STMicroelectronics Reports 2016 3Q, Nine Month Financial Results

STMicroelectronics reported financial results for the third quarter and nine months ended Oct. 1, 2016. Third quarter net revenues totaled $1.80 billion, gross margin was 35.8%, and net earnings were $71 million or $0.08 per share.
 
“In the third quarter revenues increased 5.5% sequentially and 1.9% year-over year. Revenue growth also brought improved operating profitability, with a third quarter operating margin before impairment and restructuring of 6.6%,” said Carlo Bozotti, STMicroelectronics president and CEO.
 
“Sequential growth was driven by the increasing pervasiveness of ST’s products in flagship smartphones, wearables and Internet of Things applications: from MEMS and sensors, including our latest 6-axis gyroscope, to imaging sensors, with new products based on our Time-of-Flight technology, to our expanding STM32 family of microcontrollers,” Bozotti added. “In addition, we grew year-over-year in automotive and we continued to see positive momentum in industrial, the distribution channel and the mass market.
 
“In the quarter we completed the acquisition of NFC and RFID reader assets, strengthening our portfolio of secure microcontrollers for next-generation mobile and Internet of Things devices, while also improving our cash balance thanks to increased cash flow generated from operations.,” Bozotti concluded.
 
Third quarter net revenues increased 5.5% sequentially, at the midpoint of the company’s guidance. Analog and MEMS Group (AMG) revenues increased sequentially 7.1% driven by motion MEMS and microphones. Microcontrollers and Digital ICs Group (MDG) increased 5.5% on a sequential basis driven by general purpose microcontrollers and digital ASICs for networking. Automotive and Discrete Group (ADG) revenues decreased 2.3% on a sequential basis due to seasonality in automotive products and substantially flat revenues in power discretes. Specialized image sensors, reported in Others, registered a very strong sequential revenue growth due to new products, based on ST’s Time-of-Flight technology, ramping in wireless applications.
 
On a year-over-year basis, third quarter net revenues increased 1.9%, or 3.4% excluding businesses undergoing a phase-out (mobile legacy products, camera modules and set-top box). Growth was driven by MEMS and sensors, microcontrollers, automotive, specialized image sensors and digital ASICs, partially offset by analog and power discretes – both negatively impacted by the weak computer peripheral market – and by the discontinued product lines.
 
Third quarter gross profit was $643 million. Gross margin was 35.8%.
On a sequential basis, gross margin increased 190 basis points. Third quarter operating income was $90 million compared to $28 million and $91 million in the prior quarter and year-ago quarter. Third quarter net income was $71 million, equivalent to $0.08 per share, compared to net income of $23 million in the prior quarter and net income of $90 million in the year-ago quarter.
 
In total, net revenues in the nine months 2016 decreased 2.2% to $5.11 billion from $5.23 billion in the year-ago period. Net revenues, excluding businesses undergoing a phase-out, decreased 0.9% with strong growth in specialized image sensors and solid growth in microcontrollers and automotive offset by analog and power discrete, due to weakness in the computer peripheral markets, and MEMS, due to weakness in smartphones earlier in the year.
 
Gross margin in the nine months 2016 improved to 34.4% from 33.9% in the year-ago period. Nine month 2016 operating income was $85 million compared to $84 million in the year-ago period.
 
Nine month 2016 net income was $53 million, equivalent to $0.06 per share, compared to net income of $102 million in the year-ago period. Net cash from operating activities was $330 million and $662 million for the third quarter and nine months of 2016, respectively.
 
“Demand is currently strong in the smartphone market and we continue to see positive trends in automotive and industrial,” Bozotti said. “ In the fourth quarter, we anticipate at the mid-point a sequential increase in net revenues of about 3.2% and a gross margin of about 37.0%.
 
“Thanks to our strategic focus on Smart Driving and Internet of Things, the increased traction we are seeing with our new products and positive market trends, ST is positioned to achieve year-over-year revenue growth for 2016 driven by automotive, specialized image sensors and microcontrollers,” he added. “In addition, we expect for 2016 to improve our profitability and continue to generate solid free cash flow.”