GlobalFoundries Inc.

Good day and thank you for standing by. Welcome to Global Foundry's conference call to review third quarter of fiscal year 2022 financial results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Suki Nagesh, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone, and welcome to Global Foundry's third quarter 2022 earnings call. On the call with me today are Dr. Thomas Caulfield, CEO, and Dave Reeder, CFO. A short while ago, we released GF's third quarter 2022 financial results, which is available on our website at investors.gf.com. along with today's accompanying slide presentation. This call is being recorded, and a replay will be made available on our investor relations webpage. During this call, we will present both IFRS and adjusted non-IFRS financial measures. The most directly comparable IFRS measures and reconciliations for adjusted non-IFRS measures are available in today's press release and the accompanying slides. I would remind you that these financial results are unaudited and subject to change. Certain statements on today's calls may be deemed to be forward-looking statements. Such statements can be identified by terms such as believe, expect, intend, anticipate, and may. You should not play under your reliance on forward-looking statements. Actual results may differ maturely from these forward-looking statements, and we do not undertake any obligations to update any forward-looking statements we make today. For more information about factors that may cause actual results to differ maturely from forward-looking statements, Please refer to the press release we issued today as well as risks and uncertainties described in our SEC filings, including in the sections under the caption Risk Factors in our Annual Report on Form 20-F, filed with the SEC on March 31, 2022, and on our 6-K, filed with the SEC on August 19, 2022. We will begin today's call with Tom providing a summary update on the current business environment and technologies, following which Dave will provide details on our end market, third quarter results, and also provide fourth quarter guidance. We will then open the call for questions. We request that you please remit your questions to one with one follow-up. I'll now turn the call over to Tom for his prepared remarks.

Thank you, Suki, and welcome everyone to our third quarter earnings call. I'm pleased to report third quarter results that were better than our August provided guidance as we continue to make solid progress on our strategic and financial priorities. Amidst an increasingly challenging economic environment, our team across our entire enterprise continues to execute. Let me begin by providing a brief update on the current business environment. Given the increasing macroeconomic and geopolitical uncertainty, we continue to work closely with our customers to monitor end market demand. Since the beginning of the quarter, some of our customers have requested to modestly adjust some of their 2023 shipments downward. particularly with respect to the first half of 2023. Based on the current macroeconomic environment and our customer discussions, we are proactively taking actions to contain costs and to accelerate our previously planned productivity initiatives. Though it is difficult to take these actions during a year of record output, we believe that taking these actions now enables us to continue to outperform the market regardless of the economic environment. David will provide more details about these activities on his commentary. Long-term, GF's growth drivers remain intact. Our aggregate LTAs have increased from the prior quarter as the number of customers under long-term agreements has grown from 36 to 38, with the total value of these long-term agreements now slightly above $27 billion. Additionally, the amount of committee prepays has increased 6% from a quarter ago to approximately $3.8 billion. Also, and as expected, our long-term agreements are providing a strong framework for us and our customers to have balanced and constructive demand discussions. As an example, a recent LTA amendment resulted in a modest underutilization cash payment, an ASP increase on existing demand, and an additional year added to the contract's duration. A great example of the benefit of the long-term agreement structure. Now, let me give you an overview of third quarter. Global Foundry's revenue grew 22% year-over-year, driven by increases in both wafer shipments, richer mix, and ASPs. This revenue growth, coupled with strong operational execution, resulted in continued improvement to adjusted gross margin. We reported adjusted gross margin of 29.9% in the quarter, a 12 percentage point improvement from a year-ago period. As a result, we delivered earnings per share of 67 cents, which is better than the high end of our guidance range. Again, Dave will provide more color on our financials in a moment, but let me now provide a brief update on our recent technology achievements. In the third quarter, we completed five technology qualifications. Notably, this included a 12-nanometer LP customer-specific technology covered under a five-year long-term agreement. Also among the qualifications is a customer's proprietary automotive 40 nanometer embedded non-volatile memory product for one of the largest automotive MCU suppliers in the industry. This qualification now allows us to ship this product from both our Dresden and Singapore facilities, establishing a high volume secure supply chain for the automotive industry. Within the quarter, we also taped out five new customer products on our silicon photonics platform. This included a photo IC device, fully monolithic co-packaged optics for a GPU-to-GPU 2 terabit optical interconnect. Finally, we have successfully produced a high-performance RFGAN device with our through silicon via technology. We now have demonstrated performance that exceeds silicon HBT technologies, and as I previously mentioned, integrates a novel through silicon via solution to optimize power amplifier output and efficiency. In addition, we have sampled GAN power devices to early engagement customers. Both programs are being executed in our Burlington, Vermont facility, where we recently received a $30 million grant from the US government as part of the commercialization funding for this GAN RF technology offering. To summarize, I'm pleased to report another quarter of solid execution as we deliver to all our customers and to all our stakeholders. We are on track to have a strong year of growth in 2022, And given the strength of our product portfolio, the breadth of the markets we serve, and the single-source nature of our business, we are well-positioned to navigate the current challenging macroeconomic environment.