STMicroelectronics a global semiconductor leader serving customers across the spectrum of electronics applications, reported financial results for the first quarter ended March 31, 2018.
First quarter net revenues totaled $2.23 billion, gross margin was 39.9%, and net income was $239 million or $0.26 diluted earnings per share.
“We started 2018 with another quarter of double-digit, year-over-year sales growth across all product groups and regions,” commented Carlo Bozotti, STMicroelectronics President and Chief Executive Officer.
“On a sequential basis, first quarter results were better than the mid-point of our sales and gross margin guidance. We delivered a better than seasonal performance in Automotive and Industrial, thanks to our application-focused approach on Smart Driving and Internet of Things, despite the anticipated unfavorable seasonal dynamics for smartphone applications.
“On a year-over-year basis, net revenues grew 22.2%, gross margin expanded by 220 basis points to 39.9% and operating margin increased by 480 basis points to 12.1%. Free cash flow, during a quarter of high capital spending to support our growth plans, increased by 53% to $95 million from the year-ago quarter and we exited the quarter with a solid net financial position of $522 million.”
Financial Summary (US$ Million)
|U.S. GAAP (1)||Q1 2018||Q4 2017||Q1 2017|
|Net Income attributable to parent company||239||308||108|
|Net cash from operating activities||455||587||289|
|Non-U.S. GAAP (2)||Q1 2018||Q4 2017||Q1 2017|
|Free cash flow||95||145||62|
|Net financial position||522||489||518|
(1) Certain amounts in the prior periods have been adjusted to reflect the January 1, 2018 adoption of ASU 2017-07 related to the reclassification of certain pension costs.
(2) Non-U.S. GAAP measure. See Appendix for reconciliation to U.S. GAAP and additional information explaining why the Company believes these measures are important.
Financial Summary by Product Group (US$ Million)
|Net Revenues By Product Group||Q1 2018||Q4 2017||Q1 2017|
|Automotive and Discrete Group (ADG)||817||821||708|
|Analog, MEMS and Sensors Group (AMS) (a)||655||902||518|
|Microcontrollers and Digital ICs Group (MDG)||750||740||593|
(a) Effective January 1, 2018, the Subsystems business unit was transferred from Others to Analog, MEMS and Sensors Group (AMS). Prior periods have been restated accordingly.
(b) Net revenues of Others includes revenues from sales of assembly services and other revenues.
First Quarter Review
First quarter net revenues decreased 9.8% sequentially, 20 basis points better than the midpoint of the Company’s guidance. On a sequential basis, Microcontrollers and Digital ICs Group (MDG) revenues increased 1.3% and Automotive and Discrete Group (ADG) revenues decreased 0.5% reflecting better than seasonal performance for Smart Driving and Internet of Things applications. Analog, MEMS and Sensors Group (AMS) revenues decreased by 27.4% principally reflecting unfavorable seasonal dynamics for smartphone applications negatively impacting the Company’s Imaging business.
On a year-over-year basis, first quarter net revenues increased 22.2% with all product groups delivering double-digits revenue growth. Specifically, Microcontrollers and Digital ICs Group (MDG) revenues were up 26.6% largely driven by a strong expansion of microcontroller sales; Analog, MEMS and Sensors Group (AMS) revenues increased 26.5% on sharply higher Imaging sales, as well as growth in Analog and MEMS; and Automotive and Discrete Group (ADG) revenues were higher by 15.4% on double-digit growth for both Automotive and Power Discrete products.
By region of shipment, EMEA and the Americas grew revenues sequentially 8.4% and 1.8%, respectively, while Asia Pacific decreased 18.2%. On a year-over-year basis revenues in Asia Pacific, EMEA and the Americas increased 24.5%, 22.4% and 12.7%, respectively.
First quarter gross profit was $888 million and gross margin was 39.9%, 40 basis points above the midpoint of the Company’s guidance. On a sequential basis, gross margin decreased 80 basis points mainly due to normal price pressure and negative currency effects, net of hedging partially offset by improved product mix and increased manufacturing efficiency. Gross margin increased 220 basis points year-over-year largely driven by improved manufacturing efficiency and better product mix partially offset mainly by normal price pressure as well as negative currency effects, net of hedging. .
Combined R&D and SG&A expenses were $614 million compared to $590 million in the prior quarter. On a year-over-year basis, combined R&D and SG&A expenses increased $48 million mainly due to negative currency effects, net of hedging, and inflationary dynamics.
First quarter other income & expenses, net, registered income of $16 million compared to $18 million and $17 million in the prior and year-ago quarter, respectively.
Impairment and restructuring charges in the first quarter were $21 million, compared to $20 million and $5 million in the prior and year-ago quarter, respectively, related to the substantially completed set-top box restructuring plan announced in January 2016.
Operating income in the first quarter was $269 million, equivalent to 12.1% of net revenues, compared to $411 million, equivalent to 16.7% of net revenues, in the 2017 fourth quarter and was up sharply in comparison to the 2017 first quarter operating income of $132 million, equivalent to 7.3% of net revenues. On a year-over-year basis, all product groups improved operating results due to higher revenues and improved gross margin: MDG operating margin increased to 19.5% from 10.3%; ADG operating margin doubled to 11.0% from 5.5%; and AMS operating margin expanded to 9.8% from 7.6%.
First quarter net income was $239 million, equivalent to $0.26 diluted earnings per share, compared to the 2017 fourth quarter net income of $308 million, equivalent to $0.34 per share, and increased significantly compared to 2017 first quarter net income of $108 million, equivalent to $0.12 diluted earnings per share.
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