GlobalFoundries Inc.

Good day and thank you for standing by. Welcome to the Global Foundries conference call to review the first quarter of fiscal year 2024 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 the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sam Franklin, VP of Business Finance and Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Global Foundry's first quarter 2024 earnings call. On the call with me today are Dr. Thomas Caulfield, CEO, John Hollister, CFO, and Neil Vanderscroft, Chief Business Officer. A short while ago, we released GF's first quarter financial results, which are 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 non-IFRS financial measures. The most directly comparable IFRS measures and reconciliations for non-IFRS measures are available in today's press release and accompanying slides. I would remind you that these financial results are unaudited and subject to change. Certain statements on today's call may be deemed to be forward-looking statements. Such statements can be identified by terms such as believe, expect, intend, anticipate, and may, or by the use of the future tense. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today. For more information about factors that may cause actual results to differ materially 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 20F filed with the SEC on April 29, 2024. We'll begin today's call with Tom providing a summary update on the current business environment and technologies, following which John will provide details on our end markets and first quarter results, and also provide second quarter 2024 guidance. We will then open up the call for questions with Tom, John, and Niels. We request that you please limit your questions to one with one follow-up. I'll now turn the call over to Tom for his prepared remarks.

Thank you, Sam, and welcome, everyone, to our first quarter earnings call. We believe our industry is beginning to emerge from a challenging period of inventory correction, albeit in a very cautious manner. For GF, I'm pleased to report first quarter results that exceeded the guidance ranges we indicated in our fourth quarter earnings call. The continued efforts of our employees are positioning GF to support our customers over the long term, in the markets where they excel, on the technology platforms they want, and across the regions where they need us, both globally and locally. So before I move on to the business updates, let me give a shout out and a thank you to all our teams across the world. I'm proud of how well they are partnering with our customers and executing to our plans, particularly as we begin to see signs of channel inventory in absolute dollars decline in some of the key end markets that we serve. Having said this, certain end markets remain challenged, mostly related to macroeconomic conditions and the rate of inventory reduction is much slower than anticipated as we began 2024. I'm confident in the resilience and commitment of our teams to keep winning new opportunities and innovating our technology offerings as we continue to build our future together. With this in mind, let me start with providing a brief update on the current business landscape. Like many others across the industry, we expect macroeconomic and geopolitical uncertainties to persist through 2024. Although we're seeing signs of inventory levels trending down among some of our customers in core end markets, such as smart mobile devices, other customers have indicated to us that inventory levels have remained higher in end markets, such as IoT and automotive. The combination of elevated inventory levels and the uncertain demand environment has led to some of our customers seeking to adjust their near-term volume requirements under their agreements with us. we have continued to collaborate closely with these customers to find mutually beneficial outcomes while seeking to safeguard the long-term economic value of our relationships. In some instances, the conclusion of these discussions has resulted in underutilization or restructuring payments, which John will comment on further. Importantly, the dialogue with our customers has been very constructive as we work together to accelerate the channel inventory depletion and continue to find new ways to partner together going forward. Based on the progress of these discussions, and as we set out during our last earnings call, we still anticipate that our first quarter revenue will represent the low point for 2024 with quarter-to-quarter sequential growth through the year. Let me now touch briefly on our first quarter results, which John will discuss in more detail later in his commentary. Revenue in the quarter decreased sequentially, to $1.549 billion, which was above the high point of our guidance range. We reported non-IFRS gross margin of 26.1% in the quarter, which again exceeded our guidance range. We delivered a fourth consecutive quarter of positive non-IFRS free cash flow, which continues our disciplined approach to capital deployment while preserving our strategic capacity expansion objectives I am also pleased to report that we delivered non-IFRS diluted earnings per share of 31 cents, which exceeded the high end of our guidance range. Let me now provide you a brief update on some of our recent customer and partnership activity. After a milestone year for our automotive end market in 2023, in which we delivered over a billion dollars of revenue, we are continuing to partner with our customers to identify long-term opportunities to expand share and content in the vehicles of today and the future. GIF technologies are key enablers to the silicon content growth in vehicles, including 12LP+, our FinFET platform widely used in infotainment and navigation systems, to 40 nanometer microcontrollers with and without embedded non-volatile memory for safety, powertrain, and comfort applications, and all the way through our power technologies at 130 and 180 nanometer technologies. Continuing this trend through the first quarter, our teams closed key design wins on our 40 ISP technology, this is for image sensor processor, and 130 BCD power platforms, delivering critical ADAS, motor controllers, and sensor applications at automotive grade standards. The semiconductor content of automobiles continues to expand, and although we expect a period of automotive demand moderation in 2024, We still expect full-year revenue in this end market to grow meaningfully on a year-over-year basis. Turning now to smart mobile devices, as I alluded to in my introduction, we are beginning to see positive indicators across the smart mobile device ecosystem as excess inventories are drawing down on an absolute dollar basis across several of our customers. Although inventories remain above normal levels, we expect the rate and pace of the drawdown to progress throughout 2024. We have excellent traction with our RF front-end offerings, especially our 9SW RF SOI platform, which features low standby currents for longer battery life. Our 22 FTX millimeter wave technology for smartphone connectivity has ramped to volume production, and we're also engaged with key OLED display driver makers with design winds ramping in 2024. These features drive increased silicon content, which in turn drives a need for higher performance connectivity and low power technologies, which GF is well placed to serve. In IoT, we continue to see long-term opportunities as the number and complexity of smart connected devices continues to grow. This is driven by the need to sense, acquire, process, and communicate data. This also translates into new requirements for more efficient power management, connectivity, and AI at the edge functionalities, as the number of wirelessly connected and battery-operated products continues to broaden. In the first quarter, we closed a key design win on our 22FDX Plus platform, which will be used to enable high-speed wireless interfaces for IoT applications. Our 22FDX ecosystem supports design enablement, IP, and design services to a wide range of our customers to develop wireless IoT products with improved efficiency at the lowest possible power. We expect inventories to remain elevated across IoT during at least the first half of 2024. However, the requirements for speed, security, and inference at the edge are all long-term drivers for our next-generation analog and mixed signal technologies. Furthermore, we continue to see traction in aerospace and defense, where we are addressing key needs across harsh environments such as satellite and space, avionics, and terrestrial applications with our resilient, secure, and performance-optimized products. Finally, our communications infrastructure and data center segment continued to show weakness in the first quarter amidst the sustained node migration of data center and digital-centric customers to single-digit nanometer platforms, which we discussed in our prior earnings call. We expect this end market to remain challenged in 2024, with quarterly revenue expected to be roughly in line with what we have reported for in the first quarter. However, over the long term, we expect the transition to generative AI will increase the demand for high bandwidth communication and efficient power conversions, a trend that GF is well-positioned to address through our silicon photonics and power delivery solutions. To that end, I am pleased to report an important Q1 design win using our 130 NSX platform, which will support ground terminal infrastructure for satellite communications. As we ramp these programs, we continue to execute opportunities to remix some of our excess capacity to service FinFET demand in more durable segments, such as automotive and smart mobile devices. We are also diversifying our manufacturing footprint by accelerating the transfer of technologies such as 22 FDX, 28 nanometer high voltage, and 40 nanometer ESF3 into our Fab 8 facility in Malta, New York. This diversification will offer even more choice to our customers across multiple end markets here in the U.S. and enable a broader end market participation. To that end, we are delighted with the announcement from the Department of Commerce to award $1.5 billion in proposed funding for GF as part of the U.S. Chips and Science Act, in addition to the over $600 million proposed by New York State under its Green Chips program. We're very excited to be working closely with the federal and state governments on these grants, which will enable us to add critical semiconductor manufacturing capacity and construction jobs in our U.S. locations, while supporting our customers where they need us. To summarize, I am proud of our teams around the world as they executed the plan and we delivered first quarter revenue, gross profit, and EPS, which all exceeded the high end of our guidance ranges. With that, over to you, John.