STMicroelectronics Reports Q2 2018 Financial Results

Gross profit totaled $911 million, representing a year-over-year increase of 23.6%. Gross margin was 40.2%, 20 basis points better than the mid-point of the Company's guidance, and increasing 190 basis points year-over-year, largely driven by improved manufacturing efficiency and reflecting a favorable mix shift toward higher value products.

Operating income was $289 million, compared to $181 million in the year-ago quarter, with all product groups growing double-digit and delivering improved profitability. The Company's operating margin increased 330 basis points to 12.7% of net revenues, compared to 9.4% in the 2017 second quarter.

By product group, compared with the year-ago quarter:

Automotive and Discrete Group (ADG)

  • Revenue grew double-digits, in both Automotive and Power Discrete.
  • Operating profit increased by 28.8% to $84 million, mainly due to higher revenue and associated gross profit. Operating margin increased to 9.7% from 8.7%.

Analog, MEMS and Sensors Group (AMS):

  • Revenue grew double-digits, in both Imaging and in Analog.
  • Operating profit increased by 24.1% to $64 million, mainly due to higher revenue and associated gross profit. Operating margin increased to 10.5% from 9.4%.

Microcontrollers and Digital ICs Group (MDG):

  • Revenue grew double-digits, in both Microcontrollers and Digital ICs.
  • Operating profit increased by 121.6% to $159 million mainly due to higher revenue and associated gross profit. Operating margin increased to 20.3% from 11.7%.

Net income and diluted earnings per share increased to $261 million and $0.29, respectively, compared to $151 million and $0.17, respectively, in the year-ago quarter.

Cash Flow and Balance Sheet Highlights

        Trailing 12 Months
US$ in millions Q2 2018 Q1 2018 Q2 2017 Q2 2018 Q2 2017 TTM Change
Net cash from operating activities $360 $455 $369 $1,865 $1,368 36.3%
Free cash flow (non-U.S. GAAP) $(40) $95 $52 $280 $351 (20.2)%

Capital expenditure payments, net of proceeds from sales, in the second quarter were $390 million, in line with the Company's CAPEX guidance of $1.2-$1.3 billion for the 2018 full year. In the year-ago quarter, capital expenditures were $307 million.

Inventory at the end of the quarter was $1.56 billion, up from $1.43 billion in the prior quarter, to support demand expected in the third quarter. Day sales of inventory at quarter-end was 103 days, up from 97 days in the prior quarter.

As a result, free cash flow(non-U.S. GAAP) was negative $40 million and positive $56 million in the year-to-date period.

In the second quarter of 2018, the Company paid cash dividends totaling $54 million. A cash dividend of $0.24 per common share payable in equal quarterly installments of $0.06 in each of the second, third and fourth quarters of 2018 and first quarter of 2019 was approved on May 31st at the 2018 Annual General Meeting of Shareholders.

ST's net financial position (non-U.S. GAAP) was $411 million at June 30, 2018 compared to $522 million at March 31, 2018 and reflected total financial resources of $2.13 billion and total financial debt of $1.72 billion.

Business Outlook

The Company expects third quarter 2018 revenues to increase about 10.0% Q/Q (16.8% Y/Y) at the mid-point of the Company's guidance, driven by continued healthy demand in the Automotive and Industrial end markets and, as anticipated, by growth in smartphone applications.

The Company's guidance for the 2018 third quarter is:

  • Net revenue is expected to increase about 10.0% sequentially, plus or minus 350 basis points;
  • Gross margin of about 40.0%, 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 2018 third quarter and includes the impact of existing hedging contracts.
  • The third quarter will close on September 29, 2018. 

Conference Call and Webcast Information

STMicroelectronics will conduct a conference call with analysts, investors and media to discuss its second quarter 2018 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 10, 2018.

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.

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. 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.

Forward-looking Information

Some of the statements contained in this release that are not historical facts are statements of future expectations and other forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended) that are based on management's current views and assumptions, and are conditioned upon and also involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those anticipated by such statements, due to, among other factors:

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