STMicroelectronics announces fourth quarter and full year 2022 financial results

STMicroelectronics announces fourth quarter and full year 2022 financial results

• Fourth quarter net revenue of $4.42 billion; gross margin of 47.5%; operating margin of 29.1%; net profit of $1.25 billion

• Full-year net revenue of $16.13 billion; gross margin of 47.3%; operating margin of 27.5%; net profit of $3.96 billion

• Business Outlook (median): Q1 net revenue of $4.20 billion; gross margin of 48.0%

February 2, 2023, China - STMicroelectronics (ST; NYSE: STM), a world-leading semiconductor company serving multiple electronic applications, announced its fourth quarter financial results for the period ended December 31, 2022, prepared in accordance with U.S. Generally Accepted Accounting Principles (US GAAP).

STMicroelectronics' net revenue in the fourth quarter was US$4.42 billion, gross profit margin was 47.5%, operating profit margin was 29.1%, net profit was US$1.25 billion, and diluted earnings per share was US$1.32.

Commenting on the fourth quarter results, Jean-Marc Chery, President and CEO of STMicroelectronics, said:

• “In the fourth quarter, STMicroelectronics achieved revenue and gross margin above the midpoint of its guidance.

• “Full-year 2022 revenue increased 26.4% to $16.13 billion, driven by strong demand in the automotive and industrial markets and ongoing customer projects. Operating margin increased to 27.5% from 19.0% last year, and net income doubled to $3.96 billion. Capital expenditures were $3.52 billion and free cash flow was $1.59 billion.

• “Looking ahead to 2023, STMicroelectronics expects mid-level net revenue for the first quarter to reach US$4.20 billion, an increase of approximately 18.5% year-on-year and a decrease of approximately 5.1% from the previous quarter. Gross margin is expected to be approximately 48.0%.

• “In 2023, capital expenditure is expected to be approximately US$4.0 billion, mainly used to increase 12-inch wafer production capacity, as well as the production capacity of silicon carbide chips and substrates.

• “Based on strong customer demand and our capacity ramp-up, we target full-year 2023 revenue of approximately $16.8 billion to $17.8 billion.”

Quarterly Financial Summary (U.S. GAAP)

(a) Net revenues for the third and fourth quarters of 2022 exclude the phantom interest associated with convertible bonds following the effective date of the revised U.S. GAAP financial reporting guidance on January 1, 2022. Prior period financial statements have not been revised.

(b) Diluted earnings per share for the third and fourth quarters of 2022 include the full dilutive impact of outstanding convertible debt on net income after the new U.S. GAAP reporting guidance becomes effective on January 1, 2022. Prior period financial statements have not been revised.

Annual Financial Summary (U.S. GAAP)

Summary and review of the fourth quarter of 2022

Net revenue totaled $4.42 billion, up 24.4% year-over-year. Compared to the same period last year, all product divisions of the company achieved year-over-year net sales growth, except for the analog and MEMS sub-businesses. Revenues from OEM and agency channels increased by 26.8% and 19.5% year-over-year, respectively. Net revenue in the fourth quarter increased by 2.4% quarter-over-quarter, 60 basis points higher than the median of the company's performance guidance. The ADG and MDG product divisions achieved a quarter-over-quarter increase in net revenue, while the AMS product division's net revenue declined.

Gross profit totaled $2.10 billion, up 30.7% year-over-year. Although inflation in manufacturing input costs offset some of the increase, gross margin still reached 47.5%, 20 basis points higher than the midpoint of the company's guidance and up 230 basis points year-over-year, mainly due to favorable prices, improved product mix, positive exchange rate effects, and the impact of net hedging.

Operating profit increased 45.4% to $1.29 billion, compared with $885 million in the same period last year. The company's operating profit margin increased 420 basis points year-on-year, with operating profit accounting for 29.1% of net revenue, compared with 24.9% in the fourth quarter of 2021.

Year-on-year financial results of the product division:

Automotive and Discrete Group (ADG)

• Sales revenue growth in automotive products and power discrete devices

• Operating profit increased 117.9% to $470.2 million. Operating profit margin was 27.7%, compared to 17.6% in the same period last year

Analog, MEMS and Sensors (AMS)

• Imaging product sales revenue increased; Analog and MEMS products decreased

• Operating profit increased 2.4% to $345.6 million. Operating profit margin was 25.8%, compared to 27.0% in the same period last year

Microcontroller and Digital IC Group (MDG)

• Increased revenue from microcontroller and RF communications products

• Operating profit increased by 56.6% to $495.3 million. Operating profit margin was 35.8%, compared to 29.5% in the same period last year

Net income increased to $1.25 billion, including a one-time non-cash income tax benefit of $141 million, compared with $750 million in the same period last year; diluted earnings per share increased to $1.32, compared with $0.82 in the same period last year.

Cash Flow and Balance Sheet Summary

Capital expenditures (excluding asset sales revenue) in the fourth quarter of 2022 were US$920 million, and US$3.52 billion for the full year; compared with US$548 million in the same period last year, and US$1.83 billion for the full year.

Inventory at the end of the fourth quarter was $2.58 billion, up from $1.97 billion a year ago. Inventory turnover days at the end of the quarter were 101 days, compared to 91 days a year ago.

Net cash generated from operating activities in the fourth quarter of 2022 was US$1.55 billion, and US$5.2 billion for the full year, an increase of 70.0%, accounting for 32.3% of total revenue.

Free cash flow (non-GAAP) for the fourth quarter and full year was $603 million and $1.59 billion, respectively, compared to $314 million and $1.12 billion in the same period last year, respectively.

During the fourth quarter, the Company paid cash dividends to shareholders of $54 million and completed $87 million of stock repurchases under its previously announced stock repurchase program.

As of December 31, 2022, STMicroelectronics' net financial position (non-GAAP) was US$1.8 billion, compared with US$1.46 billion as of October 1, 2022; total current assets were US$4.52 billion and total financial liabilities were US$2.72 billion.

Business Outlook

Company guidance for the first quarter of 2023 (median):

• Net revenue is expected to be $4.20 billion, a decrease of approximately 5.1% from the previous quarter, plus or minus 350 basis points;

• Gross profit margin of approximately 48.0%, plus or minus 200 basis points;

• This forward-looking statement assumes a USD/EUR exchange rate of approximately USD 1.06 = EUR 1.00 in the first quarter of 2023, including the impact of current hedging contracts

• The first quarter closing date is April 1, 2023.

Use of Supplemental Non-GAAP Financial Information

This press release contains non-GAAP financial information for supplemental purposes.

Readers are cautioned that these non-GAAP financial measures are unaudited, not prepared in accordance with GAAP, and should not be considered equivalent to GAAP financial measures. In addition, these non-GAAP financial measures should not be compared with similarly named information from other companies. To compensate for these limitations, these supplemental non-GAAP financial information should not be read in isolation but in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Please see the appendix to this press release for a reconciliation of non-GAAP financial measures to GAAP financial measures.

Forward-Looking Statements

Certain statements contained in this press release that are not historical facts are forward-looking statements and other forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, or Section 21E of the Securities Exchange Act of 1934, as amended) based on management's current beliefs and assumptions. Forward-looking statements are subject to and involve known and unknown risks and uncertainties. These risks and uncertainties could cause actual results, performance or events to differ materially from those anticipated by these statements as a result of the following factors:

• changes in global trade policies, including the use and expansion of tariffs and trade barriers, which could affect the macroeconomic environment and adversely affect demand for our products;

• uncertain macroeconomic and industry trends (e.g., inflation and supply chain fluctuations), which could impact production capacity and end-market product demand;

• Customer demand does not match demand forecasts

• The ability to design, manufacture and market innovative products in a rapidly changing technological environment;

• Changes in the economic, social, public health, labor, political environment or infrastructure conditions in the regions where our company or our customers or suppliers operate due to macroeconomic or regional events, military conflict (including the Russian-Ukrainian conflict), social unrest, labor action or terrorist activities;

• unexpected events or circumstances that could affect our ability to execute our government-funded research and development programs and/or achieve our research and development and manufacturing program goals;