;
- Gross margin of about 43.0%, plus or minus 200 basis points;
- This outlook is based on an assumed effective currency exchange rate of approximately $1.18 = €1.00 for the 2021 fourth quarter and includes the impact of existing hedging contracts.
- The fourth quarter will close on December 31, 2021.
Conference Call and Webcast Information
STMicroelectronics will conduct a conference call with analysts, investors and reporters to discuss its third 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 November 12, 2021.
