STMicroelectronics N.V.

Thank you everyone for joining our fourth quarter and full year 2024 Financial Results Call. Hosting the call today is Jean-Marc Chéry, S.T. President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, President and CFO, and Marco Cassis, President Analog, Power and Discrete, MEMS and Sensor Group, and Head of S.T. Micro Electronic Strategy System Research and Application and Innovation Office. This live webcast and presentation materials can be accessed on the HG Investor Relations website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause HG results to differ materially from management expectations and plans. We encourage you to review the safe harbor statement contained in the press release. That's what issues with the result this morning, and also in ESG most recent regulatory refiling for a full description of these risk factors. Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up. Now I'd like to turn the call over to Jean-Marc Chéry, ESG President and CEO.

So thank you, Jerome. Good morning, everyone. And thank you for joining ST for our Q4 and the full year 2024 earnings conference call. So today, I will start with an overview of the fourth quarter and the full year 2024, including business dynamics. And I will hand over to Lorenzo for the detailed financial overview. I will then comment on the outlook and conclude before answering your questions. So, starting with Q4. In a persisting challenging environment, we achieved Q4 2024 financial results pretty much in line with the midpoint of our guidance. Our Q4 net revenues decreased 22.4% year over year, and increased 2.2% sequentially to $3.32 billion. Our gross margin was 37.7%, our operating margin was 11.1%, and net income was $341 million. Our Q4 net revenues were in line with the midpoint of our business outlook range, driven by higher revenues in personal electronics, offset by lower revenues in industrial, while automotive and communication equipment and computer peripherals perform as expected. Q4 gross margin was broadly in line with the midpoint of our business outlook range. Looking at the full year 2024, Net revenues decreased 23.2% to $13.27 billion, mainly driven by a strong decrease in industrial and to a lesser extent in automotive. Gross margin was 39.3%, down from 47.9% in full year 2023. Operating margin was 12.6% compared to 26.7% in full year 2023 and net income decreased 63% to $1.56 billion. We invested $2.53 billion in net capex while generating free cash flow of $288 million. Let's now discuss our business dynamics during Q4 and a recap of our 2024 business highlights. In automotive, during the fourth quarter, we continued to face a slowdown, particularly in Europe, and our book-to-bill ratio remained below 1. For 2024, we continued to execute our strategy supporting the transition of the automotive industry to car electrification and digitalization. In electrification, we want business with our power discrets and modules, both silicon and silicon carbide, as well as smart power technologies and smart fuse solutions. With silicon carbide products, Our revenue for the year was $1.1 billion. During the year, we had multiple high-value wins with both silicon carbide devices and modules for automotive customers, including a cooperation with Ampère, as well as broadly in industrial applications. In China, which is the fastest growing market for electrical vehicles. We have a very strong momentum in terms of design in activities. And as of today, we have more silicon carbide engagements with top Chinese carmakers than any other suppliers. To this respect, in June, we announced we signed a long-term silicon carbide supply agreement with Geely Auto. We also introduced our fourth generation of silicon carbide MOSFET technology, bringing new benchmarks in power efficiency, power density and robustness. Our automotive microcontroller portfolio supports both electrification and digitalization. And during the year, we saw continued design wind momentum across applications such as software-defined vehicle architectures and car electrification systems. Important trends here are the integration of multiple ECUs into a single more powerful unit and the zonal architecture approach. During Q4, We announced a straightened offering for our advanced arm-based stellar microcontrollers, as well as a brand new series in the STM32 family designed for actuation of carbony, convenience, and onboard charging applications. In ADAS, we worked closely with our long-time customer and partner, Mobileye, with a focus on their latest market introduction, the IQ6 family. The family includes the IQ6L, designed for performance, power, and cost efficiency for level 1 and 2 driver assistance, as well as the IQ6H, which delivers premium ADAS and full surround view functionality. In industrial, during Q4, we continued to face a delayed recovery and inventory correction, particularly in Europe, and our book-to-bill ratio remained below 1. Looking at our 2024 highlights in power and energy management applications, we had a broad range of design wins, including in data centers, EV charging stations, renewable energy systems, white goods, and factory automation. We introduce a wide range of new products, solutions, and reference designs, also including high-performance telecom applications and AI server power supply. Another important growth opportunity around AI for ST, on top of our focus on Edge AI. In embedded processing solutions, we further strengthened STM32 microcontroller and microprocessor families and ecosystem, introducing many new products and tools. A particular focus was on Edge AI enablement for our customers. In June, the ST Edge AI suite came online bringing together tools, software, and knowledge to simplify and accelerate edge AI application development. In December, we made our most powerful MCU series, the STM32N6, available for broad market adoption. The series is the first to feature our proprietary neural ART accelerator NPU, making it possible to run computer vision, audio processing, sound analysis, and more consumer and industrial applications at the edge on a microcontroller. We also introduce an innovative smart sensor with edge AI processing for motion tracking in industrial and robotics applications. The combination of software and tools ecosystem continues to lower the barrier to entry for developers to take advantage of AI accelerated performance for real-time operating systems. In October, we announced a new strategic collaboration with Qualcomm Technologies for the new generation of industrial and consumer IoT solutions. Together, we are integrating Qualcomm's leading wireless connectivity technologies with our STM32 microcontroller ecosystem. We also introduced the industry's first embedded SIEM meeting, the GSMA standard for eSIEM IoT deployment, to support the proliferation of secure cloud-connected autonomous SIEMs. In personal electronics, Q4 was slightly better than expected while in communication equipment and computer peripherals was in line with our expectations. In personal electronics, during 2024, we continued to be successful with our focused approach through solid execution of engaged customer programs, securing sockets in flagship devices with differentiated products. and leveraging our broad portfolio to address high-volume applications. In communications equipment, our RF communication business delivered solid results. We continue to progress well with engaged customer programs in satellite and cellular communication infrastructure and receive awards from a new player in the low Earth orbit satellite market. Let me now share a summary of our May 2024 manufacturing initiative. In May, we announced the construction of a new high-volume 200 mm silicon carbide manufacturing facility in Catania, Italy, to manufacture power devices and modules, including testing and packaging. Along with the silicon carbide substrate manufacturing facility on the same site, these facilities will form ST Silicon Carbide Campus, a fully vertically integrated manufacturing hub for silicon carbide devices. In sustainability, all our strategic manufacturing initiatives are aligned with our sustainability strategy and our commitment to sustainable manufacturing in terms of energy consumption, greenhouse gas emissions, air and water quality. We are on track to be carbon neutral by 2027 in all direct and indirect emissions from Scope 1 and 2 and focusing on product transportation, business travel and employee commuting emissions for Scope 3. and we are on track for our 100% renewable energy goal by 2027, as well as for other key sustainability commitments. Power purchase agreements will play a major role in our transition. Following the first ERG announcement in Q4 2023, we headed two more in 2024, one in Italy with Centrica, and one in Malaysia with Engie. You will also have noticed we just announced another one in France with Total for 15 years. We also continue to work closely with external bodies to maintain our strong presence in the major sustainability indices. Let me close this section with a recap of our 2024 corporate development activities. ST has made a number of significant changes in the way our company is structured and operates during 2024. In January, we announced the reorganization of our product groups into two groups, split in four reportable segments, as well as the creation of a new application marketing organization, Buy&Market, implemented across all regions with the existing end marketing organization. In May, I was pleased to be re-appointed as Member and Chairman of the Managing Board for a three-year term to expire at the end of the 2027 Annual General Meeting of Shareholders, and Lorenzo was appointed as Member of the Managing Board for the same three-year term. In October, Lorenzo, President and CFO, added responsibilities to cover supply chain, corporate development and integrated external communication, in addition to finance, global procurement, digital transformation and information technology, enterprise risk management and resilience. In October, We also announced the launch of a new company-wide program to reshape our manufacturing footprint, accelerating our wafer fab capacity to 300 mm silicon in Agrate and Kroll and 200 mm silicon carbide in Catagra and resizing our global cost base. This program should result in strengthening our capability to grow our revenues with an improved operating efficiency, resulting in annual cost savings in the high triple-digit million dollars range exiting 2027. Specifically, in terms of operating expenses, SG&A and R&D, The program is now going to start and we expect annual cost savings totaling $300 million to $360 million exiting 2027 compared to the cost base of 2024. Now over to Lorenzo who will present our key financial figures.

Thank you, Jean-Marc. Good morning, everyone. Let's start with a detailed review of the fourth quarter, starting with revenues on a year-over-year basis. By reportable segment, analog products, MEMS and Sensor, was down 15.5%, mainly due to decreases in analog and imaging. Power and discrete products decreased 22.1%, with a decline in both power and discrete. Microcontrollers revenue declined 30.2%, mainly due to general-purpose microcontrollers. Digital ICs and RF products declined 22.8%, mainly due to ADAS and infotainment. By end market, industrial declined by about 41%, automotive by about 20%, personal electronics by about 17%, and communication equipment and computer peripherals increased by about 2%. Year over year, sales decreased 19.8% to OEMs and 28.7% to distribution. On a sequential basis, revenue increased 1.1% in analog MEMS and sensor, 7.2% 7.0% in microcontroller, and 13% in digital ICs and RF, while decrease 6.8% in power and discrete. Buy and market. Industrial grew by about 12%, communication equipment, computer peripheral by about 13%, and automotive by about 1%, while personal electronic decreased by about 8%. Turning now to profitability. Gross profit in the fourth quarter was $1.25 billion, decreasing 35.7% on a year-over-year basis. Gross margin was 37.7%, decreasing 780 basis points year-over-year. mainly due to unfavorable product mix and, to a lesser extent, to sales price and higher unused capacity charges. Total net operating expenses amounted to $884 million in the fourth quarter. This was better than anticipated, reflecting higher level of R&D grants, a stronger dollar, as well as the continuous strict monitoring of our expenses in the current market environment. Talking about the net OPEX, let me give you an indication for the first quarter of 2025. In the first quarter of 2025, we expect them to stand at about $850 million. As a reminder, these amounts are net of the other income and expenses. Coming back to the four-quarter. As a result, four-quarter operating income decreased 64% to $369 million. Q4 operating margin was 11.1%, down from the 23.9% in the year-ago period. With analog MEMS and sensors, at 14.7%, power and discrete at 11.9%, microcontroller at 14.3%, and digital ICs and RF at 31%. Q4 24-net income was $341 million compared to $1.08 billion in the year-ago quarter. Earnings per diluted share were $0.37 compared to $1.14 one year ago. As a reminder, the fourth quarter of 2023 net income included a one-time non-cash income tax benefit of $191 million. Looking now at our full year 2024 financial performance, net revenue decreased 23.2% to $13.27 billion. High-end market. On a year-over-year basis, industrial revenues decreased 49%. Automotive was down 14%. Personal electronics declined 11%. And communication equipment and computer peripherals were down 2%. Automotive represented about 46% of our total 24 revenues. Personal electronic about 21%, industrial 20%, and communication equipment computer peripheral about 13%. By customer channel, sales to OEMs and distribution represented 73% and 27% respectively. of the total revenues in 2024. The lower share of distribution compared to 2023 reflected the inventory correction in the industrial land market, which is mainly addressed through distributors. By region of customer obligation, 40% of our 2024 revenues were from the Americas, 30% from Asia Pacific, and 30% from Europe. Looking at the sales performance by reportable segment, analog MEMS and sensor was down 13%, with all subgroups declining. Power and discrete decreased 18.8%, with a decline in both power and discrete. Microcontroller revenues declined 38.8%, mainly due to general-purpose microcontrollers. Digital ICs and RF products declined 16.5%, mainly due to ADAS and infotainment. In 2024, gross margin decreased to 39.3%, compared to 47.9% for 2023, mainly due to product mix and to lesser extent to sales price and higher unused capacity charges. In 2024, operating margin decreased to 12.6% compared to 26.7% in 2023. By reportable segment, analog products, MEMS and sensor operating margin decreased to 14.3% from 21.7%. Power and discrete operating margin decreased to 14.3%. 0.7 percent from 26.1 percent microcontroller operating margin decreased to 14.4 percent from 35.6 percent and digital ics and rf operating margin decreased to 29.7 percent from the 35.6 percent of the previous year net income was $1.56 billion, and earning per share was $1.66. Net cash from operating activities decreased 50.5% in 2024, totaling $2.97 billion. Net capex stood at $2.53 billion in 2024, in line with our expectation, compared to $4.11 billion in 2023. Pre-cash flow was at $288 billion in 2024, compared to $1.77 billion previous year. Inventory at the end of the year 2024 was $2.79 billion, compared to $2.7 billion in 2023. Day sales of inventory at the year end was 122 days, substantially in line with our expectations. compared to 130 days at the end of Q3 24 and 104 days at the end of the previous year. Cash dividend paid to stockholders in 2024 totaled $288 million. In addition, during 2024, ST executed share buyback totaling $359 million. SDNet financial position of $3.23 billion at December 31, 2024, reflected total liquidity of $6.18 billion and total financial net debt of $2.95 billion. Now back to Jean-Marc, who will comment on our outlook.