· As of the third quarter, net revenue for the year was 6.98 billion US dollars; gross profit margin was 36.3%; operating profit margin was 9.5%; net profit was 525 million US dollars

· Median business outlook: Fourth quarter net income of US$2.99 ​​billion; gross margin 38.5%

STMicroelectronics (ST; New York Stock Exchange code: STM), the world’s leading semiconductor supplier across multiple electronic applications, has announced its compilation in accordance with the US General Accounting Principles (US GAAP) as of September 26, 2020 The third quarter earnings report. This press release also contains non-GAAP financial data (see appendix for details).

STMicroelectronics’ third-quarter net revenue was US$2.67 billion, gross profit margin was 36.0%, operating profit margin was 12.3%, net profit was US$242 million, and diluted earnings per share was US$0.26.

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

· "As we announced in advance on October 1, 2020, net revenue in the third quarter of 2020 increased by 27.8% from the previous quarter, which was 690 basis points higher than the highest estimate. The overall market environment in the third quarter was significantly better than expected. Product demand, customer projects implemented in our personal electronic product field, and microcontroller demand are the main factors for this performance. The gross profit margin in the third quarter is at the median level of our expectations, including about 140 basis points of idle capacity expenditure.

· "Looking forward to the fourth quarter, the median revenue is expected to increase by 12.0% from the previous quarter. Except for the radio frequency communications sub-business, all other product businesses are expected to achieve growth. The gross profit margin is expected to be approximately 38.50%, including approximately 70 basis points of idle Capacity expenditure.

· "The median net revenue for the full year of 2020 is expected to be approximately US$9.97 billion, an increase of 4.3% year-on-year, while the operating profit margin will remain in double digits.

Total net revenue

US$2.67 billion, a year-on-year increase of 4.4%. Compared with the same period last year, although the revenue of automotive products, imaging chips and power discrete devices has declined, the growth in sales of microcontrollers, radio frequency communications, MEMS and analog devices offset some of the decline. OEM sales revenue increased by 7.5% year-on-year; agency channel sales revenue decreased by 3.4% year-on-year. From a month-on-month perspective, net revenue increased by 27.8%, 690 basis points higher than the company's expected maximum target. All product divisions achieved double-digit growth in sales revenue from the previous quarter.

Gross profit totaled US$959 million, a year-on-year decrease of 0.8%. Gross profit margin was 36.0%, a year-on-year decrease of 190 basis points. Price pressure and idle capacity expenditure were the main factors for the year-on-year decline. Gross profit margin in the third quarter was the same as the median forecast of the company.

Operating profit decreased by 2.0% year-on-year, totaling US$329 million, compared with US$336 million in the same period last year. Operating profit margin decreased by 80 basis points year-on-year, accounting for 12.3% of net revenue, compared with 13.1% in the third quarter of 2019.

The financial performance of each product department year-on-year:

Automotive and Discrete Products Group (ADG)

· Sales revenue of automotive products and power discrete devices has declined

· Operating profit was US$49 million, a year-on-year decrease of 35.7%. Operating profit margin 5.8%, 8.5% in the same period last year

 

Analog Devices, MEMS and Sensor Products Division (AMS)

· Sales revenue of MEMS and analog devices both achieved growth, while revenue from imaging chips decreased

· Operating profit was US$175 million, a year-on-year decrease of 11.8%. Operating profit margin 17.5%, 20.5% in the same period last year

 

Microcontroller and Digital IC Products Group (MDG)

· Microcontrollers and RF communications (previously "Digital IC" sub-business unit) both grow

· Operating profit was US$142 million, an increase of 32.0%. Operating profit margin 17.4%, 15.7% in the same period last year

Idle capacity expenditures are listed in the "Other" column of the department.

Net profit and diluted earnings per share fell to US$242 million and US$0.26, respectively, compared to US$3.02 and US$0.34 in the same period last year.


In the third quarter of 2020, capital expenditure (after deducting asset sales income) was US$319 million, with a cumulative total of US$897 million from the beginning of the year to the third quarter. In the same period last year, capital expenditures were US$244 million.

Inventories at the end of the quarter were US$1.93 billion, higher than the US$1.79 billion in the same period last year. The inventory turnover days at the end of the quarter was 103 days, lower than 100 days in the same period last year.

In order to further strengthen the company’s wireless connection business, business mergers and acquisitions spent US$76 million; the 2022 Class A convertible bonds issued in 2017 settled and paid accrued interest of US$33 million; after deducting these two expenses, the third quarter free cash flow (non-US General Accounting Standards) was negative 25 million U.S. dollars, compared with positive 170 million U.S. dollars in the same period last year.

The company paid a total of $38 million in cash dividends in the third quarter.

As of September 26, 2020, STMicroelectronics' net financial position (non-US GAAP) was US$662 million, compared to US$570 million on June 27, 2020. Total current assets are 3.53 billion U.S. dollars and total liabilities are 2.87 billion U.S. dollars.

In this quarter, STMicroelectronics exercised its bond redemption option to redeem the 2022 Class A convertible bonds issued in 2017 in advance. In the end, holders of Class A bonds exercised a total of US$750 million. STMicroelectronics received and paid bonds in a net settlement method, paid 750 million US dollars in cash and approximately 11 million treasury shares. Most of the transactions were completed in the third quarter, and the rest was completed at the beginning of the fourth quarter. In the third quarter of 2020, while the redemption rights are being exercised, STMicroelectronics also issued a new two-tier priority unsecured convertible bond of US$1.5 billion (US$750 million per level), maturing in 2025 and 2027 respectively .

Business outlook

 

Company guidance target for the fourth quarter of 2020 (median):

· Net revenue is expected to be US$2.99 ​​billion, an increase of approximately 12.0% from the previous month, with a fluctuation of 350 basis points;

· Gross profit margin is about 38.5%, with a fluctuation of 200 basis points;

· This forward-looking assumes that the effective exchange rate of the U.S. dollar to the euro in the fourth quarter of 2020 is approximately 1.15 U.S. dollars = 1.00 euros, including the impact of the current hedging contract

· The fourth quarter checkout date is December 31, 2020