STMicroelectronics NV Q3 FY2024 earnings call

• Appointed Jerome Ramel as Executive Vice President, Corporate Development and Integrated External Communication. - In Q3, net revenues were in line with outlook, gross margin broadly in line with guidance. - Strategic focus areas: In Automotive, continued execution on car electrification with new Silicon Carbide MOSFET technology and wins in traction inverters, battery management, etc. In Industrial, ongoing inventory correction but had design wins in power and analog for AI servers. In Embedded Processing, STM32 microcontrollers growing. - Launched a new company-wide program to reshape manufacturing footprint, accelerating 300-millimeter silicon and 200-millimeter silicon carbide transitions and resizing global cost base.

Third quarter net revenues were $3.25 billion, in line with the midpoint of the business outlook range. Year-over-year, net revenues decreased 26.6%, mainly driven by declines in Industrial and Automotive. On a sequential basis, net revenues increased 0.6%. For the 9-month period, net revenues were down 23.5% to $9.95 billion. By segment: Analog, MEMS and Sensors were down 13.3% YOY; Power and Discrete products down 18.4% YOY; Microcontrollers down 43.4% YOY; Digital ICs and radio frequency products down 29.7% YOY. Sequentially, Analog, MEMS and Sensors up 1.7%; Power and Discrete products up 7.9%; Microcontrollers up 3.6%; Digital ICs and radio frequency products down 17.4%. Gross margin was 37.8% in Q3, down from 47.6% YOY. Operating margin was 11.7%, down from 28% YOY. Net income was $351 million in Q3.

• Q4 2024 net revenues expected at midpoint of ~$3.32 billion, down 22.4% YOY, up 2.2% QOQ, gross margin expected ~38%. - 2024 full-year net revenues at midpoint ~$13.27 billion, down 23.2% YOY, gross margin ~39.4%. - Q1 2025 expected revenue decline above normal seasonality. - New manufacturing program expected to result in annual cost savings in the high triple-digit million-dollar range by 2027.

• Market cycle dynamics affecting Automotive and Industrial. - Inventory correction in Industrial. - Pricing pressure in negotiations with customers.

Q: Francois-Xavier Bouvignies asked about Q1 revenue drivers and pricing.

A: Jean-Marc Chery and Lorenzo Grandi discussed that Q1 revenue decline is due to shorter quarter and mild pricing pressure, with mid-single digit price decline expected next year.

Q: Sandeep Deshpande inquired about automotive slowdown and pricing.

A: Marco Cassis said automotive slowdown is in EVs, with hybrids gaining share, and pricing negotiations showing mid-single digit pressure.

Q: Lee Simpson asked about R&D and AI server wins.

A: Lorenzo Grandi and Marco Cassis talked about R&D expenses and ST's wins in AI server power semis across power supply units, voltage handling, etc.

Q: Didier Scemama asked about Q1 gross margin and restructuring.

A: Lorenzo Grandi and Jean-Marc Chery discussed Q1 gross margin impact from unloading charges and restructuring savings.

Q: Gianmarco Bonacina asked about cost-saving plan and EV penetration.

A: Lorenzo Grandi and Jean-Marc Chery spoke about onetime charges and ST's commitment to EV penetration via 300-millimeter transition.

Q: Stephane Houri asked about silicon carbide targets and tax impact.

A: Marco Cassis and Lorenzo Grandi discussed silicon carbide targets and tax impact expected to be below 1 percentage point on tax rate.

Q: Joshua Buchalter asked about 300mm transition and CapEx.

A: Jean-Marc Chery and Lorenzo Grandi discussed CapEx reduction with 300mm transition and smart manufacturing approach.